Billionaires Barry Diller and John Malone took their Byzantine battle over IAC/InterActiveCorp to court Monday in a weeklong trial that kicked off in Wilmington, Del.
At stake is whether Diller, IAC chairman and chief executive, violated his unusual deal allowing him to vote IAC shares held by Malone's Liberty Media Corp. that constitute controlling interest in IAC and its HSN unit.
Malone, 67, accused Diller, 66, of a "breach of faith" in proposing Liberty's voting strength be diluted from 62 to 30 percent when the St. Petersburg-based TV shopping network is spun off from IAC this summer.
The pair's close 20-year business relationship started to unravel in 2007, so they agreed to carve IAC into five separate pieces. Liberty wanted to own all of HSN as part of the split-up, but talks fell apart over price and Malone's insistence on a tax-free transaction.
Hostilities escalated when Diller pledged to ramrod the deal using Liberty's votes in the upcoming shareholder vote to approve the breakup.
Liberty owns TV shopping giant QVC outright and once owned HSN, too. But in 1995 Liberty granted Diller rights to vote most of its HSN shares, which later became IAC shares, in return for Diller taking the helm of the struggling network. In testimony on Monday, Malone bristled that Diller continues to refer to IAC as "his business."
He complained in court that Diller had "pushed the boundaries" of appropriate use of corporate jets, churned through executive talent and had been amply rewarded with more than
$1.1-billion in compensation even as IAC's stock slumped.
The crowning blow, however, came when Diller voted against Malone and Liberty's interests. Now Malone wants Diller and his board appointees ousted.
Diller counters that Malone, who termed the voting proxy granted Diller "a loan," misinterpreted the deal committed to writing in 2005.
Diller e-mailed HSN employees Monday suggesting they "ignore" news coverage of what he called "a business dispute."
"I will try as well, but probably fail," he wrote.
Mark Albright can be reached at firstname.lastname@example.org or