Albert Villareal began working for Toyota of Downtown Los Angeles as a car salesman in 2015, and his job performance was satisfactory or better. The parent company of the dealership was Lithia Motors Inc. On February 1, 2018 Villareal injured his knee and back and was unable to walk without difficulty.

He returned to work on March 1, and worked up until June 4, 2018, when he took leave due to recurring pain. He underwent knee surgery in August 2018. Following the surgery, Villareal was placed on medical leave. When he informed the employer that his medical leave was extended for another three months, his employment was terminated the following day.

Villareal filed this action on August 24, 2020, asserting claims under FEHA for discrimination, retaliation, failure to prevent discrimination, failure to provide reasonable accommodation, and failure to engage in a good faith interactive process and other theories.of violation of the Labor Code.

When his employment began, he signed an agreement to resolve employment disputes through binding arbitration. Thus the defendants filed a motion to compel arbitration, A header on the first page of the agreement stated it was “[b]etween DT Los Angeles Toyota and Albert Villareal.” Villareal argued there was no valid arbitration agreement because DT Los Angeles Toyota was neither a legal entity nor a fictitious business name. Thus the dealership lacked the capacity to contract or consent to the agreement. And they could not maintain an action because they had not filed a fictitious business name statement..

The trial court found no merit in any of Villareal’s arguments except for the fictitious business statement problem. Business and Professions Code 17918 provides that a party who fails to file a valid statement cannot “maintain any action upon or on account of any contract made . . . in the fictitious business name in any court of this state until the fictitious business name statement” has been filed. The motion to compel arbitration was denied on that basis.

The employer appealed, and the Court of Appeal vacated the order and remanded in the published case of Published case of Villareal v LAD-T, LLC B313681 (October 2022).

Failure to comply with the fictitious-name statutes does not make the parties’ promises, agreements, and transactions invalid as such. Noncompliance merely prevents a fictitiously named business from enforcing obligations owed to it until it places on record its true nature and ownership.(Hand Rehabilitation Center v. Workers’ Comp. Appeals Bd. (1995) 34 Cal.App.4th 1204, 1214). The requirement similarly applies to motions to compel arbitration.

On May 17, 2022, after the appeal was in progress for many months, LAD-T filed a fictitious business name statement registering the names “DT Los Angeles Toyota” and “Toyota Downtown LA.,

Thus the employer contend that LAD-T’s recent filing of a fictitious business name statement for DT Los Angeles Toyota “resolves any grounds for abatement of [defendants’] petition to compel arbitration under . . . section 17918,” rendering the trial court’s order denying defendants’ motion to compel arbitration moot, and the trial order should be reversed on that basis.

Ultimately the Court of Appeal concluded the trial court did not err in denying defendants’ motion to compel arbitration, but it “must address the appropriate disposition in light of the unusual facts before us.”

It “agree with Villareal that defendants failed to act diligently in filing their fictitious business name statement.” After the June 1, 2021 Order denying the motion to compel arbitration, defendants then filed their notice of appeal on June 18 2021. But it was not until May 17, 2022 that it filed the Fictitious Business Name Statement.

“Defendants provide no explanation for why they would vigorously defend their position that no fictitious business name statement was required, including appealing the trial court’s order, then abandon this position at the eleventh hour by filing the very statement that could have enabled the case to proceed to arbitration a year earlier.” The trial court will need to determine in the first instance whether defendants have by their conduct waived their right to arbitration.

The order denying defendants’ motion to compel arbitration was vacated and the matter remanded for the trial court to address whether defendants have waived their right to compel arbitration. If the court finds waiver, it should again deny the motion to compel arbitration; if it finds no waiver, it should grant the motion.