Williams & Connolly Client Richard Grasso Prevails in NY Court of Appeals
June 2008

The state's highest court on Wednesday upheld a lower court ruling last year throwing out several key parts of New York Attorney General Andrew Cuomo's case over former New York Stock Exchange Chairman Richard Grasso's $187.5 million compensation package. In an order Wednesday, the New York Court of Appeals affirmed a split decision by the New York State Supreme Court's Appellate Division for the First Department that the attorney general's office "does not have the authority" to bring major parts of its case under the state's not-for-profit law.

In a 3-2 decision in May 2007, the appellate division threw out four of six causes of action against Mr. Grasso. The intermediate appeals court said the attorney general's office could bring two causes of action -- unlawful transfer of corporate assets and breach of fiduciary duty. Those statutory claims are pending. 

"A side-by-side comparison of the challenged claims and the statutory claims reveals that the attorney general has crafted four causes of action with a lower burden of proof than that specified by the statute, overriding the fault-based scheme codified by the Legislature and thus reaching beyond the bounds of the attorney general's authority," the Court of Appeals said Wednesday.

By affirming the appellate division's ruling, the Court of Appeals removed one of two causes of action on which New York Supreme Court Justice Charles Ramos relied upon in granting a partial summary judgment in 2006 that Mr. Grasso must return a portion of his compensation package. The attorney general's office has said Mr. Grasso should be forced to return more than $112 million. 

In its ruling Wednesday, the high court said each of the challenged causes of action sought to ascribe liability against Mr. Grasso based on the size of his compensation package. 

"The Legislature, however, enacted a statute requiring more," the Court of Appeals said. "The attorney general may not circumvent that scheme, however unreasonable that compensation may seem on its face. To do so would tread on the Legislature's policy-making authority."

The case was brought by then-New York Attorney General Eliot Spitzer in 2004, alleging his pay was excessive for a not-for-profit corporation. Mr. Spitzer stepped down as New York's governor in March amid pressure following revelations that he was a client of a high-end prostitution ring.

Mr. Grasso, who left the NYSE in 2003 amid turmoil over his pay, has denied wrongdoing. The Big Board has since become a publicly traded for-profit company, NYSE Euronext Inc.

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