U.S. District Court Judge Paul D. Borman ruled that statements Moore made about James Nichols in the 2002 "Bowling for Columbine" documentary were "factual and substantially true."
James Nichols claimed in the suit that the statements could be misinterpreted by viewers to inaccurately link him to the bombing. He also claimed the film invaded his privacy and inflicted emotional distress.
Borman said Nichols, a Sanilac County soybean farmer, is considered a public figure for the purposes of the lawsuit.
Terry Nichols is serving two life sentences without parole for his role in the April 1995 bombing that killed 168 people. Timothy McVeigh (search) was executed in 2001 for masterminding the attack.
James Nichols' farm was raided two days after the bombing, after his brother and McVeigh were identified as suspects. James Nichols was arrested that day and held for 32 days, then released for lack of evidence. Charges against him were later dropped.
McVeigh had listed James Nichols' home as his address on some forms and said when he was arrested that Nichols was his next of kin.
Moore, an outspoken liberal activist, is known for such films as "Fahrenheit 9/11" and "Roger and Me." "Bowling for Columbine," a scathing look at the gun culture in America, won the Oscar for best documentary of 2002.