Motorola Inc., the mobile-phone maker that declined 50 percent in value this year, lost a bid to dismiss a lawsuit accusing it and former chief Ed Zander of misleading investors about the company's prospects.

U.S. District Judge James B. Moran in Chicago denied the company's request in a decision dated Sept. 23. Moran said shareholder Eric Silverman had made sufficient allegations of wrongdoing to withstand a challenge to the complaint.

``Plaintiffs have successfully pleaded a primary violation'' of federal laws barring corporations and those who run them from knowingly making statements that are material and misleading, Moran ruled.

Former Chief Executive Officer Zander and other officers are accused in the suit of repeatedly telling investors to expect strong sales growth. Motorola, the biggest U.S.-based mobile-phone maker and the world's third largest, has posted six straight quarters of declining sales.

While allowing the plaintiffs to move forward with their case, Moran struck parts of their claims and absolved two of the company's executive of liability for others.

``We are pleased with the court's dismissal of large portions of the plaintiff's case and we plan to vigorously contest the remaining allegations,'' Paula Thornton Greear, a spokeswoman for the Schaumburg, Illinois-based company, said today in an e-mail.

Shareholders Group

Silverman's suit for unspecified money damages, filed in August 2007, seeks class-action, or group, status on behalf of everyone who bought Motorola stock from July 2006 to January 2007.

Zander, then chairman as well as CEO, said in November 2007 that he was leaving the company. He was replaced by current Co-CEO Gregory Brown, a defendant in the suit. The defendants also include Ronald Garriques, previously a vice president of Motorola's mobile-phone business and now president of computer- maker Dell Inc.'s global consumer group.

Zander, Brown and the other officers were accused of repeatedly telling investors to expect strong sales and revenue growth.

Moran dismissed some allegations against defendants Brown and Daniel Moloney, now head of Motorola's advanced research group. Moran said the two wouldn't have had reason to know about potential problems with the company's next generation of phones that were allegedly concealed from investors by the other officers.

The suit was filed by the San Diego-based class-action law firm Coughlin Stoia Geller Rudman & Robbins. Reached by phone, Rudman said the parties would now begin requests for evidence.

A date hasn't been set for a hearing on class certification. ``We'll look to do that as soon as we can,'' Rudman said.

Motorola rose 37 cent to $7.87 in New York Stock Exchange composite trading at 4:15 p.m.

The case is Silverman v. Motorola Inc., 07cv4507, U.S. District Court, Northern District of Illinois, Eastern Division (Chicago).

Source:Bloomberg