84 Cal.App.5th 446
Cal. Ct. App.2022Background
- Plaintiff Albert Villareal worked as a car salesman for a dealership operated as Toyota of Downtown LA; in June 2017 he electronically signed an employment/onboarding packet containing a binding arbitration agreement headed “DT Los Angeles Toyota.”
- Defendants LAD-T, LLC (Toyota of Downtown Los Angeles) and parent Lithia moved to compel arbitration in October 2020, producing the arbitration agreement but acknowledging the name “DT Los Angeles Toyota” was never a separate legal entity.
- Villareal opposed, arguing (inter alia) the named DBA was unregistered and thus defendants could not maintain an action on a contract made under that fictitious business name per Business & Professions Code § 17918; the trial court denied the motion on that ground despite finding the agreement otherwise enforceable.
- While the appeal was pending, defendants filed a fictitious business name statement for “DT Los Angeles Toyota”; the Court of Appeal took judicial notice of that filing.
- The Court of Appeal held § 17918 applies to motions to compel arbitration (equitable actions to enforce contracts), rejected FAA preemption, found substantial evidence that defendants transacted business under the fictitious name, and vacated and remanded for the trial court to decide whether defendants waived the right to arbitrate by their delayed registration.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether § 17918 bars a motion to compel arbitration brought in the name of an unregistered fictitious business | Villareal: § 17918 prevents maintaining any action on a contract in the fictitious name until registration; motion to compel is a suit in equity and thus barred | Defendants: § 17918 is inapplicable because name was an internal DBA or a de minimis variation; arbitration motion should proceed | Held: § 17918 applies to motions to compel arbitration because they are equitable actions to enforce contracts; substantial evidence supported that defendants transacted business under the fictitious name, so noncompliance abated the proceeding until registration |
| Whether the FAA preempts § 17918 as applied to arbitration agreements | Villareal: state law abatement rule validly applies and is generally applicable to contracts | Defendants: FAA preempts any state rule that limits enforcement of arbitration agreements | Held: FAA does not preempt § 17918; the statute is a neutral, generally applicable abatement rule that does not invalidate agreements but suspends enforcement until compliance |
| Whether Villareal waived the § 17918 defense by not raising it earlier | Villareal: he timely raised the defense in opposition to the motion to compel | Defendants: defense was waived because not raised at the earliest procedural opportunity | Held: Villareal timely raised the defense in opposition; waiver was not decided on appeal and is remanded for the trial court to assess under established waiver factors |
| Effect of defendants’ late registration during appeal (mootness / relief) | Villareal: appeal should be dismissed as moot or defendants should be barred from re-raising arbitration due to delay | Defendants: registration cures defect and renders the appeal moot or requires reversal | Held: Appeal is not moot because this court can grant effective relief; because registration cures the statutory bar only prospectively and defendants delayed, the appellate court vacated the denial and remanded so the trial court can determine whether defendants waived arbitration by their delay |
Key Cases Cited
- Hydrotech Systems, Ltd. v. Oasis Waterpark, 52 Cal.3d 988 (Cal. 1991) (fictitious-name statute abates enforcement of contracts until registration; purpose is to reveal true identity of parties)
- Freeman v. State Farm Mut. Auto. Ins. Co., 14 Cal.3d 473 (Cal. 1975) (proceeding to compel arbitration is essentially a suit in equity to compel specific performance)
- McGill v. Citibank, N.A., 2 Cal.5th 945 (Cal. 2017) (FAA savings clause permits application of generally applicable contract defenses)
- St. Agnes Medical Center v. Pacificare, 31 Cal.4th 1187 (Cal. 2003) (factors guiding waiver of right to arbitrate)
- Iskanian v. CLS Transportation Los Angeles, LLC, 59 Cal.4th 348 (Cal. 2014) (policy favoring arbitration; heavy burden to prove waiver)
- Kadota Fig Assn. v. Case-Swayne Co., 73 Cal.App.2d 796 (Cal. Ct. App. 1946) (statutory noncompliance is abatement, not jurisdictional dismissal)