Court to Diller: Spin Away

In the epic battle of Barry Diller versus John Malone, the victory is going to Diller. Too bad the courts can't mandate a recovery in InterActive Corp.'s flagging operations.

Stephen Lamb, a chancery court judge in Delaware ruled in favor of Diller, who had assumed rights to vote the proxy of other investors to decide whether to spin off pieces of the Internet-commerce conglomerate into smaller companies. One big investor -- Malone's Liberty Media - objected to the spinoff and to Diller using his votes. But the court said Diller can do just that.

A copy of the 79-page decision is available on PaidContent.org, as are some choice highlights.

the court concludes that Liberty has failed to demonstrate that Diller has breached or threatened to breach any contractual duty he owes to Liberty. In particular, the court rejects Liberty's claim that the proposed single-tier spin-off gives rise to any right of consent on Liberty's part. It follows that the proxy remains in effect, with the consequence that the Liberty parties who purported to execute written consents on January 28, 2008, lacked the power to vote Liberty's shares in IAC.

Thus, the court will enter judgment in the section 225 action in favor of the defendants. The court also concludes that Liberty's various other contract-based objections to the proposed spin-off lack merit and should be dismissed on the basis of the record that now exists.