Groves was the bookmakers favourite to take charge at Fratton Park, while James suddenly came into the frame after administrator Andrew Andronikou revealed that the goalkeeper had said he wants to move into management in the future.
Andronikou is running Pompey while trying to find a buyer for the club, who were relegated to the Championship this summer and are struggling with massive debts.
"Discussions have been had between Paul and a senior member of my team and he wants to stay on as a coach. He wants to distance himself from the job, he does not want to be manager," Andronikou told The News.
"I know David wants to go into management, but he has not really got the experience at the moment. Really he needs to learn his trade under somebody and needs to get his coaching badges, so I'm not sure whether this is quite the right time for him."
Derby County have completed the signing of Polish striker Tomasz Cywka from Wigan Athletic.
Cywka, 21, spent time on loan at Pride Park last season and has agreed to return on a two-year contract.
"His performances towards the end of the season were impressive and we were delighted with what we saw," said Rams manager Nigel Clough.
"He instantly struck up a rapport with the supporters, who took to Tomasz straight away. Tomasz isn't the finished article by any means, but he has plenty of talent and potential."
Bristol City have purchased 13.9 acres of land to extend their training facilities to include more pitches and base their academy and administration staff there.
Middlesbrough will receive £1million from Manchester City after Adam Johnson made his senior England debut.
It takes the transfer fee received from City to £8m, with a further £1m to come based on appearances.
Plymouth Argyle have signed defender Bondz N'Gala from West Ham United.
N'Gala, who made two appearances on loan at Scunthorpe earlier this season, has signed a two-year contract at Home Park.