Los Angeles Superior Court Judge Ralph Dau said the case brought by the state Attorney General's office was legislative in nature and should not be decided in the courts.
Among the eight defendants are former city administrator Robert Rizzo and former assistant city administrator Angela Spaccia. Rizzo is charged with more than 50 counts for orchestrating a scam that nearly bankrupted the working-class suburb.
In March, the judge heard defense motions to dismiss the case and issued a tentative ruling granting the request. He then took the case under submission and finalized the ruling on Monday.
Prosecutors said that in all, former Bell officials have looted more than $6 million of city money for lavish salaries and perks.
The Associated Press contributed to this story.