The blind star received the accolade for his classic hit Superstition, but it has since found its way into the hands of Gotta Have It! Collectibles owner Pete Siegel, who is planning to sell it off.
Representatives from the National Academy of Recording Arts and Sciences, the body responsible for the Grammys, have taken issue with the sale and have filed suit against Siegel, accusing him of a variety of charges, including fraud, unjust enrichment and false advertising.
It is unclear how Wonder lost ownership of the honour, although reports suggest Grammy organisers are suspicious of how Siegel obtained the gong, which is among a 1,000-item lot also featuring memorabilia from The Beatles and Led Zeppelin.
The Grammy in question has been given a minimum starting bid of £7,500, reports the New York Post.
It is not the first time Siegel's star sales have hit the headlines – last year.
Lady Gaga contacted the firm to buy up a collection of her old belongings after a former manager announced plans to auction them off, while the FBI seized john Lennon's 1976 application for U.S. residence in October after determining the item was the property of the U.S. Government and therefore could not be sold.