A US appeals court sided with Argentina Monday and restricted the number of plaintiffs who can sue the country in a class-action suit to recover funds from defaulted bonds.

The appeals court overruled a decision by US District Judge Thomas Griesa that had expanded the class and faulted Griesa for not following an earlier appeals court ruling.

"We conclude that the District Court erred," said US Appeals Judge Chester Straub, writing on behalf of the three-judge panel.

"The mandate... gave the District Court specific instructions that did not permit expanding the plaintiff classes," Straub said. "A district court must follow the mandate issued by an appellate court."

At issue is participation in a class-action suit of bondholders filed against Argentina following the South American country's default on nearly $100 billion in debt in 2001.

If excluded from the class, a bondholder could still launch an individual case against Argentina, but that is more costly to litigate.

Earlier rulings by the appeals court faulted Griesa's method for calculating the size of the class-action judgment and instructed the district judge to hold a hearing to analyze bonds sold on secondary markets, among other issues.

"The District Court, however, did not hold an evidentiary hearing," Straub said.

Monday's decision does not affect another case overseen by Griesa led by NML Capital and other hedge funds that have sought repayment on $1.3 billion in bonds.

A hearing in New York is scheduled for Wednesday on whether Argentina has openly disclosed assets in the NML litigation.