Barry Diller

A Delaware court ruled in favor of InterActive Corp CEO Barry Diller in his legal dispute with Liberty Media's

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[LCAPA  Loading...      ()   ] John Malone in a battle over who could control InterActive Corp's

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[IACI  Loading...      ()   ] future.

This means that Diller can go ahead with his plan to spin off four stand-alone companies: Ticketmaster, HSN Home Shopping Network, Lending tree, and its time share business, from IAC, which would retain the Internet companies like Ask.com. The very last page of the 78-page ruling says "Liberty does not have a right to contest to the proposed spin-off" --meaning Diller doesn't need Malone's permission.

But it's not entirely over. Diller still has to figure out the structure of the spin off--a battle that could land the media mogul pair back in court. Diller proposed a single class voting structure for the spin offs, which is different from what IAC currently has. Liberty opposes that new structure because it currently has voting control over the company because of its dual-tiered voting structure and it wouldn't with the new plan.

Here's what happened: Liberty Media owns about a third of IAC, but controls about 60 percent of the company's voting stock. Liberty's Malone and IAC's Diller were longtime friends and business partners, so Malone gave Diller "irrevocable proxy" for his vote on that controlling stake.

A few months ago Diller proposed splitting up the company, with a voting structure that would diminish Malone's voting power. Malone said he no longer wanted Diller to have voting power for his stock, and furthermore, he wanted Diller and his folks (including his wife Diane Von Furstenberg) kicked off IAC's board because he said Diller hadn't properly managed the company.

They called each other names, and instead of settling out of court, as they were expected to, things escalated. The two have talked about some sort of asset trade for a while...and people have been saying that Diller would be interested in trading its stock for HSN to merge with Liberty's QVC. It would make sense. Diller would get control of his company back, Malone would get to merge the two TV-shopping businesses. This could still happen I suppose, but I'd guess not for a while.

I'm surprised it turned out this way. I thought the judge would rule that Diller couldn't go ahead and split up the company without Malone's permission but also that Malone didn't have the right to kick Diller and his people off the board. That decision I was expecting would have left them pretty much at square one to figure it out for themselves. This was clearly in favor of Diller, but it's not over yet-- we'll see how Malone responds!

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