Only Melbourne Storm fans can now win the battle with the NRL over massive salary cap penalties after the club dropped its legal action against the league.

The News Limited owned Storm announced on Thursday it would be dropping the case against the NRL, which is half-owned by News Limited.

The case, which sought an injunction on the penalties that included stripping the club of the 2007 and 2009 premierships and all competition points this year, had been brought by the club's four independent directors.

But the independent directors were sacked last week after a report revealed the Storm's salary cap breaches were greater than first thought.

After a legal review, the club's new directors, appointed by News Limited, decided the case would not proceed.

NRL chief executive David Gallop said the decision removed the "barriers the Storm's legal team had placed in the path of the NRL salary cap auditor" and the league could now begin working with the club on a playing roster for 2011.

"This case did not have merit and has only served to give false hope to Storm fans," Gallop said in an NRL statement.

"The penalties were the right ones for what had occurred.

"It's time for all of us to concentrate on the club's future."

Storm lawyer Leon Zwier told the Victorian Supreme Court on Thursday he had instructions that the matter be discontinued.

"The parent-subsidiary and half brother are now in agreement," he said.

"We are now one big happy family."

And in an almost farcical situation, the News Limited owned club were ordered to pay legal costs to the half News Limited owned league.

But the matter may not be over yet. Lawyer Peter Gordon wrote to the NRL earlier this week, asking the league to recognise the standing of Storm fans in a future legal action.

When the legal action commenced in May, Gordon said he represented 116 Storm members and that he may take an interest in the proceeding at a later time.

Gordon did not return calls on Thursday night.

It's understood the NRL's solicitors have replied to Gordon disputing his grounds for taking on the action.

The Storm's former directors Peter Maher, Rob Moodie, Petra Fawcett and Gerry Ryan were sacked last Thursday after the release of an independent investigation into the club's salary cap rorting, leaving their case in limbo.

Outside court on Thursday, Zwier said the matter was over.

"Whilst it is fair to say that our advice hasn't changed, certainly our instructions have and that has brought it to an end," he said.

"I remain confident that neither Mr Gallop (NRL chief executive David Gallop), nor the NRL will never allow for repetition of the events that occurred on the 22nd of April.

"From the Melbourne Storm's perspective the dispute is now over."

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