New York Attorney General Eliot Spitzer is seeking to have his compensation lawsuit against Richard Grasso remanded down to state court from federal court. Grasso is also fighting back this week, denying Spitzer’s charges and angling to keep the $200 million compensation package that forced his ouster as chairman of the New York Stock Exchange last year.
The Wall Street Journal reported that Spitzer filed documents Wednesday in U.S. District Court in Manhattan, arguing that the question of whether Grasso’s pay package was excessive is a matter of state, not federal, jurisdiction.
Spitzer stated that "oversight of internal corporate affairs, including regulation of directors and officers, is a matter clearly reserved to the states' historic police powers" and "not subject" to federal law, the Journal reported.
Grasso’s legal team filed a motion last month that resulted in the case being transferred from state court to federal court. Grasso’s lawyers must respond to Sptizer’s latest motion by Aug. 23. If they choose to challenge it, Grasso’s camp would get two additional weeks to respond before a federal judge decides on where the case will be tried.
Spitzer hopes to recoup up to $100 million in his case against Grasso, the NYSE and former exchange compensation-committee chairman Kenneth Langone. Spitzer’s suit claims, among other things, that the size of the pay package violated the state law that governs not-for-profit groups and resulted from Grasso’s manipulation of the exchange’s board of directors, the Journal reported. A trial in this case could set a precedent for executive compensation cases at nonprofits and charities.
While the NYSE is governed by federal securities laws, Spitzer argues the matter of executive compensation belongs in state court. Grasso, a former friend of Sptizer’s, has accused the attorney general of using the case to raise his profile before an expected gubernatorial bid in 2006.
In another move in the ever-complex case, Grasso fought back by formally denying Sptizer’s claims and suing current exchange Chairman John Reed for disparagement, the Journal reported.
Grasso defended his pay by saying the compensation awarded during his tenure as chairman and chief executive was "earned ... during more than three decades of faithful service to the Exchange pursuant to employment agreements that were unanimously approved" by directors, the filing said and the Journal reported. Grasso also sued the exchange for an additional $50 million he thinks he is still owed and sued Reed for comments he made in the medial after Grasso’s September 2003 ouster, the Journal reported.
"This is just one step in a process," a spokesman for Grasso told the Journal. "We are confident that as the case progresses, Spitzer's claims will prove to have no merit and that Mr. Grasso is the only person entitled to any recovery."