Do Juries Add Value? Evidence from an Empirical Study of Jury Trial Waiver Clauses in Large Corporate Contracts

• Author: Geoffrey P. Miller,Theodore Eisenberg
• Published date: 01 November 2007
• DOI: http://doi.org/10.1111/j.1740-1461.2007.00099.x
• Date: 01 November 2007

Do Juries Add Value? Evidence

from an Empirical Study of Jury

Trial Waiver Clauses in Large

Corporate Contracts

Theodore Eisenberg and Geoffrey P. Miller*

We study jury trial waivers in a data set of 2,816 contracts contained as

exhibits in Form 8-K filings by reporting corporations during 2002. Because

these contracts are associated with events deemed material to the financial

condition of SEC-reporting firms, they likely are carefully negotiated by

sophisticated, well-informed parties and thus provide presumptive evidence

about the value associated with the availability of jury trials. A minority of

contracts, about 20 percent, waived jury trials. An additional 9 percent of

contracts had arbitration clauses that effectively preclude jury trials though

the reason for arbitration clauses need not specifically relate to juries. We

explore three groups of factors to explain the pattern of jury trial waivers:

(1) contract-specific factors: the subject matter of a contract, a measure of

its standardization, choice of law, and choice of forum, (2) contracting-party

factors: domestic versus international status, place of business, place of

incorporation, attorney locale, and industry, and (3) factors external to the

contracts and parties: perceptions of jury fairness in the forum specified in

the contract and the relative length of jury and bench trial queues in that

forum. Contract type is significantly associated with jury trial waivers. For

example, over 50 percent of security agreements and over 60 percent of

credit commitments waived jury trials. In contrast, 5 percent of employment

*Address correspondence to Theodore Eisenberg, Henry Allen Mark Professor of Law, Cornell

Law School, Myron Taylor Hall, Ithaca, NY 14853; e-mail: ted-eisenberg@lawschool.cornell.edu.

Miller is Stuyvesant P. Comfort Professor of Law, NYU Law School; e-mail: geoffrey.miller@

nyu.cornell.edu.

A draft of this article was presented at a workshop of the Concordia University-HEC Institute

of Governance of Private and Public Organizations in Montreal. We thank attendees at the

workshop, Mark Geistfeld, John Duffy, Clay Gillette, Sam Issacharoff, Florencia Marotta-

Wurgler, Deborah Schenk, Linda Silberman, Martin Wells, and Kathryn Zeiler for comments

and Natalie Erbe, Jeremy Masys, Sergio Muro, Hilel Pohulanik, Whitney Schwab, Nadav Weg,

and Cathy Weist for valuable research assistance.

Journal of Empirical Legal Studies

Volume 4, Issue 3, 539–588, November 2007

©2007, Copyright the Authors

Journal compilation ©2007, Cornell Law School and Blackwell Publishing, Inc.

539

contracts, 2 percent of bond indentures, and 3.5 percent of pooling service

agreements waived jury trials. The presence of a forum selection clause,

greater contract standardization, and perceived fairness of juries are signifi-

cantly associated with jury trial waivers. Over 80 percent of the contracts

designating Illinois as a forum contained jury trial waivers whereas less than

half the contracts designating New York as a forum, and only about one-

third of the contracts designating California, Texas, or Florida as a forum,

contained waiver clauses. Jury trial waivers were not more common in

international contracts. Our results suggest that, contrary to a widespread

perception about the alleged inadequacies of juries in complex business

cases, sophisticated actors may perceive that juries add value to dispute

resolution.

I. Introduction

Commercial contracts frequently contain agreements about how the parties

wish to resolve disputes that may arise under the contract. One ex ante

provision for dispute resolution is an agreement to waive the right to a jury.

Such waivers will ordinarily be enforced, provided they are found to be

knowing and deliberate.1Given widespread beliefs that juries do not

1The Seventh Amendment provides federal litigants with a right to jury trial in civil cases. U.S.

Const. amend. VII. Many state constitutions also guarantee civil jury trial rights. See, e.g., Cal.

Const. art. I, § 16.

The right to a jury can be waived. In federal civil cases, for example, the right to jury trial is

waived if not specifically demanded in timely fashion, and may also be waived by consent of both

parties. FRCP Rules 38, 39. Some states, however, allow the court to reject a jury trial waiver and

impose a jury on the parties in a civil case. See, e.g., Miss. Rule of Civil Procedure 38(b). Juries

may also be waived in criminal cases, providing the waiver is knowing and deliberate. Such

waivers are implicit in plea bargaining. See Boykin v. Alabama, 395 U.S. 238 (1969).

Federal courts also enforce predispute contractual waivers of jury trial. Waivers are implicit in

agreeing to arbitration and courts generally enforce such waivers under general principles of

contract law without requiring a heightened showing of consent. See, e.g., Caley v. Gulfstream

Aerospace Corp., 428 F.3d 1359 (11th Cir. 2005). But see Walker v. Ryan’s Family Steak Houses,

Inc., 400 F.3d 370, 381 (6th Cir. 2005) (holding arbitration agreement waiver of jury right to

higher standard than ordinary contract principles). Federal courts also enforce predispute jury

trial waivers outside the context of arbitration agreements, at least if the agreement is knowing

and voluntary. See Debra T. Landis, Contractual Jury Trial Waivers in Federal Civil Cases, 92

A.L.R. Fed. 688 (2003); Henry S. Noyes, If You (Re)Build it, They Will Come: Contracts to

Remake the Rules of Litigation in Arbitration’s Image, 30 Harv. J.L. & Pub. Pol’y 579 (2007);

Leasing Serv. Corp. v. Crane, 804 F.2d 828, 832 (4th Cir. 1986); K.M.C. Co. v. Irving Trust Co.,

757 F.2d 752, 755 (6th Cir. 1985); Rodenbur v. Kaufmann, 320 F.2d 679, 683 (D.C. Cir. 1963);

RDO Fin. Servs. Co. v. Powell, 191 F. Supp. 2d 811, 813 (N.D. Tex. 2002). But see Deborah J.

540 Eisenberg and Miller

perform well in complex commercial cases,2we might suppose that ex ante

jury trial waivers would be nearly universally observed in major business

contracts.

This article reports on the first large-scale empirical study of jury trial

waivers in large commercial contracts.3We 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 9 percent of

contracts contained mandatory arbitration clauses. Such clauses are likely

adopted for reasons other than jury avoidance. If their only purpose were to

avoid a jury, this goal could be achieved more parsimoniously with a simple

jury waiver.4But even if arbitration clauses are classified as jury waivers, a

substantial majority of the contracts—over 70 percent—do not preclude

juries.

What causes the relative paucity of jury trial waivers in our data? Pos-

sible explanations include agency costs, strategic considerations, and trans-

actions costs. It is also possible—perhaps likely, though difficult to prove

directly—that the parties omit jury trial waivers because they believe poten-

tial jury availability adds value to the contract. Because the contracting

parties in our data set are sophisticated business entities negotiating over

Matties, A Case for Judicial Self-Restraint in Interpreting Contractual Jury Trial Waivers in

Federal Court, 65 Geo. Wash. L. Rev. 431, 462–63 (1997).

Most state courts also enforce predispute jury trial waivers. See Jay M. Zitter, Contractual Jury

Trial Waivers in State Civil Cases, 42 A.L.R.5th 53, 71 (1996); In re Prudential Ins. Co. of Am.,

148 S.W.3d 124 (Tex. 2004); Mall, Inc. v. Robbins, 412 So. 2d 1197, 1200 (Ala. 1982);L&R

Realty v. Connecticut Nat’l Bank, 715 A.2d 748, 754–55 (Conn. 1998); Malan Realty Investors,

Inc. v. Harris, 953 S.W.2d 624, 626–27 (Mo. 1997) (en banc) (per curiam); Lowe Enters.

Residential Partners, L.P. v. Eighth Judicial Dist. Court, 40 P.3d 405 (Nev. 2002); Rhode Island

Depositors Econ. Prot. Corp. v. Coffey & Martinelli, Ltd., 821 A.2d 222, 226 (R.I. 2003). Two

states—California and Georgia—reject predispute waivers as inconsistent with applicable stat-

utes. See Grafton Partners L.P. v. Superior Court, 116 P.3d 479 (Ca. 2005); Bank S., N.A. v.

Howard, 444 S.E.2d 799 (Ga. 1994).

2See text accompanying infra notes 62–82.

3See Robert E. Scott & George G. Triantis, Anticipating Litigation by Contract Design, 115 Yale

L.J. 814, 857 (2006) (noting that contract law scholars “focus principally on the substantive

terms” of contracts rather than on ex ante mechanisms for enforcement, and characterizing the

investigation of such mechanisms as a “rich avenue for future research”).

4See J. Michael McGuire & Adam S. Belzberg, Are Jury Trial Waivers Coming of Age? 38 Md. B.J.

25 (2006) (employers can avoid juries by jury trial waivers without arbitration clauses in employ-

ment contracts).

Jury Trial Waiver Clauses in Large Corporate Contracts 541