THQ Inc. (THQI), the third-largest U.S. video-game publisher, won a ruling in a dispute with Jakks Pacific Inc. (JAKK) over whether an arbitrator needs to disclose potential conflicts of interest before being appointed.
The California Court of Appeals in a Feb. 28 ruling denied a request by Jakks to reverse a lower court's decision that disclosure is required when a neutral arbitrator is appointed, and not until then. Jakks, a Malibu, California-based toymaker, and THQ seek arbitration in a royalties dispute.
The decision allows the arbitration process to move forward, Agoura Hills, California-based THQ said today in a statement. The companies are renegotiating the royalties THQ has to pay Jakks for the WWE wrestling video game. THQ sought to compel arbitration and asked the court to appoint a neutral arbitrator. Jakks sought to disqualify four of five potential arbitrators because they hadn't provided disclosure statements.
``Jakks's proposed interpretation makes much more work for everyone involved without any apparent benefit,'' the three- judge appellate panel in Los Angeles said. ``If all five candidates are required to comply with their disclosure requirements, four will necessarily have wasted their time.''
Games based on World Wresting Entertainment characters have generated sales of more than $1 billion worldwide, THQ Chief Executive Officer Brian Farrell said in the statement. Both companies participate in a venture that holds worldwide publishing rights to the games.
Jakks spokeswoman Genna Rosenberg didn't immediately return a call for comment. Julie MacMedan, a spokeswoman for THQ, didn't immediately return a call.
THQ fell 48 cents to $18.23 in Nasdaq Stock Market trading. The stock has fallen 43 percent in the past year. Jakks rose 45 cents to $28.40, and has risen 20 percent in the past year.
The case is Jakks Pacific v. The Superior Court of Los Angeles County, B201466, California Court of Appeals, 2nd Appellate District.