Ex Ante Choice of Jury Waiver Clauses in Mergers

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 from 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.