Appeals court backs former NYSE chief in pay case

By Martha Graybow

NEW YORK (Reuters) - The state's highest court on Wednesday sided with former New York Stock Exchange chief Richard Grasso in his efforts to throw out key parts of a lawsuit seeking the return of more than $100 million of his pay.

The unanimous ruling by the seven-member court does not end the long-running lawsuit, but means New York Attorney General Andrew Cuomo's office could have a harder time proving its case at trial. Legal experts say the ruling, which upholds a lower court decision in Grasso's favor, increases the chances the matter could be settled or dropped ahead of trial.

Grasso, who ran the exchange for eight years, was sued by state officials in 2004 after an uproar over his $187.5 million compensation package.

The New York Court of Appeals said state law did not give the attorney general's office the ability to pursue the claims against Grasso, "however unreasonable that compensation may seem on its face."

"To do so would tread on the Legislature's policy-making authority," Chief Judge Judith Kaye said in a written ruling upholding a lower court decision that threw out four claims against Grasso.

Two other parts of the case were not part of the appeal, although they are being challenged by Grasso's lawyers separately.

Based on the current ruling, the attorney general's office now will be forced to prove at an eventual trial that, not only was the NYSE chief's pay unreasonable, but Grasso knew that was the case and tried to conceal his pay details from the exchange's board.

"The claims are starting to get a little bit old," said Stuart Kaswell, a partner at law firm Bryan Cave LLP in Washington who is not involved in the case. He said it will be up to Cuomo's office to decide "whether this is a case worth pursuing."