A federal judge threw out a lawsuit against Macy's Inc. by developer City Center Realty Partners, which at one time was seen as a front-runner to buy the Macy's store in downtown Minneapolis.

City Center Realty Partners, which has offices in Minneapolis and San Francisco, in the suit accused Macy's of "pulling the rug out from under" it when Macy's decided last December to sell the three buildings it owned on Nicollet Mall to 601W Cos., a New York real estate investment firm.

In dismissing the case, U.S. District Court Judge Susan Richard Nelson said the outcome of the negotiations was "understandably disappointing to City Center," but there wasn't any factual basis to show that the conduct of Macy's "rose to the level of fraud."

The suit was originally filed in January in Hennepin County District Court and was later moved to federal court.

City Center Realty Partners said it signed a letter of intent last summer to do a deal with Macy's and that it lost millions in the unfinished deal because of costs related to due-diligence work, including an environmental investigation.

Nelson said City Center took the risk that the final deal would never materialize.

"City Center well knows that the letter of intent was a risky proposition, with no assurance of a final purchase agreement and closing and the potential for the expenditure of significant funds without any written guarantees. … The letter of intent merely identified the preliminary steps that might lead the parties to the successful negotiation of a purchase agreement," the judge wrote. "It contained no mechanism for the reimbursement of City Center's negotiating expenses."

In March, Macy's Inc. announced it completed the sale of the property to 601W Cos. for the price of $59 million. The new owner plans to remodel the buildings, with 1 million square feet of space, for new offices and retailers.