Genesco, Inc. won the first battle of what many believe will be a long drawn out war in its legal fight with The Finish Line, Inc. to complete a merger first announced in June of this year. The judge in the Chancery Court in Nashville, where Genesco filed its suit to force The Finish Line and financial backer UBS to complete their $1.5 billion buy-out of Genesco, issued a ruling on Thursday that The Finish Line, Inc. must complete the merger deal.

Chancellor Ellen Hobbs Lyle dismissed Finish Line's claims that Genesco executives withheld key financial information that could have forewarned FINL and UBS of impending sales and earnings issues after the deal closed. Her ruling effectively holds that GCO executives did not commit fraud during merger negotiations. Lyle said The Finish Line and Swiss investment bank UBS AG were sophisticated enough to know what they were getting into with the $54.50-per-share purchase. The deal was conducted by “teams of lawyers, advisers and handlers being paid enormous sums to orchestrate the procedure for obtaining information” she wrote in her ruling. “This milieu is UBS' home territory,” Lyle said inthe 48-page ruling.

The Finish Line, Inc. said that it is disappointed with the ruling issued by the Court, and issued a release saying it is studying the Court's decision and is considering its options, including the possibility of an appeal.

In a release late Thursday Alan H. Cohen, CEO of The Finish Line, said, “While the litigation proceeds, we are continuing to operate our business in the ordinary course and are focused on implementing our product and branding strategies.”

This is just round one of this fight. The litigation concerning the commitment made by UBS Securities LLC and UBS Loan Finance LLC to finance the Genesco transaction is still pending in the United States District Court for the Southern District of New York. The Finish Line’s take on the Nashville ruling is that the Court “expressly reserved for determination by the New York Court whether the merged entity would be insolvent. If the New York Court so holds, the merger will be halted.”

That case is still pending, but Lyle disagreed that the combined company would be doomed.

“The merger has a reasonable chance of succeeding,” she said.

For more details on this case and analysis on its implications, look for this week’s special issue of Sports Executive Weekly.