United States Court of Appeals 

for the Fifth Circuit ____________ 

No. 23-20424 

____________ 

Georgia Firefighters’ Pension Fund, 

Plaintiff—Appellee, 

Norfolk City Council as Administering Authority of 

the Norfolk Pension Fund; Iron Workers Local 580 

Joint Funds; Building Trades United Pension Trust 

Fund, 

Movants—Appellees, 

versus

Anadarko Petroleum Corporation; Robert G. Gwin; 

Robert P. Daniels; Ernest A. Leyendecker, III; R. A. 

Walker, 

Defendants—Appellants. 

______________________________ 

Appeal from the United States District Court 

for the Southern District of Texas 

USDC No. 4:20-CV-576 

______________________________ 

Before King, Ho, and Engelhardt, Circuit Judges.

James C. Ho, Circuit Judge: 

Our adversarial system of justice requires that we give both sides full 

and fair opportunity to present their strongest possible arguments to the 

United States Court of Appeals 

Fifth Circuit 

FILED 

April 25, 2024 

Lyle W. Cayce 

Clerk 

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No. 23-20424 

2 

court. See, e.g., Penson v. Ohio, 488 U.S. 75, 84 (1988); Lefebure v. D’Aquilla, 

15 F.4th 670, 674–75 (5th Cir. 2021). It is through that clash of ideas that we 

ensure that justice is done pursuant to the laws that govern the dispute in 

question. 

That clash of ideas was missing here. A class of stock purchasers 

allege that Anadarko Petroleum Corporation fraudulently misrepresented 

the potential value of its Shenandoah oil field project in the Gulf of Mexico, 

in violation of federal securities law. During the class certification 

proceedings below, Plaintiffs presented new evidence for the first time in a 

reply brief. As a result, Anadarko did not have fair opportunity to address 

that new evidence at an earlier stage in the briefing. So the district court 

should have permitted Anadarko to file a sur-reply responding to that new 

evidence contained in Plaintiffs’ reply. 

Accordingly, we vacate the district court’s order certifying the class 

and remand for further proceedings. 

I. 

Plaintiffs sue on behalf of the class of stock purchasers who acquired 

Anadarko common stock between February 20, 2015, and May 2, 2017. They 

allege that Anadarko, along with the individual Defendants, fraudulently 

misrepresented the value of the Shenandoah oil field. 

Specifically, Plaintiffs contend that a decline in Anadarko’s stock 

price on May 3, 2017, resulted from Anadarko’s May 2 after-hours disclosure 

that the Shen-6 sidetrack well was dry, that Anadarko was taking a $902 

million write-off for the Shenandoah project, and that Anadarko was 

suspending further appraisal. 

In securities fraud class actions, plaintiffs may show reliance on a 

defendant’s misrepresentations—and therefore satisfy Federal Rule of Civil 

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3 

Procedure 23(b)(3)’s predominance requirement—by invoking the Basic

presumption, a rebuttable presumption that allows courts to presume “an 

investor’s reliance on any public material misrepresentations” if certain 

requirements are met. Basic Inc. v. Levinson, 485 U.S. 224, 247 (1988). 

Plaintiffs must prove “(1) that the alleged misrepresentation was publicly 

known; (2) that it was material; (3) that the stock traded in an efficient 

market; and (4) that the plaintiff traded the stock between the time the 

misrepresentation was made and when the truth was revealed.” Goldman 

Sachs Grp., Inc. v. Ark. Tchr. Ret. Sys., 594 U.S. 113, 118 (2021). The 

defendant may rebut the presumption by demonstrating that the “alleged 

misrepresentation did not actually affect the market price of the stock.” Id.

at 119 (internal quotation omitted). 

Here, Plaintiffs invoked the Basic presumption in their motion to 

certify the class, and submitted an expert report to demonstrate market 

efficiency. In response, Anadarko contended that its May 3 stock price 

decline was caused, not by its Shenandoah disclosure, but by an entirely 

separate and distinct event—news linking Anadarko to a fatal Colorado home 

explosion, and announcing related regulatory requirements estimated to cost 

Anadarko $140 million. 

Plaintiffs’ reply brief included a rebuttal report from their expert, 

Bjorn Steinholt. Most importantly for this appeal, Steinholt’s report pointed 

to (1) evidence that Anadarko’s stock price fell 4.1% in after-market trading 

on May 2 after the Shenandoah disclosure at 4:16 p.m. but before a news 

article about the Colorado announcement was published at 4:51 p.m., and (2) 

a new event study that controlled for the Colorado news but still found a 

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statistically significant price decline associated with Anadarko’s Shenandoah 

disclosure.1 

Anadarko moved for leave to file a sur-reply. It argued that Plaintiffs’ 

reply brief contained new evidence to which Anadarko was entitled to 

respond. The district court denied leave, stating that Anadarko “chose not 

to provide an event study.” The court concluded that Plaintiffs’ reply 

“squarely responded to arguments in [Anadarko’s] response” and “didn’t 

introduce new arguments or evidence.” 

Anadarko subsequently moved to exclude Steinholt’s rebuttal report 

under Daubert. The district court denied this motion as well, and proceeded 

to certify the class. 

The class certification order cited evidence from Steinholt’s rebuttal 

report, stating that “the Anadarko stock price dropped 4.1 percent during 

after-hours trading between the time Anadarko made its Shen disclosures and 

the time the [Colorado] news broke,” and that the “event study concluded 

that the price drop on May 3rd remained statistically significant even when 

controlling for the [Colorado] news.” The district court denied Anadarko’s 

motion for reconsideration. 

Anadarko appealed, arguing that the district court abused its 

discretion by relying on new evidence in Plaintiffs’ reply without allowing 

Defendants an opportunity to respond. Anadarko also argued that the 

district court failed to conduct a proper Daubert analysis, and that 

Defendants sufficiently rebutted the Basic presumption. 

_____________________ 

1

 An event study “is a statistical regression analysis that examines the effect of an 

event . . . on a dependent variable, such as a corporation’s stock price.” Ludlow v. BP, 

P.L.C., 800 F.3d 674, 683 (5th Cir. 2015) (internal quotation omitted). 

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II. 

 We agree with Anadarko that the district court should have allowed a 

sur-reply. 

Ordinarily, sur-replies are “heavily disfavored,” and the decision to 

allow a sur-reply lies within the district court’s discretion. Butler v. S. Porter, 

999 F.3d 287, 297 (5th Cir. 2021) (internal quotation omitted). 

But when a party raises new arguments or evidence for the first time 

in a reply, the district court must either give the other party an opportunity 

to respond or decline to rely on the new arguments and evidence. See 

Residents of Gordon Plaza, Inc. v. Cantrell, 25 F.4th 288, 296 (5th Cir. 2022) 

(“[A] district court abuses its discretion when it considers new arguments 

raised for the first time in a reply brief without providing the non-movant an 

adequate opportunity to respond prior to a ruling.”) (internal quotation 

omitted); RedHawk Holdings Corp. v. Schreiber, 836 F. App’x 232, 235 (5th 

Cir. 2020) (“[A] district court may consider arguments and evidence raised 

for the first time in a reply brief without abusing its discretion so long as it 

gives the non-movant an adequate opportunity to respond prior to a ruling.”) 

(internal quotations omitted). 

Plaintiffs’ reply brief presented new evidence. As Steinholt himself 

noted, “the primary focus” of his original report was market efficiency—not 

price impact. Steinholt did not discuss or introduce evidence of the May 2 

after-hours trading until his rebuttal report. The district court itself 

described Steinholt’s event study as “new.” As Plaintiffs’ counsel 

acknowledged at oral argument, this material was not in the record prior to 

the reply brief. Yet the district court “considered” the rebuttal report 

“where pertinent,” and referred both to the after-hours trading and to the 

new event study in its predominance analysis. The after-hours trading and 

the event study constituted key new evidence directly related to the central 

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6 

class certification dispute: whether Anadarko’s stock price decline was 

caused by the Colorado news or the Shenandoah disclosure.

The district court therefore abused its discretion by denying Anadarko 

leave to file a sur-reply. 

III. 

Anadarko also challenges the admissibility of Steinholt’s rebuttal 

report under Daubert, arguing that the district court failed to conduct a 

sufficiently rigorous Daubert analysis and that the rebuttal report is 

unreliable. 

Class actions may only be certified “based on adequate admissible 

evidence to justify class certification.” Prantil v. Arkema Inc., 986 F.3d 570, 

575 (5th Cir. 2021) (internal quotation omitted). Daubert therefore applies 

with the same rigor at the class certification stage as at trial. See id. 

Anadarko argues that the district court failed to conduct a rigorous 

Daubert analysis, because it considered Anadarko’s Daubert challenge as 

“little more than an attempt to re-urge Defendants’ recently denied motion 

for leave to file a surreply,” and noted that “[t]he new event study certainly 

won’t be immune from criticism.” 

Specifically, Anadarko argues that Steinholt’s after-hours trading 

evidence is unreliable, because Steinholt failed to establish that the afterhours market was efficient, failed to conduct an event study specifically for 

after-hours trading to determine whether the stock movement was 

statistically significant, and erroneously identified the time the Colorado 

news became public as 4:51 p.m., not 4:03 p.m. Anadarko additionally argues 

that the event study is unreliable because it added Colorado comparators but 

removed the industry index. 

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We agree with Anadarko that the district court failed to perform a full 

Daubert analysis. The record indicates that the district court conducted a 

Daubert inquiry to some extent—the class certification order noted 

Steinholt’s credentials, stated that the rebuttal report was reliable, and 

concluded that the rebuttal report would be “considered where pertinent.” 

But it is not clear that the district court “appl[ied] Daubert’s reliability 

standard with full force.” Prantil, 986 F.3d at 576. Instead, the district court 

appears to have denied Anadarko’s Daubert motion at least in part on the 

basis that “[i]t has already been determined that class certification will rise 

or fall with what is fairly briefed in the papers under the Local Rules of the 

Southern District”—not Anadarko’s sur-reply arguments that the district 

court stated were “re-urge[d]” in Anadarko’s Daubert motion. 

The district court’s denial of Anadarko’s motion for reconsideration 

of class certification also seems to indicate that the district court may not 

have fully considered Anadarko’s Daubert arguments. It stated that 

“[m]any” of Anadarko’s arguments in its motion for reconsideration 

“derive from information presented in the Daubert briefing, with express 

determination that such would not be properly considered.” 

On remand, the district court should fully consider Anadarko’s 

Daubert challenge. 

* * * 

We vacate the class certification order entered by the district court, 

and remand for proceedings consistent with this opinion. 

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