The plaintiffs claimed racketeering, fraud and deceit by Mortenson, co-author David Oliver Relin, Penguin and Central Asia Institute, saying they conspired to build Mortenson into a false hero to raise money.
Haddon wrote in his ruling that their lawsuit fell short because it did not identify the racketeering activity and failed to identify each defendant's role in the alleged fraud.
"CAI is invigorated with the court's ruling today. Greg is on his way to Pakistan. Our dual mission continues unabated," said Anne Beyersdorfer, the charity's interim executive director.
They had asked Haddon to order Penguin to account for all the money collected from book sales and refund that money to people who bought the books, with the rest going to a humanitarian organization.
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 did not address the books' contents.
That state investigation dealt only with the financial affairs of the charity, and not the contents of Mortenson's books. The civil lawsuit was filed after "60 Minutes" and author Jon Krakauer reported last year that Mortenson fabricated parts of those books, which recount his efforts to build schools in Central Asia.
"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.