Monday, January 22, 2007

Jury Waivers in Big Business Contracts

An empirical study looks at contracts that were reported in companies' 8-K statements filed with the SEC -- that is, statements about contracts that are "big" enough to merit disclosure as material to investors. In the contracts' dispute resolution sections, how many waive jury trial? what factors affect the waiver? Theodore Eisenberg & Geoffrey P. Miller, Do Juries Add Value?: Evidence from an Empirical Study of Jury Trial Waiver Clauses in Large Corporate Contracts, NYU Law & Economics Working Papers, Paper 84 (Draft of 11/26/06).

This paper reports on the first large-scale empirical study of jury trial waivers in large commercial contracts.3 We find that such waivers are far from universal. Explicit jury trial waivers were contained in only about 20 percent of the more than 2,800 contracts in our data set. Another nine percent of contracts contained mandatory arbitration clauses. Such clauses may well be adopted for reasons other than a wish to avoid a jury; indeed, they almost certainly have other motivations because if their only
purpose were to avoid a jury, this goal could be achieved more parsimoniously with a simple jury waiver.4 But even if arbitration clauses are classed as jury waivers, a substantial majority of the contracts in our study—over 70 percent—do not preclude juries.
p. 3. From here, the authors spin out hypotheses and then test them against the data -- type of contract, type of industry, place of business, place of incorporation, etc.
A striking result is the 80 percent rate of jury trial waivers in contracts designating Illinois as a litigation forum. * * * Two factors appear to contribute to this result. First, * * * Illinois has an extremely long difference in time-to-adjudication between jury trials and bench trials. Jury trials take substantially longer to adjudicate in Illinois, relative to bench trials, than the relative time they take in other states. * * * Second, Figure 3 suggests that large corporations perceive Illinois juries to be among the least fair.
p. 55. The authors conclude that overall parties appear to value the availability of jury trials, since they consider waiving them and do not.

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