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Diller on the Stand

Battle of the Moguls enters its last day in a Delaware courtroom. At stake: IAC/Interactive's $5 billion in assets.
Barry Diller

A hint of Barry Diller's relationship with his erstwhile partner John Malone surfaced Wednesday in the courtroom battle for control of internet services conglomerate IAC/Interactive.

In an email introduced in Delaware Chancery Court, Diller told former General Electric C.E.O. Jack Welch that working with Liberty Media chairman Malone was the "usual nightmare." Today, the blunt-spoken and sometimes volatile Diller will have a chance to elaborate when he takes the stand in Vice Chancellor Stephen Lamb's courtroom.

Diller, who has built IAC into a $5 billion company with Malone's backing, wants to spin off four businesses in a deal that would dilute Liberty's control. Liberty says that would breach longstanding agreements between the companies.

Liberty has long had super majority voting rights in IAC; that in theory gives it the power to block a breakup. The sticking point: Malone gave Diller a proxy to vote Liberty's shares. Can Diller now cast Liberty's votes against Liberty's interests?

Malone, the silver-haired Liberty chairman, took the stand on Monday. And as the first star in what has been billed as a Battle of the Moguls, he delivered an icy and detached performance. Neither his emotion nor blood pressure seemed to rise, even as he related his disagreement with his associates' plan to annul Diller's proxy to vote—an idea he attributed to "brain damage."

Diller is expected to deliver more fireworks. The Beverly Hills native has a combative temperament; Malone, by contrast, is an engineer who's been called "Doctor" throughout the trial, which began Monday.

But Diller faces a tough challenge this morning: He needs to convince Lamb that his course of action is right, and Lamb is closer in personality to Malone. A former partner from Skadden, Arps, Slate, Meagher & Flom, Lamb is a no-nonsense judge, say those who know him. 

"He's very controlled," says Lawrence Hamermesh of Widener University School of Law in Wilmington, Delaware. "I don't know of anybody who is more deliberate in the way he conducts himself in the courtroom." And, Hamermesh adds, "He's not interested in capturing headlines: Steve's very dry."

Lamb has rolled his eyes a few times during the trial so far and scolded Liberty's counsel, Kevin Abrams of Abrams & Laster, for putting words into the mouths of his witnesses.

On Diller's side, he has able counsel in Wachtell, Lipton, Rosen & Katz, a firm that has seen its way around Delaware Chancery Court for decades. He's made it through at least one previous tussle for corporate control in the Delaware courts—and won.

In December 1993, the Delaware Supreme Court ruled that Paramount Communications had not been fair to shareholders when it blocked a takeover bid from Diller's QVC Inc. Some have described the Diller/Malone dispute as harkening back to the slugfest over control of Paramount.

Whether he succeeds this time may hinge on his testimony today.

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