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BUTTE (AP) — A federal judge on Friday ruled that a shareholder lawsuit against the former Montana Power Co. and its successor Touch America should be heard in District Court here.

Lawyers representing shareholders were pleased with U.S. District Judge Sam Haddon's decision at the end of a 21/2 hour hearing.

The hearing centered on whether MPC and its successor Touch America potentially violated federal stock trading laws. NorthWestern Corp. is also part of the suit, but is being tried separately.

The original suit was filed in fall 2001 and was sent to Haddon for review in January after NorthWestern lawyer Donald Morrow sought to have the case moved to federal court.

Shareholders' lawyers said the case is about not being allowed to participate in the decision-making process that eventually dismantled MPC, a process that the lawyers say was made in a closed-door executive session Dec. 17, 1999.

"We have deliberately chosen not to plead a securities fraud theory," said shareholders' lawyer Roger Sullivan. "We're not attacking the merger or the reorganization. The right of shareholders to vote and dissent is the center of our case."

When MPC ceased to exist, its shareholders were given equal shares of Touch America stock. Montana Power stock once traded as high at $65 a share, but the telecommunications stock was delisted from the New York Stock exchange recently because it traded under $1 for an extended time. Touch America was delisted from over-the-counter trading this week because it was not current on its filings with the Securities and Exchange Commission.

In the suit, shareholders claim that they have lost $3 billion since executives made the decision to get out of the power business and into the high-tech field.

In an attempt to keep the case in federal court, NorthWestern's Morrow argued the action alleges a five-year scheme to defraud the people of Montana and that was grounds to try the case in federal court.

However, Haddon said the exchange of stock — and any related problems — came with the merger of Touch America and MPC. The stockholders' case centered on the events leading up to the merger, he said.

Shareholders wanted the case to stay in state court.

Frank Morrison, a shareholders' lawyer, said the case would be sent back to District Judge Thomas McKittrick of Great Falls and McKittrick will issue a scheduling order to get it moving again.

Copyright © 2003 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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