Morgan Stanley won a crucial legal ruling in its battle with former credit card subsidiary Discover Financial Services over almost $800 million Morgan Stanley says it is owed.

In a decision Monday, New York State Supreme Court Justice Barbara Kapnick ruled that Discover was obligated to pay the amount as a special dividend to Morgan Stanley.

At issue is money stemming from a $2.75 billion settlement payment Discover received from Visa Inc. and MasterCard Inc. as part of a 2004 lawsuit. Morgan Stanley, which had acquired Discover in the 1990s, spun off the card company into an independent entity in 2007. As part of the spinoff, the companies agreed that Morgan Stanley was entitled to receive a portion of Discover's settlement proceeds.

But Discover contended that Morgan Stanley had breached the spinoff agreement by meddling in the Visa-MasterCard settlement and declined to pay the dividend. That prompted Morgan Stanley to file a suit against Discover in New York State Court last fall. Morgan Stanley claimed that it was owed $1.2 billion of the $2.75 billion settlement. After taxes, that comes to about $785 million, plus interest.

Discover has sued Morgan Stanley over the settlement payment and that case is still pending.

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