San Diego Gas & Electric (SDGE) promised in 2012 to buy a $285 million stake in the Rim Rock wind farm in Montana, but withdrew from the deal later that year.
The utility company said that NaturEner had breached the contract because it had failed to properly take into account the possibility of eagle deaths when planning the development, and misrepresented the threat when the deal was made.
Counter to this, NaturEner has said that it has gone to "great lengths" to protect a nearby colony of eagles.
In December, SDGE attempted to have the suit heard at a federal court on the basis that eagle protection legislation covers all states, but this move has been blocked.
In a ruling, US district judge Brian Morris said potential federal issues that might be raised over bird protections are not sufficient grounds to remove the NaturEner's lawsuit against SDGE from the state district court, where the lawsuit was originally filed in December.
"Accordingly, this case should be decided in state court, rather than in federal court," Morris wrote in his order.
SDGE has continued to purchase the electricity from the project following its commissioning in late 2012. The wind farm features 126 Acciona 1.5MW turbines with 77-metre rotors.
The utility company's concerns about the project will no doubt have been peaked by the news in November that Duke Energy agreed to pay $1 million in damages following its admission that golden eagles and other protected birds were killed by turbines at two of its Wyoming wind farms.
The company faced the charges because it was deemed not to have given proper consideration to the risk of bird deaths when planning the wind farms.