Finish Line, whose stock fell as much as 25 percent, has been trying to walk away from its June agreement to buy Genesco.

Genesco, based in Nashville, Tennessee, said the court ruled that Finish Line had breached their merger agreement.

"We look forward to working with The Finish Line to consummate the merger expeditiously," Genesco Chief Executive Hal Pennington said in a statement.

Swiss bank UBS sued both companies last month in federal court in New York in a bid to be relieved of its obligation to fund the deal.

Genesco, meanwhile, separately sued Finish Line and UBS in Tennessee in an attempt to force completion of the agreement.

"The only hurdle at this point is insolvency, and whether or not UBS can prove the combined entities would in fact be insolvent and not able to make interest payments and therefore possibly file for bankruptcy," Susquehanna Financial analyst Christopher Svezia told Reuters.

"That's part of the reason why you're seeing Genesco move, but you're not seeing it trade up to $50. There's a lot that needs to get settled here," said Svezia, whose firm has "neutral" ratings on both stocks.

The Tennessee court reserved judgment on whether the combined company would be solvent, saying it would await a ruling in the suit filed by UBS, Genesco said.