U.S. Appeals Court Restores Consumer Fraud Suit Against Keating, Associates : Litigation: The lawsuit seeks $250 million for small investors defrauded in the 1989 failure of Lincoln Savings & Loan in Irvine and its parent company.

Small investors who have already recouped part of the money they lost in the 1989 collapse of Charles H. Keating Jr.’s financial empire may now have another route to recovery.

The U.S. 9th Circuit Court of Appeals on Thursday reinstated a consumer fraud suit that the California attorney general’s office had filed against Keating, directors of his company and the accounting firm Arthur Young & Co., now called Ernst & Young.

The suit, filed in Orange County Superior Court, was consolidated with a multitude of other state and federal civil cases against Keating and others in federal court in Tucson. U.S. District Judge Richard M. Bilby dismissed the case, but the appeals court said he should have sent it back to the state court.

The higher court ordered that the case be returned to Orange County for the Superior Court to resolve. The suit seeks $250 million for small investors defrauded in the failure of Lincoln Savings & Loan in Irvine and its parent company, American Continental Corp. in Phoenix. Investors have recovered about half their money through settlements and judgments in other civil cases.

Meanwhile, Keating asked a federal judge Thursday to reverse his Jan. 6 conviction on racketeering, fraud and conspiracy charges. He contends that the evidence was insufficient and that the government prevented important witnesses from testifying by refusing to grant them immunity from prosecution.