But Superior Court Judge Yvette Palazuelos rejected Anschutz Entertainment Group Live's request the entire wrongful-death lawsuit be dismissed, leaving the giant concert promoter as the sole defendant.
AEG Live Chief Executive Randy Phillips and executive Paul Gongaware "did not assume personal liability" when dealing with the supervision of Dr. Conrad Murray, Jackson's personal physician now serving four years for involuntary manslaughter in the singer's death, Palazuelos said in her decision.
"Rather, they acted solely as an agent of AEG Live," she said.
But "substantial evidence has been presented at trial from which a jury can reasonably infer that defendants [AEG Live] knew or should have known that Dr. Murray presented an undue risk of harm to decedent [Jackson]," Palazuelos said.
In addition, the Jacksons "presented substantial evidence" AEG Live's "conduct was a substantial factor in causing" Jackson's death, Palazuelos said.
"A jury may logically infer from the evidence that [Jackson] died because Dr. Murray, who was adversely affected by a conflict of interest created by his contractual arrangement with AEG, treated a deteriorating insomniac who was not ready to perform, causing Dr. Murray to make bad medical decisions that caused [Jackson's] death," the judge said in her ruling.
The jury was not present when the ruling was issued. Testimony was suspended this week so a female juror could travel out of the state to visit a seriously ill close relative.
CNN said both sides were expected to rest their cases and present closing arguments by the end of next week. The Los Angeles Times indicated the trial could last longer, with the jury not starting deliberations until late this month or next.
Jackson's 83-year-old mother, Katherine -- who is the legal guardian of Jackson's children Prince, Paris and Blanket -- is suing AEG Live for the pop star's wrongful death.
AEG sponsored a planned series of 50 Jackson "This Is It" comeback concerts that were to be held at London's O2 Arena from July 2009 through March 2010.
Jackson died June 25, 2009, at age 50, less than three weeks before the first scheduled concert July 13.
The lawsuit alleges AEG negligently hired Murray to care for the singer while he rehearsed for the concerts. It also alleges AEG missed several warning signs Jackson's health was deteriorating under Murray's care.
Katherine Jackson seeks damages equivalent to the amount of money Jackson would have earned over the course of his remaining lifetime if he had not died, estimated at $40 billion before the trial began five months ago.
AEG Live argues Jackson, not its executives, chose and controlled Murray before the shows were even planned.
AEG lawyers have argued the company never signed a contract with Murray and the $150,000 a month the company was supposed to pay the doctor was an advance to the singer.
Jurors will have to decide if an internal company email at the center of the case persuasively disputes the AEG claim.
The email, which Gongaware wrote 11 days before Jackson died, said: "We want to remind him [Murray] that it is AEG, not MJ, who is paying his salary. We want him to understand what is expected of him."