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Former Lehman Brothers Holdings Inc executives, directors, auditors and underwriters on Wednesday lost their bid to dismiss an investor lawsuit seeking to hold them responsible for losses tied to the investment bank's collapse.

In a 106-page ruling, U.S. District Judge Lewis Kaplan in Manhattan said the plaintiffs, which includes individuals, pension funds, and companies, sufficiently alleged that Lehman materially misled them about its accounting and their ability to manage risk before filing bankruptcy on September 15, 2008.

Kaplan said "it is entirely plausible" that the "misleading picture" Lehman portrayed about its financial conditions inflated its stock price, and resulted in investor losses.

The complaint "adequately alleges misstatements and omissions that overstated Lehman's financial strength, misstated and understated the extent to which it was leveraged, misstated its risk management practices, and understated its exposure to Alt-A and commercial real estate assets," Kaplan wrote.

The investors had bought some of the more than $31 billion of equity and debt that Lehman had issued under a 2006 shelf registration statement and subsequent filings. Among the defendants who failed to win dismissal are former Lehman Chief Executive Richard Fuld, and former auditor Ernst & Young.

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