March 28 (Reuters) - It's never a happy development for

plaintiffs when a federal appeals court agrees to review a trial

judge's decision to certify an investor class to pursue

securities fraud claims.

I'd argue that these mid-case, or interlocutory appeals, are

even more perilous for shareholders since the U.S. Supreme Court

held in 2021's Goldman Sachs ( GS ) v. Arkansas Teachers Retirement

System that trial judges should consider "all probative

evidence" in weighing whether defendants have managed to rebut

the presumption that their alleged fraud impacted the company's

share price.

Look, for instance, at what happened when the Goldman Sachs ( GS )

case returned to lower courts after the Supreme Court issued its

decision. The trial judge recertified the class for a third

time, but Goldman persuaded the 2nd U.S. Circuit Court of

Appeals to grant its third interlocutory appeal to review the

decision. The third time proved the charm for the bank: The

appeals court decertified the class, holding, as I've reported,

that there was too wide a gap between Goldman's general

statements about conflict management and subsequent revelations

about conflicts in specific collateralized debt deals to support

shareholders' theory that the bank's alleged misrepresentations

propped up its share price.

Now defense lawyers for Anadarko Petroleum are hoping that

the Supreme Court's Goldman ruling prompts the 5th Circuit to

undo the certification of a class of shareholders alleging that

the company covered up disappointing drilling results in a

much-ballyhooed oilfield in the Gulf of Mexico.

The 5th Circuit will hear oral argument next week on

Anadarko's contention that U.S. District Judge Charles Eskridge

of Houston improperly certified the class based on expert

evidence first introduced in shareholders' reply brief in

support of class certification.

Cravath, Swaine & Moore, which represents Anadarko (now part

of Occidental Petroleum ( OXY )) argued in its brief to the

right-leaning appellate court that under the Goldman Sachs ( GS )

standard, Eskridge should have allowed the company to submit a

sur-reply brief after shareholders disclosed an expert report on

the price impact of Anadarko's alleged misrepresentation in

their brief responding the company's opposition to class

certification.

As is usual in securities fraud class actions, the details

of the case are unique and complex. Shareholder lawyers from

Robbins, Geller, Rudman & Dowd told the 5th Circuit in their

brief that the full trial court record proves that Eskridge

properly denied Anadarko's motion to submit a sur-reply brief,

as well as its motions to exclude the expert report on price

impact and to reconsider class certification.

The judge, according to Robbins Geller, gave Anadarko all of

the leeway it was entitled to, so the appeals court cannot

conclude that he abused his discretion.

But because Anadarko and Cravath pitched the interlocutory

appeal as a chance for the 5th Circuit to solve a recurring

problem in shareholder fraud class actions - arguing that, in

the wake of the Supreme Court's Goldman Sachs ( GS ) decision, the

court should use this case to confirm defendants' right to

respond to new shareholders' evidence - the securities bar

should be paying attention.

Anadarko counsel Kevin Orsini of Cravath did not respond to

my query. Shareholder lawyer Joe Daley of Robbins Geller

declined to comment.

Shareholders allege that Anadarko's share price fell by

about 8% in May 2017 after the company disclosed a $902 million

write-down on its investment in the Shenandoah oilfield in the

Gulf of Mexico after a so-called appraisal well came up dry.

Plaintiffs' lawyers contend that Anadarko hid warnings from its

own engineers and geoscientists, who had been predicting for

years that the field would not measure up to Anadarko's hype.

Anadarko, meanwhile, maintains that its share price fell on

that day for a reason wholly unrelated to the Shenandoah field.

At around the same time that the company disclosed the $902

million write-down, Colorado officials announced that Anadarko's

gas operations were responsible for the deadly explosion of a

home in Firestone, Colorado - and that all oil and gas companies

in the state would be required to conduct additional safety

checks. The Colorado announcement, according to Anadarko, "led

to significant regulatory uncertainty," which, in turn, pushed

its share price lower.

Anadarko did not submit an expert event study of its share

price to refute shareholders' claims in its brief opposing class

certification. It instead cited its expert's analysis of the

share prices of its partners in the Shenandoah project and its

Colorado oil and gas competitors to argue that the Colorado

news, not the Shenandoah write-down, impacted the market for its

shares.

In response, Robbins Geller cited an Anadarko-specific event

study by its expert, who refuted the conclusions of the

company's expert.

Anadarko contested the shareholders' event study in a

Daubert motion and also asked for a chance to counter its

findings in a sur-reply brief. Eskridge denied both requests,

concluding that the shareholder study was a legitimate rebuttal

to Anadarko's arguments.

Robbins Geller told the 5th Circuit that Anadarko should not

get a second chance based on its unsuccessful strategy of

submitting event studies of the company's partners and

competitors instead of the company itself.

Anadarko said Eskridge erred grievously in basing his class

certification decision on evidence introduced in a reply brief

without giving the company a fair shot to refute it.

The company is asking the appeals court not only to remand

the case to the trial court with instructions to reconsider

class certification in light of Anadarko's price impact evidence

but to go even farther and hold that the class cannot be

certified.

The case will be heard next Thursday by Judges Carolyn King,

James Ho and Kurt Engelhardt.

Read more:

FirstEnergy investor class action will get appellate review

in multibillion case

Goldman Sachs ( GS ) appellate ruling is boon for securities class

action defendants

Securities class action defendants counting on SCOTUS'

Goldman ruling