BP and partners say most victims not yet entitled to sue

A road sign expresses local frustration with BP in Belle Chasse, Louisiana along the north/south Route 23 that travels from New Orleans to Louisiana's southeast tip, July 13, 2010.

WILMINGTON, Delaware (Reuters) - BP and its partners in the blown-out Gulf well said on Monday that thousands of fishermen, seafood processors, restaurants, hotel owners and others may not yet have the right to sue over the spill, according to court papers.

BP and its partners such as Transocean Ltd and Halliburton Co said the majority of alleged victims who have brought about 400 lawsuits must first take their claims to a $20 billion fund established by BP.

The document was part of the defense team's proposal for managing the case, which could become one of the largest and most costly in U.S. history.

The plaintiffs' attorneys also filed their management proposal, in which they pressed the court to begin expanded discovery next month. They also proposed that by March they would identify test cases that would proceed to trial.

The plaintiffs would likely benefit if the hundreds of cases move quickly. They proposed BP and its partners should turn over electronic messages, contracts and details about employees with knowledge about the well and much more in the coming weeks.

The defendants, who are presumably better served if the cases languish and drop from the news coverage, countered with a proposal by setting a schedule to agree on the format for requested documents.

BP and its defendants sought to use the $20 billion claims fund to slow the pace of the lawsuits.

They argued that cases in which someone claimed an economic loss, such as a restaurant that suffered because it could not serve Gulf seafood or a shrimper whose boat was idled by the fishing ban, could not sue until it brought its claim to the BP fund.

The fund would then have 90 days to pay the claim or reject it. The claimant could only proceed to the courts if their claim was rejected, according to the defendants.

The defendants said the question of the right to sue should be settled before they have to expand the type of documents they provide to the plaintiffs.

The fund, which was taken over last month by Obama administration's former executive pay czar Kenneth Feinberg, could presumably pay the vast majority of the stronger claims, such as those brought by resorts that had oil-smeared beaches.

That could leave BP and its defendants facing weaker claims that the fund rejects, such as those brought by businesses miles from areas affected by the spill.

BP's incoming Chief Executive Bob Dudley has told analysts that the $20 billion independent claims fund would be sufficient to meet compensation claims.

Both defendants and plaintiffs agreed that the best way to proceed was to bundle similar cases, such as one track for workers injured in the blast on the rig, another for state and local governments suing for loss of tax revenue and so on.

The hundreds of cases filed around the United States as a result of the spill were consolidated in a New Orleans court.

The case is In re Oil Spill by the Oil Rig "Deepwater Horizon" in the Gulf of Mexico April 20, 2010, U.S. District Court, Eastern District of Louisiana, No. 10-MDL-2179.

(Editing by Valerie Lee)