California's statutory requirement that an arbitrator disclose matters that could reasonably cause a person to doubt the arbitrator's neutrality is triggered by the selection and notification of the arbitrator, not by a proposal that he or she might be selected, according to a California Court of Appeal.

In Jakks Pacific, Inc. v. Superior Court, No. B201466, 2008 WL 518748 (Cal. Ct. App. Feb. 28, 2008), THQ entered into a contract with Jakks to pay a percentage of net sales revenue from the manufacture of video games. A dispute arose over the payment procedure, and the parties agreed to arbitrate the dispute, with the court appointing the arbitrator from lists of individuals proposed by the parties.

During the arbitrator proposal procedure, Jakks gave notice that it would provide, and expected THQ to provide, disclosures for each party's proposed arbitrators, supposedly in accordance with Cal. Code Civ. Proc. § 1281.9. THQ objected, maintaining that such disclosures were not required until selection or appointment by the court. The trial court struck Jakks' notice and appointed an arbitrator.

On appeal, the Court determined that the statutory disclosure requirements were not triggered by the trial court's nomination of five persons from lists provided by the parties. Instead, the Court found that the plain language of the statute did not require disclosure "until (1) a determination is made that he is to serve as a neutral arbitrator… and (2) he has received written notice of his proposed nomination by the parties or appointment by the court." See Cal. Code Civ. Proc. § 1281.9, subd. (b).

The Court agreed that the word "nominate" was used to describe the trial court's obligation to propose a list of arbitrators in Cal. Code Civ. Proc. § 1281.6. However, to the Court, the use of the term "nomination" in § 1281.9 as to the disclosure requirement referred instead to "the act of appointing" the arbitrator by the trial court.

Finally, the Court also noted that the legislative history of § 1281.9 supported this differential definition of "nominate" as to the disclosure requirement, and that Jakks' interpretation that disclosure is required for every "proposed" arbitrator "makes much more work for everyone involved without any apparent benefit."