he decision sends the case back to the same court that previously frustrated Okada's attempts to access Wynn Resorts' financial records.
Okada, in his suit in January, alleged that the casino company's us$ 135 million donation pledge to the University of Macau Development Foundation was "inappropriate."
In February, Wynn Resorts responded to Okada's suit with its own accusations, flagging some us$ 110,000 in hotel rooms and other expenses that Okada allegedly provided to Philippine gaming regulators through his Universal Entertainment. It then forcibly redeemed Okada's 20 percent stake in the casino company.
The legal battle has thrown a harsh spotlight on corporate governance in the gambling industry at a time when casinos are mushrooming throughout Asia.
Okada earlier this month sought a preliminary injunction against Wynn to protect his stake in the casino company, asking a federal judge to immediately restore the rights of his Universal Entertainment subsidiary, Aruze USA, as the largest shareholder of Wynn Resorts. Wynn opposed the transfer of the suit to federal court.
U.S. District Judge Larry Hicks on Thursday sent the suit back to the state court, saying the federal court did not have jurisdiction. Wynn Resorts said it was pleased that the judge agreed the state court was the proper forum for the matter to be adjudicated.
Okada, whom Wynn once called his "best friend" and helped bankroll Wynn's casino empire starting in 2000, has fought to claw back his stake in Wynn Resorts that Wynn forcibly bought back at a steep discount after producing a report that outlining Okada's "improper" activities.
Okada's Aruze USA said the latest venue ruling does not harm its case. "The judge's ruling today addresses only the question of where the case should be heard, not the merits of the case," said Steve Getzug, a spokesman for Azure USA.
"While we respectfully disagree with the court's decision, we're quite confident that a jury, no matter where it is seated, will agree that Wynn Resorts CEO Steve Wynn and his dutiful Board of Directors unlawfully stripped Aruze USA of its leadership stake in the company without any legitimate justification and to silence a vocal critic," he said in a statement.
Okada has also filed an amended counterclaim against Wynn, the company's general counsel and individual board members, alleging racketeering and fraud.
Wynn in response said Okada was recycling his previous baseless allegations in the press while continuing to interfere with the judicial process by refusing to accept service of court documents.
Steve Wynn faced another legal headache earlier this week when his ex-wife asked the federal court hearing the case to lift curbs on the sale of her shares in the casino operator.
Elaine Wynn, who ended her 41-year marriage to Wynn in 2009, said in a filing that the restriction lacked legal basis after the company ousted Okada by forcibly redeeming his stake. The 2010 agreement, she argues, exists mainly to ensure control of the company by Okada, Steve Wynn and herself.
Elaine Wynn owns just under 10 percent of the company, according to Thomson Reuters data, about even with her ex-husband.