A2 ACADEMY LLC ET AL VS. SWORD HEALTH, INC. ET AL

Matter on the Discovery / Law & Motion Calendar for Thursday, Jun-11-2026. LINE 4. DEFENDANT SWORD HEALTH TECHNOLOGIES, INC.'S DEMURRER to Amended COMPLAINT.

Sword Health Technologies, Inc.'s demurrer to plaintiffs' third amended complaint is overruled. First, SHT does not specify by cause of action and party the basis for its demurrer. Second, plaintiffs adequately plead that SHT is a successor entity that is liable on any judgment rendered against Sword Health, S.A. (See Ray v. Alad Corp. (1977) 9 Cal. 3d 22, 28; TAC paras. 20-22.)

"The general rule is 'where one corporation sells or transfers all of its assets to another corporation, the latter is not liable for the debts and liabilities of the former unless (1) the purchaser expressly or impliedly agrees to such assumption, (2) the transaction amounts to a consolidation or merger of the two corporations, (3) the purchasing corporation is merely a continuation of the selling corporation, or (4) the transaction is entered into fraudulently to escape liability for debts. [Citations.]'" (McClellan v. Northridge Park Townhome Owners Ass'n Inc. (2001) 89 Cal.App.4th 746, 753 [emphasis omitted].)

"If a corporation organizes another corporation with practically the same shareholders and directors, transfers all the assets but does not pay all the first corporation's debts, and continues to carry on the same business, the separate entities may be disregarded and the new corporation held liable for the obligations of the old." (Id. [citation simplified].)

While some courts have held inadequate consideration is the critical and required factor, other courts have deemed it merely optional. (Compare Franklin v. USX Corp. (2001) 87 Cal. App. 4th 615, with Wolf Metals Inc. v. Rand Pacific Sales, Inc. (2016) 4 Cal.App.5th 698, 710 [citing Cleveland v. Johnson (2010) 209 Cal.App.4th 1315].)

The court concludes that plaintiffs' successor liability pleading is adequate, and the court cannot resolve the truth of plaintiffs' allegations on demurrer. If SHT is a successor entity, and all of the causes of action in the TAC are live as to Sword Health, S.A. and Sword Health, Inc., then SHT is a proper defendant on all causes of action.

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