U.S. judge denies Vivint request to advance SunEdison litigation

September 13, 2016 3:08 PM EDT

The headquarters of SunEdison is shown in Belmont, California April 6, 2016. REUTERS/Noah Berger

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By Jessica DiNapoli

(Reuters) - A U.S. bankruptcy court judge on Tuesday denied Vivint Solar Inc's (NYSE: VSLR) request to advance its lawsuit against bankrupt renewable energy developer SunEdison Inc stemming from a failed merger.

Vivint filed a lawsuit earlier this year against SunEdison in Delaware Chancery Court after Vivint terminated its planned $2.2 billion merger with SunEdison. The lawsuit was automatically put on hold when SunEdison filed for bankruptcy protection in April.

Vivint asked Judge Stuart Bernstein to allow the lawsuit to move forward so it could secure a judgment against SunEdison. Vivint has said in court papers its claim against the bankrupt company is approximately $1 billion in damages.

It is the largest unsecured creditor in the case and can potentially influence how SunEdison's bankruptcy moves forward.

SunEdison declined to comment. A spokeswoman for Vivint did not immediately return a request for comment.

Bernstein rejected Vivint's request because it will take up too much of SunEdison's time.

"Prosecution of the ... litigation at this time will interfere substantially with the progress of the bankruptcy case and prejudice the interests of other creditors by diverting [SunEdison's] resources and personnel at a critical time in the case," Bernstein wrote.

SunEdison has been selling off assets piece by piece as it decides which path its reorganization will take.

(Reporting by Jessica DiNapoli in New York; Editing by Jeffrey Benkoe)

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