The lawsuit by four people who bought Mortenson's books claimed that they were cheated out of about $15 each because the books were labeled as nonfiction accounts of how Mortenson came to build schools in central Asia. They had asked U.S. District Judge Sam Haddon to order Mortenson and publisher Penguin Group (USA) to refund all the money collected from Mortenson's book sales.
The readers from Montana, California and Illinois filed the lawsuit after "60 Minutes" and author Jon Krakauer reported last year that Mortenson fabricated parts of those books.
The plaintiffs said Mortenson, co-author David Oliver Relin, Penguin and Central Asia Institute were involved in a fraud and racketeering conspiracy to build Mortenson into a false hero to sell books and raise money for CAI, the charity Mortenson co-founded.
Haddon wrote in his ruling that their racketeering allegations "are fraught with shortcomings" and the plaintiffs' "overly broad" claims that they bought the books because they were supposed to be true were not supported in the lawsuit.
The ruling is good news for Mortenson and his charity after the Montana attorney general earlier in April announced a $1 million agreement to settle claims that Mortenson mismanaged the institute and misspent its funds. The agreement removes Mortenson from any financial oversight and overhauls the charity's structure, but it does not address the books' contents.
Mortenson, who was travelling to Pakistan and Afghanistan, said in an email Monday to The Associated Press that the past year has been challenging as he faced the Montana investigation, the lawsuit, the media reports, plus surgery for a small hole doctors found in his heart.
"At times, facing so much was overwhelming and devastating, however, my attorneys always offered steadfast encouragement to stay positive and keep the high ground, even when subjected to false allegations, vicious name-calling and slander," Mortenson said in his first public statement in a year.
The judge's ruling "upholds and confirms my belief and faith that our American legal and judicial system is honourable and fair," he added.
"Three Cups of Tea," which has sold about 4 million copies since being published in 2006, was conceived as a way to raise money and tell the story of his institute, founded by Mortenson in 1996.
The book and promotion of the charity by Mortenson, who appeared at more than 500 speaking engagements in four years, resulted in tens of millions of dollars in donations.
The book recounts how Mortenson lost his way after a failed mountaineering expedition and was nursed back to health in a Pakistani village. Based on the villagers' kindness and the poverty he saw, he resolved to build a school for them.
The lawsuit claimed, as did the Krakauer and "60 Minutes" report, that Mortenson fabricated that story and others in the book and its sequel, "Stones Into Schools."
Mortenson has denied any wrongdoing, though he has acknowledged some of the events in "Three Cups of Tea" were compressed over different periods of time.
The judge did not address allegations of fabrications, but wrote that the plaintiffs can't simply rely on general allegations of lies in making a claim.
Haddon wrote that many of the items that the lawsuit lists as lies made by the defendants after the books were written, such as CAI paying for Mortenson's expenses and purchasing his books, "do not actually appear to be untruthful or illegal, and are overly vague."
Haddon also ruled that the plaintiffs can't rewrite their complaint to address those shortcomings, noting that the case has been pending for nearly a year and the lawsuit already has been changed five times.
"The imprecise, in part flimsy, and speculative nature of the claims and theories advanced underscore the necessary conclusion that further amendment would be futile," Haddon wrote.
Plaintiffs' attorney Zander Blewett did not immediately return a call seeking comment.
The yearlong state investigation found that Mortenson's poor record keeping and personnel management resulted in unknown amounts of cash spent overseas or for management costs without receipts or documentation. CAI's two other board members were Mortenson loyalists who generally did not challenge him, and he resisted or ignored other employees who questioned his practices, the investigation said.
Mortenson also reaped financial benefits at the charity's expense, including the free promotion of his books, and the royalties from thousands of copies the organization bought to donate to libraries, schools, churches and military personnel, the state found.
The organization spent more than $2 million on Mortenson's charter flights to speaking engagements, and Mortenson and his family charged personal items to the charity, according to the report.
Anne Beyersdorfer, CAI's interim executive director, has said Mortenson will remain the face of the charity but not as executive director, and that he is barred from being a voting member of the board of directors as long as he draws a paycheque from CAI.