May 8 (Bloomberg) -- Richard Grasso, the former New York Stock Exchange chairman, won a ruling that makes it more likely he can keep his $190 million pay package that the state challenged in a lawsuit.

Grasso appealed four of six claims in the suit, arguing that former Attorney General Eliot Spitzer lacked the authority to sue under state law. The Manhattan appeals court agreed with Grasso today in a 3-2 decision. It said the attorney general can't override the Legislature on what is in the public interest.

``The court is essentially saying what many critics of Spitzer have claimed, and that is that he stretched the power that he had,'' James Fishman, a professor at Pace Law School in White Plains, New York, said after the ruling.

Today's decision, if it stands, means Grasso will keep at least part of millions of dollars a lower-court judge in October ordered him to pay. That money, calculated at $112.2 million by the state, included loans challenged in one of the claims thrown out today.

``We are reviewing the decision and expect to appeal,'' said Jeffrey Lerner, a spokesman for Attorney General Andrew Cuomo.

Gerson Zweifach, Grasso's lawyer, said he and Grasso would have no comment. Michael York, a lawyer for the NYSE at the Reston, Virginia-based law firm Wehner & York, also declined to comment.

State law authorizes suits by the attorney general on the two remaining claims. They might be harder to prove than the ones thrown out today, because they would require proof of fault on Grasso's part.

Remaining Claims

One accusation is that by accepting his compensation, Grasso knowingly accepted an unlawful transfer of assets. Another is that he breached his fiduciary duty to the stock exchange.

The main claim thrown out today was that Grasso's package wasn't ``reasonable'' or ``commensurate with the services performed,'' and that it was ``against public policy.''

Today's ruling turned on whether the attorney general had the right to sue even though it hadn't been granted by the state Legislature. Spitzer argued the suit served the public interest by protecting the exchange. The court majority rejected the argument.

``The authority to bring suit in what the attorney general perceives to be the interest of the state cannot trump contrary determinations about the public interest made by the Legislature,'' the court said in a 54-page opinion.

Reason for Appeal

Cuomo's decision to appeal may be based more on considerations about the attorney general's power than Grasso's pay, said attorney Richard Schulman of the St. Louis-based law firm Bryan Cave.

``This is enough of a cramping of the attorney general's authority that as a policy matter -- having nothing to do with the merits of the case -- he would feel obliged to go to a higher level to get this sorted out,'' Schulman said.

Grasso's victory came after repeated setbacks in the Manhattan courtroom of state Supreme Court Justice Charles Ramos.

Last year, Ramos ruled that the suit would be resolved through a nonjury trial. He also determined that Grasso breached his fiduciary duty to the exchange and ordered the return of an unspecified amount of the pay package. Some of those rulings will argued before the appeals court next month.

For Spitzer, the Grasso suit was part of a campaign that challenged Wall Street firms and practices during his eight years as state attorney general.

Grasso's Career

For Grasso, 60, the lawsuit followed a 35-year career at the NYSE, where he climbed the ranks from a clerk. At one point he ruled out a settlement, saying his reputation was at stake.

Grasso joined the Big Board at age 21, earning $81 a week, after leaving the U.S. Army. His eight-year tenure as chairman ended in an uproar after the exchange disclosed details of the compensation package of almost $190 million.

Under his leadership, the market value of the exchange's listed companies rose 88 percent to $17.3 trillion, fueled by overseas listings, according to data on the NYSE Web site.

Since he left, the exchange has overhauled its trading systems and automated many jobs done by floor traders. Chief executive officer John Thain in March 2006 made good on a Grasso promise to turn the NYSE into a publicly traded company.

Grasso has fought the state's pay suit at every step, insisting his pay was reasonable and properly approved NYSE's directors including Henry Paulson, the present U.S. treasury secretary; and former Secretary of State Madeleine Albright.

``Some of the well-respected leaders from finance and corporate America decided what I was worth,'' Grasso said in a January interview. ``I never asked for a nickel. The only thing I ever said about my compensation was `Thank you. I'm blessed.'''

The case is New York v. Grasso, 04-401620, New York Supreme Court, New York County (Manhattan).

To contact the reporter on this story: Patricia Hurtado in New York Supreme Court at pathurtado@bloomberg.net; Edgar Ortega in New York at ebarrales@bloomberg.net

Last Updated: May 8, 2007 18:29 EDT