UPDATE 1-Judge rejects banks' request in Clear Channel case

(Adds quotes from lawyers from both sides, representatives, background)

SAN ANTONIO, April 11 (Reuters) - A judge in Texas on Friday refused a request by several New York-based banks to dismiss a lawsuit filed by Clear Channel Communications Inc (CCU.N: Quote, Profile, Research) and two buyout firms trying to acquire the radio operator.

Bexar County State District Judge Joe F. Brown Jr set a June 2 trial date for the case.

"We need relief," Clear Channel attorney Ricardo Cedillo said, arguing for a quick trial. "We have 6,000 employees whose employment cannot be guaranteed. We have contracts around the world which have been thrown into uncertainty."

Private equity firms Thomas H. Lee Partners and Bain Capital had filed complaints in New York and Texas against Citigroup Inc (C.N: Quote, Profile, Research), Morgan Stanley (MS.N: Quote, Profile, Research), Credit Suisse Group (CSGN.VX: Quote, Profile, Research), Royal Bank of Scotland Group Plc (RBS.L: Quote, Profile, Research), Deutsche Bank AG (DBKGn.DE: Quote, Profile, Research) and Wachovia Corp (WB.N: Quote, Profile, Research), seeking to force them to fund a $20 billion buyout of Clear Channel.

Clear Channel joined them in the Texas suit, but was not a plaintiff named in the New York case.

The buyout firms claim the banks balked at providing financing when the debt markets deteriorated and asked for a change in its terms that prevented completion of the deal. The banks were to have earned more than $400 million in fees.

In the Texas case, Clear Channel, Thomas H. Lee and Bain in claim "tortious interference" with the deal which "if allowed to continue and succeed, could result in immeasurable damages" exceeding $26 billion, according to the suit.

In New York, the private equity firms are seeking "specific performance" of a commitment letter that details the plans to fund the deal. Specific performance is when one party asks a judge to order another party to stick to a contract.