A federal judge has dismissed a lawsuit that alleged that former America Online co-founder Steve Case used insider information to acquire Grove Farm Co. in 2000.

In a 42-page order yesterday, U.S. District Judge Robert Jones found that he could not "rationally find" that Case or his companies "made misrepresentations or omissions" when they paid $26 million for the Kaua'i-based real estate company eight years ago.

"There is a total failure of proof ... that Stephen Case or (ALPS Investment LLC) through Stephen (Case) or anyone else acted 'with an intent to deceive, manipulate, or defraud,' " Jones wrote.

Former Grove Farm shareholders sued Case in 2005, alleging that Case and ALPS improperly used information from Grove Farm's former chief executive officer and Case's father, local attorney Dan Case, when it bought the company.

The former shareholders asked Jones to undo the 2000 deal and sought more than $2.5 billion in damages.

In a news release yesterday, Case's attorney Paul Alston said the judge recognized that his client "did nothing improper in purchasing Grove Farm's stock."

"After two years of litigation, Judge Jones found no fault on the part of Mr. Case," Alston said.

"Under Mr. Case's direction, Grove Farm continues to be a good steward and responsible citizen on the island of Kaua'i."

A 1976 graduate of Punahou School, Case co-founded AOL and served as its chairman until 2003. Case's grandfather lived on Grove Farm and worked as its treasurer until 1959. His father, Dan Case, lived on Grove Farm until 1974, and his law firm represented the company.

Based in Lihu'e, Grove Farm is one of Kaua'i's largest private landowners, with about 40,000 acres.