COURT REINS IN INVESTIGATORS, LEAVES STATE OPEN TO SUIT.(Local)

Byline: Carol DeMare Staff writer

An appellate court refused Thursday to broaden the State Investigation Commission's scope of immunity to protect it from more than $34 million in damages sought by Patrick F. Mahoney, an engineer who claims the agency defamed him and cost his firm the loss of business.

Mahoney and his Albany firm, Smith & Mahoney P.C., have been embroiled with the commission in two courts since 1984, in a protracted battle stemming from Mahoney's involvement in a waste management project on Long Island.

The unanimous ruling by the Appellate Division of state Supreme Court clears the way for a trial in the state Court of Claims that could …