Judge Royce Lamberth dismissed the suit against Terna Energy USA Holding from federal court in Washington DC because he said the venue was not appropriate.
Terna lawyers had argued that the contract signed by representatives for both companies required that any dispute be heard in New York courts.
Lawyer Tim Xia, for Ralls, told Bloomberg that his client will now file suit in federal court in New York.
Ralls is affiliated with Chinese manufacturer Sany Electric.
The company reportedly failed to make a $4.2 million payment to Terna in December and wants to prevent the sale of collateral pledged in the deal, said Bloomberg.
Separately, Ralls has sued president Barack Obama seeking to lift the block on the development.