The decision by Superior Court Judge Jonathan N. Harris dismissed some claims against Citigroup, but retained Parmalat's charges that the largest U.S. bank aided Parmalat insiders in committing an accounting fraud that led to Europe's largest bankruptcy in 2003.

The damages at issue could now be less than $7 billion, but have not yet been specified.

New York-based Citigroup, which was a financial adviser and investment bank to Parmalat, is accused of arranging complex financial transactions to hide Parmalat's massive debt and artificially increase its cash flow.

Citigroup has maintained it lost hundreds of millions of dollars as a victim of Parmalat.

Citigroup spokeswoman Andrea Hurst said they were pleased with the decision. "We look forward to vindication on the remaining claims and counterclaims for the losses we suffered as a victim on Parmalat's admitted fraud," she said.

A Parmalat lawyer did not immediately return a message seeking comment.

The 58-page opinion by Harris is the latest milestone in Parmalat's 2004 lawsuit, one of many filed in Italy and the United States to recover money from banks, auditors and advisers accused of complicity in the fraud.

Most of the lawsuits are being handled in federal court in Manhattan.

A criminal trial began last month in Italy against 24 former Parmalat executives, including founder Calisto Tanzi.

Harris refused to dismiss the entire lawsuit, writing, "The evidence is not so one-sided that Citigroup's agents were conclusively unknowing and oblivious of the alleged dissipation of Parmalat corporate assets. There are factual disputes that swirl around this controversy; thus, a trial on (Parmalat CEO Enrico) Bondi's grievances regarding insider pillage and plunder is required."

The trial, for which Harris has allowed 50 days, will also hear counterclaims by Citigroup, Harris said: "It asserts, in essence, that it was hoodwinked along with all of Parmalat's other creditor-victims, and seeks tort-based remedies for the monumental losses suffered at the hands of Parmalat's old regime."