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.”
A representative for Cuomo could not immediately be reached for comment. Grasso’s lawyer was also not immediately available.
The lawsuit was originally brought by former state Attorney General Eliot Spitzer and was inherited by Cuomo when he took office. Spitzer, known for taking on Wall Street and the financial industry, later became governor, but resigned after a prostitution scandal.
Cuomo argues Grasso’s pay was unreasonable and that recouping the money is in the public’s interest, even though state law governing not-for-profit companies does not specifically give him the power to seek such a payback.
At the time Grasso headed the exchange, the NYSE was a member-owned institution. It now is a publicly traded, for- profit company called NYSE Euronext. Grasso left the exchange in 2003.
Grasso’s lawyers contended that the Attorney General’s office overreached and that state law did not give it the ability to pursue the claims.
A trial could be a Wall Street spectacle, reliving an embarrassing episode for the NYSE. Potential witnesses could include U.S. Treasury Secretary Henry Paulson and ex-Bear Stearns chairman James Cayne, who both sat on the exchange’s compensation committee.
Reporting by Martha Graybow, editing by Derek Caney and Andre Grenon
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