By Jonathan Stempel
(Reuters) - A U.S. appeals court said BP (LONDON:BP) Plc, which in July reached a $18.7 billion settlement of federal, state and local claims over the 2010 Gulf of Mexico oil spill, must face one of two proposed class-action lawsuits claiming that the oil company defrauded shareholders over the disaster.
The 5th U.S. Circuit Court of Appeals in New Orleans said investors who bought BP's American depositary shares in a 33-day period soon after the spill may pursue group claims that BP initially "lowballed" the oil flow rate, and that the share price tumbled as the crisis' magnitude became known.
Writing for a 3-0 panel, Circuit Judge Patrick Higginbotham said the issue of whether revelations of the spill's severity were linked to earlier BP misrepresentations was "undeniably common to the class, and is susceptible of a class-wide answer."
The court also said investors who bought BP shares in the 2-1/2 years before the spill, and said the company "lulled" them into believing its ability to manage safety issues was better than it was, cannot sue as a group.
Higginbotham said some of these investors might have bought the stock even knowing of the risk. These investors may still sue London-based BP individually.
Tuesday's decision upheld May 2014 rulings by U.S. District Judge Keith Ellison in Houston, which both sides appealed.
The decision could boost BP's costs over the April 20, 2010 explosion of the Macondo rig and subsequent spill. As of late July, BP had taken $54.6 billion of pre-tax charges.
It can be easier for investors to recover more money at lower cost by suing as a group.
Russell Post, a lawyer for many plaintiffs, said: "We are disappointed with the decision, which we believe erects additional hurdles to class certification that the Supreme Court does not require."
BP spokesman Geoff Morrell said the company will continue to defend against the plaintiffs' "meritless" securities claims.
The defendants also include former BP Chief Executive Anthony Hayward and former Chief Operating Officer Douglas Suttles. Their lawyer Richard Pepperman, who also represents BP, declined to comment.
Other plaintiffs include New York State Comptroller Thomas DiNapoli, who oversees that state's Common Retirement Fund. A spokeswoman, Jennifer Freeman, said the comptroller is pleased that the certification of the post-explosion class was upheld.
The certified class period runs from April 26 to May 28, 2010. BP's ADS price fell 37 percent from the start through the first trading day after it ended.
The case is Ludlow et al v. BP Plc et al, 5th U.S. Circuit Court of Appeals, No. 14-20420.