EBay wins shareholder suit against Craigslist

A Delaware Chancery Court judge has ruled in favor of eBay in a shareholder suit against Craigslist and majority shareholders Jim Buckmaster and Craig Newmark.

The ruling rescinds a measure adopted by Craigslist's board that would have blocked a potential hostile takeover by San Jose, Calif.-based eBay Inc. But in a split ruling, the decision also left in place Craigslist's staggered board provisions, which were passed in an effort to remove eBay's board seat.

In 2004, eBay paid $32 million for a 28.4 percent interest in San Francisco-based Craigslist, with founder Newmark and CEO Buckmaster getting $8 million each. But relations broke down after eBay launched a rival classifieds business in 2007.

In January 2008, controlling stakeholders Newmark and Buckmaster adopted a rights plan that diluted eBay's stake in the company, and a legal battle quickly ensued.

EBay and Craigslist both filed lawsuits against each other, with eBay claiming Craigslist had tried to unfairly dilute its stake, and Craigslist alleging that eBay had used it to develop its own competing classified service.

"We are very pleased that the court gave eBay what it sought from the lawsuit," eBay general counsel Michael Jacobson said in a press release. "EBay brought this suit to protect its own shareholders and preserve its valuable investment in Craigslist."

Officials from Craigslist could not immediately be reached for comment. EBay was represented by Cooley litigation partner Michael Rhodes in San Francisco and corporate and business litigation partner William Lafferty of Morris, Nichols, Arsht & Tunnell in Delaware. Perkins Coie litigation partner Michael Clyde in Phoenix led Craigslist's trial team.

(Published by Law - September 10, 2010)