The Jackson family matriarch claims the company negligently hired Dr. Conrad Murray to oversee the singer's medical care.
Although Murray is not named in the lawsuit, he prescribed the powerful anesthetic propofol, and was later convicted of manslaughter in Michael Jackson's death.
"The basic claim is that there were a lot of red flags with respect to Dr. Murray's care of Michael Jackson and AEG ignored all those flags," said Eyewitness News legal analyst Dana Cole. "Now (AEG) is simply saying, they didn't know what was happening, what was going on between Dr. Murray and Michael Jackson. It was confidential between doctor and patient."
In documents obtained by Eyewitness News, Katherine Jackson and each of the singer's children are individually seeking in excess of $50 million in general damages and in excess of $10 billion in special damages.
In its court documents, AEG says "California damages law is grounded in reality, not imagination." The company calls the idea "fiction" that Jackson would earn $500 million a year for the rest of his life.
The trial is expected to last 2 to 3 months. Jackson's children may testify.
Murray may be called to testify, but he is reportedly saying he will plead the 5th Amendment and refuse to answer any questions.