Former Gov. John G. Rowland and Marc Ryan, his former budget director, dropped their legal defense of their decade-old labor decision on Friday, as the state enters into settlement negotiations.

In a statement from the lawyer the state hired to defend them, the two announced they would not pursue further legal action at this time.

“Governor Rowland and Mr. Ryan are hopeful that the Attorney General will be successful in his efforts to resolve this longstanding dispute,” Daniel Klau of McElroy, Deutsch, Mulvaney & Carpenter, said in an email.

Rowland and Ryan were being held personally liable for the 2003 decision to lay off 2,800 state employees. The Second Circuit Court of Appeals found that they violated the First Amendment rights of the union employees when they laid them off. The two disagreed and asked the U.S. Supreme Court to hear their case, but last week learned the court declined.

The state had been paying Klau’s law firm to represent Rowland and Ryan. According to the Attorney General’s office, the firm has been paid about $130,644 since Aug. 1. On Aug. 1 the state, which had been represented by three law firms over the years, decided to move the case in-house. It’s difficult to say exactly how much of the $942,026 the state has paid outside law firms to defend the decades old lawsuit should be attributed to the defense of Rowland and Ryan.

“We welcome Governor Rowland and Mr. Ryan’s decision, as we are committed to moving forward with settlement discussions,” Jaclyn Falkowski, a spokeswoman for Attorney General George Jepsen, said. “We continue to believe the best course is to attempt to settle all claims in this case if we can in the best fiscal interests of the state, including the interest in avoiding additional litigation expenses.”

In December, the state dropped its petition with the U.S. Supreme Court asking for a hearing and instead sought to negotiate a settlement with the unions.