(The opinions expressed here are those of the author, a

columnist for Reuters.)

By Alison Frankel

April 8 (Reuters) - Not all circuit splits are created

equal.

Intuitively, everyone who tracks U.S. Supreme Court

litigation understands that idea. As you know, one of the most

effective ways to attract the justices' attention is to contend

that the Supreme Court must step in to resolve differences among

federal appellate courts on important issues. That's why

experienced Supreme Court lawyers frequently cite circuit splits

in their clients' petitions.

But in reality, not every circuit split deserves the court's

attention. Sometimes the underlying issue isn't really pressing.

Sometimes the purported split is more a matter of semantics than

substance. And sometimes, the split itself isn't of much

consequence, perhaps because one circuit is a lone outlier or

because the issue rarely arises in the circuits with differing

views.

If the Supreme Court, after all, granted review to every

petition asserting a circuit split, the justices would have a

vastly busier docket than their usual 70 or 80 cases.

The justices and their clerks are obviously quite

experienced when it comes to qualitatively assessing purported

circuit splits. But in a new amicus brief urging the Supreme

Court to grant a petition by chipmaker Nvidia ( NVDA ), Stanford

Law School professor Joseph Grundfest told the justices about a

new methodology he has devised to quantify the significance of

circuit splits, based on what Grundfest calls the "market share"

of the appellate courts on opposite sides of the split.

The new Grundfest test, which the professor laid out in more

detail in a working paper titled Quantifying the Significance of

Circuit Splits in Petitions for Certiorari: The Case of

Securities Fraud Litigation, relies on two key metrics. The

first, called "aggregate circuit split share," estimates the

economic consequences of the split, or, as Grundfest's lawyers

at Quinn Emanuel Urquhart & Sullivan explained in the Nvidia ( NVDA )

brief, "the aggregate share of the overall market implicated by

the conflict."

In the Nvidia ( NVDA ) case, for example, Nvidia's ( NVDA ) lawyers at Hogan

Lovells argue that the 9th U.S. Circuit Court of Appeals split

with five other federal appellate courts, including the 2nd

Circuit, when it ruled that Nvidia ( NVDA ) shareholders adequately

alleged the company's fraudulent intent based on internal

documents, even though plaintiffs have not seen the documents

and cannot say specifically what they contain. (Shareholders

allege that the company misrepresented the extent to which sales

of a particular chip depended on the volatile crypto mining

market.) Nvidia ( NVDA ) also contends that the 9th Circuit split with

the 2nd Circuit in holding that shareholders could rely on an

expert report, rather than specific alleged facts, to prove the

falsity of the company's purported misstatements.

Between them, Grundfest said in his amicus brief, the 2nd

and 9th Circuits handle 60% of all shareholder securities fraud

cases in federal court. And when you add up the rest of the

circuits that have weighed in on one side or the other on the

contested questions presented to the Supreme Court, the

Grundfest brief said, you see that a robust 86% of the "market"

for securities class actions is affected by the circuit split on

the first question and 64% on the second.

The second Grundfest factor, dubbed the "split ratio," looks

at the market shares of the appellate courts on either side of

the split, instead of simply tallying up the number of courts on

each side of the divide. Grundfest argues that the Supreme Court

should be quicker to grant review when the split ratio is close

to 50/50, because that reflects real foment in the lower courts

rather than rulings by an outlier circuit or two.

The split ratio is a more complex calculation than the

market share determination, but in the Nvidia ( NVDA ) case, Grundfest's

brief argued, the ratios indicate that the division on both

questions is not just a matter of a rogue circuit.

Both the quantitative metrics, the Grundfest brief said,

"demonstrate that the circuit splits identified by the petition

are highly consequential."

Shareholders' counsel of record, Gregory Joseph of Joseph

Hage Aaronson, did not respond to my query. The plaintiffs'

brief opposing Nvidia's ( NVDA ) petition is due on May 6. Nvidia ( NVDA )

declined to comment. Notably, the company received additional

amicus support for its Supreme Court bid from 10 former

high-ranking U.S. Securities and Exchange Commission officials

who argued that the 9th Circuit decision will undermine the

requirement that shareholders provide specific allegations of

defendants' fraudulent intent.

Grundfest told me that he's been toying for years with the

idea of quantifying the significance of circuit splits but was

galvanized into action by the Nvidia ( NVDA ) case, which offered what he

described as an ideal way to illustrate the underlying concepts

of market share and split ratio.

Stanford maintains an exhaustive database on securities

class actions, which allowed Grundfest to calculate each

circuit's share of this kind of litigation. But he said the same

principles could apply in other fields, such as administrative

law.

His draft article described a correlation within each

federal circuit between economic metrics involving shareholder

class actions, such as settlement values and the volume of new

lawsuits, and "semantic" metrics including the number of

citations to securities law provisions in reported opinions from

the circuit. If that correlation holds up in other areas of

litigation, Grundfest said, it might be possible to use keyword

searches across legal databases to calculate aggregate circuit

split shares.

Grundfest acknowledged (as does his draft article) that it

will take a lot more research to figure out how to calculate

circuit shares and split ratios outside the realm of securities

class actions. But he told me that the value of his methodology

is that the metrics are neutral. The shareholder class action

bar, he said, can use his test to argue against Supreme Court

review in cases involving circuits with small market shares or

lopsided split ratios.

"This is the first step in a particular direction,"

Grundfest said. "I'm just trying to help the Supreme Court

allocate a scarce resource."

Read more:

Will "expert" allegations become the next big thing in

securities litigation?