When Chancellor William Chandler III of Delaware Chancery Court ruled last September that Craigslist had improperly diluted eBay Inc.’s stake in the classified ads company in an effort to keep eBay-supported directors off Craigslist’s board, he referred to the two companies as oil and water. The Delaware corporate case, it turns out, is only one front in the litigation between these onetime allies-turned-bitter-enemies. And last week, Craigslist got good news on the other front, when a San Francisco Superior Court judge refused to dismiss a fraud suit against eBay.
Here’s the backstory: In 2004 eBay acquired a minority stake in Craigslist. Three years later, eBay launched a rival classified ads service. Craigslist responded with a series of corporate maneuvers designed to ward off a hostile takeover by eBay; eBay then filed a Delaware Chancery Court suit to block the poison pill measures and Craigslist sued eBay in San Francisco state court for fraudulently obtaining its confidential information with the intent of establishing a rival site.
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