Grasso Victorious in Pay Case; Cuomo Won't Appeal

The New York Supreme Court's Appellate Division Tuesday threw out a summary judgment decision that former New York Stock Exchange Chairman Richard Grasso must return a portion of his $187.5 million compensation package, and the New York attorney general's office has told CNBC it will not appeal the decision.

The decision dismisses the two remaining actions against Grasso and one against former NYSE director Ken Langone, saying New York Attorney General Andrew Cuomo's authority to pursue the claims under the state's not-for-profit law lapsed when the NYSE became a for-profit company, NYSE Euronext. (Get more details from CNBC's exclusive interview with Grasso in the accompanying video.)

The decision is likely to deal a body blow to the case as Cuomo's office does not have the automatic right to an appeal.

A spokesman in Cuomo's office said the attorney general will not appeal the decision. "We have reviewed the court's opinion and determined an appeal would not be warrented," he said. "Thus, for all intents and purposes, the Grasso case is over."

This latest ruling is the second major setback in a week for the state attorney general's office as it attempts to force Grasso to return more than $112 million in compensation.

The New York Court of Appeals, the state's highest court, last week upheld a lower court decision that had tossed out four of six claims in a lawsuit challenging Grasso's pay package.

Taken together, the decisions deal yet another blow to the legacy of former Attorney General Eliot Spitzer, who had initially brought these claims against Grasso.

Grasso left the exchange in 2003 after an uproar over his $187.5 million compensation package. He was then sued in 2004 by Spitzer's office, which said the pay was exorbitant for an organization classified as a not-for-profit group.

However, Grasso argued that a private interest like NYSE should be free to set its own compensation.