Wolinsky took Malone through a series of deals made during the 13-year relationship between Diller and Malone, making it clear that Malone was not aware of the legalities of how the proxy would work over time.

In fact, once Gregory Maffei of Microsoft took over as Liberty's chief financial officer in 2005, Maffei—who was no fan of Barry Diller—asked Liberty's legal counsel to draft a memo on the question of Diller's voting rights.

Before leaving the witness stand, Malone seemed a bit contrite. "I still hold him no ill will," he said. "And I still seek a win-win solution. In a sense, that we were unable to resolve this without going to court, I think we both hurt ourselves."

William Berkman, who became a Liberty representative on IAC's board in 2006, said the spin-offs combined with the single tier stock structure—reducing Liberty's voting interest from about 60 percent to 9 percent—described the impact as fundamentally unfair. "Our relationship is based on trust. I fundamentally don't think it's fair," he said.

He described the showdown between Diller and Malone at the January 16 board meeting as a "a classic sort of challenge situation."

While he could not remember Diller's exact words, Berkman said "there was no doubt in my mind," that Diller planned to use the irrevocable proxy to vote in favor of the spin-offs.

"It was final," Berkman testified. He was not shaken from this view on cross examination: "I've thought about it a lot because it's so important."