New York state Supreme Court Judge Charles E. Ramos on Tuesday said he would probably reject a defense motion seeking to throw out much of Attorney General Eliot L. Spitzer's excessive-compensation lawsuit against former New York Stock Exchange chairman Dick Grasso.
In the first substantial hearing in the high-profile case in months, Grasso attorney Gerson Zweifach asked Ramos to dismiss four of six claims made by Spitzer, saying the attorney general lacked legal authority to bring the claims. Ramos did not immediately issue a written ruling but said he was inclined to reject the motion. He told lawyers for both sides to proceed as if all six claims filed against Grasso will be presented to a jury when the case goes to trial.
Spitzer filed suit in May of last year, arguing that $139.5 million in salary, bonus and benefits paid to Grasso for his eight years as chairman of the NYSE violated state law requiring that compensation for executives at not-for-profit organizations such as the exchange be "reasonable" and "commensurate with services performed."
Grasso was forced out of the exchange in September 2003 after the payment generated intense anger among regulators and investors burned by Wall Street and corporate scandals of the past several years. The NYSE is a federally recognized self-regulatory organization charged with overseeing its members and protecting investors. Grasso filed a countersuit last July seeking $50 million for breach of contract and defamation of character.
The Spitzer vs. Grasso case, billed as a blockbuster battle between titanic personalities, has moved at an excruciatingly slow pace. Most of this year has been spent on exhaustive discovery, as each side seeks documents and interviews to build its case. The case is not expected to go trial before the beginning of next year.
Since the case was filed in 2004, the NYSE has announced plans to acquire electronic-trading firm Archipelago Holdings Inc. and become a publicly traded, for-profit company. If it wins regulators' approval, the NYSE would spin off its regulatory arm into a separate, not-for-profit organization.
Spitzer has said he will run for governor of New York next year and is viewed as the leading Democratic candidate. Spitzer foes claim the attorney general is dragging his feet on the Grasso case because he is not confident he can win and does not want an embarrassing loss during an election year. The attorney general has firmly denied that assertion and repeatedly has said he is confident of victory in the Grasso case.
Spitzer deputy Avi Schick said in court on Tuesday that any money recovered by the attorney general's office would probably go to the newly formed, not-for-profit regulatory body overseeing the NYSE. Ramos scheduled another hearing for Nov. 29 to hear arguments about the discovery process. The NYSE is seeking the return of documents it says were inadvertently given to Grasso's side during discovery. Grasso attorney Zweifach said the documents included some "important information" but did not specify the contents.