A ruling by the state Appellate Court that Fairfield can't pursue principals of investment funds that funneled money to Bernard Madoff's massive Ponzi scheme doesn't mean an end to the town's legal efforts to recoup $42 million in pension funds lost when the fraud collapsed.

The state's second highest court ruled 3-0 Wednesday that a Stamford Superior Court judge had correctly decided that Fairfield was only indirectly affected by actions of two partners in an investment firm accused of conspiring with the disgraced Madoff.

But a lawyer hired by the town to press its claims said Wednesday the appellate court denied the town's case because town officials did not have direct dealings with those feeder fund principals.

However, the town will press ahead with its action against the investment fund that it did have direct contact with, he said.

"One of the cases we brought was against a group of defendants, including defendents from the first feeder fund that received our pension funds," said Richard Robinson, a lawyer with the firm of Pullman and Comley, as well as those from the second feeder fund in which town pension funds were invested.

Also named were members of the Madoff family, as well as Walter Noelle and Jeffrey Tucker, who were the principals in the Fairfield Greenwich Group, which ran the Fairfield Sentry Fund. Robinson said that was the largest of the feeder funds.

However, he said, the town never did business directly with either Fairfield Greenwich Group or Fairfield Sentry Fund -- the basis of the appellate court's dismissal of the town claims.

"We asserted a conspiracy-like claim," Robinson said. "They conspired with people who took our money to give to Madoff to manage in illegal ways."

However, Robinson told the Fairfield Citizen the town's claims against those firms with which it had direct contact, such as Maxam Absolute Return Fund, are continuing.

"This has very little effect on our ability to recover money," Robinson said of the ruling, "for a number of reasons. We're fighting the good fight."

Town Attorney Richard Saxl said Wednesday he has recommended to Robinson and the lead lawyer for the town, David Golub, that if they feel the Appellate Court ruling was wrong, they also should file for certification to take the case to the State Supreme Court.

The town also filed suit against NEPC, which was the pension fund's investment consultant at the time the Madoff scandal broke. The company, however, said Fairfield had invested with Madoff prior to retaining NEPC, and that in 2006, it had recommended the pension fund reduce its exposure in Madoff investments.

The town had made investments totaling $15.9 million into the fund, which officials had been told had grown to $42 million, which was lost when Madoff's fraud was exposed.

Meanwhile, regarding the town's continuing legal action, Saxl said, "We're making significant progress, but I'm not at liberty to discuss the details at this time."

Prior to the collapse of Madoff's $50 billion Ponzi scheme in December 2008, Fairfield officials believed the value of the town's pension funds to be $352 million, with money invested in the Madoff fund valued at $42 million.

The most recent pension fund valuation was put at $293 million, it was reported at a Board of Finance meeting two weeks ago.