Ex Ante Choice of Jury Waiver Clauses in Mergers
17 American Law and Economics Review (Fall 2015)
37 Pages Posted: 6 Aug 2015 Last revised: 8 Dec 2015
Date Written: August 5, 2015
This paper examines empirically why sophisticated parties in some merger and acquisition deals choose to waive their right to jury trials and some do not. We examine merger agreements for a large sample of 276 deals for the 11-year period 2001 to 2011. We exclude private company deals and those where the choice of forum and law is Delaware. First, we find that 48.2% of the deals have jury waiver clauses. Second, we find that deals in which New York is chosen as the governing law and forum state are more likely to include a jury waiver clause. No other state has such an effect. Third, we find that contracts negotiated by counsel from high reputation law firms tend to include jury waiver clauses, and this effect is more significant for the acquirer’s law firm than for the target’s law firm. Fourth, we find strong evidence for the bargaining power hypothesis wherein larger acquirers that take over smaller targets are more likely to include jury waiver clauses. Finally, we find no evidence that lawyer familiarity, industry-effects, whether the acquirer was an international firm, or whether the deal was completed has a statistically significant impact on the likelihood of having a jury waiver clause.
Keywords: merger, acquisition, jury trials, merger agreements, jury waiver clause, ex ante choice
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