A U.S. appeals court upheld the 19 felony convictions of former Enron President and Chief Executive Jeffrey Skilling but said he must be resentenced.

David J. Phillip / AP

The ruling, handed down by the U.S. Court of Appeals for the Fifth Circuit in New Orleans Tuesday, said the lower court erred when applying federal sentencing guidelines, so the former executive could now receive a shorter sentence.

Skilling was convicted along with former Chairman Kenneth Lay in May 2006 on conspiracy and fraud changes stemming from the collapse of the energy trading company. Skilling is serving a 24-year term at a minimum security prison in Colorado.  Lay died before being sentenced so his case was thrown out.

Skilling's lawyers had argued in lengthy appeals that all 19 counts against the executive should have been tossed out because government prosecutors had used a flawed legal theory to win the case.  They also said that the Houston jury was biased and the prosecutors in the case acted improperly.

But the three-judge panel wrote that Skilling's appeal "failed to demonstrate the government's case rested on an incorrect theory of law or that any reversible errors infected his trial."

Skilling's attorney, Daniel Petrocelli, told CNBC the legal team is weighing its options, saying  the ruling is "ripe for further review." He noted that the same court upheld the conviction of Enron's accounting firm, Arthur Andersen, only to see that ruling overturned unanimously by the U.S. Supreme Court.

Among Skilling's legal options are appealing the panel's ruling to the full Fifth Circuit Court of Appeals, or going directly to the Supreme Court.

Petrocelli says he has not decided yet which course to take. "It's all too fresh," he said.

Petrocelli said he spoke to Skilling, who is two years into his 24-year sentence, shortly after the rulling.

"Jeff is obviously disappointed," Petrocelli said, "but he is going to keep his resolve, and we're behind him 100 percent."

Enron filed for bankruptcy in December, 2001, less than four months after Skilling's abrupt resignation as CEO. At the time, it was the largest bankruptcy in U.S. history.

Skilling had argued there was no fraud, in part because he was working in the interests of the shareholders and not trying to enrich himself. But the appeals court ruled that by trying to boost Enron's stock price, Skilling was trying to enrich himself.

The appeal also argued the case should not have been tried in Enron's hometown of Houston because of community prejudice. The appeals court agreed there was prejudice in Houston, but ruled that was taken care of by an "exemplary" jury selection process.

The court did agree, however, that Skilling's sentence was too severe, and ordered a new sentencing by U.S. District Judge Sim Lake, who presided over the original trial. No date has been set.

—The AP contributed to this report.

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