Two eBay Claims Against Craigslist Dismissed; Others Headed for Trial

A Delaware court dismissed two of eBay Inc.’s claims against classified website Craigslist Inc. and its two biggest shareholders Friday, but five key claims remain to be heard in an upcoming trial.

The case, expected to go to trial in December after two delays, stems from an April 2008 lawsuit filed by eBay in which the online giant claimed Craigslist’s two majority shareholders approved a “coercive plan” that diluted eBay’s minority share in the company from 28.4 percent to 24.85 percent.

In the first of the dismissed claims, EBay accused Craigslist founder Craig Newmark and Chief Executive James Buckmaster of breaching their fiduciary duty by approving indemnification agreements that benefited themselves and were “motivated by intent to harm eBay.”

But Chancellor William Chandler III of Delaware’s Court of Chancery wrote that eBay relied on a “speculative” argument when it claimed that the defendants — who had approved but never actually signed the agreements — might ink them at some future date.

The indemnification agreements provided, among other things, that in the case of joint liability with Craigslist, the company would pay any judgment or settlement without requiring the indemnitee to contribute.

EBay’s second claim charged that the indemnification agreements were “a waste of corporate assets,” but the judge found that no funds had ever been spent.

“Without an actual agreement, there is no contract or transaction for me to examine under self-dealing or waste claims,” Chandler wrote.

EBay could not immediately be reached for comment.

On a Craigslist blog published Friday, Buckmaster wrote that the company and its directors will demonstrate in trial that they adopted “reasonable governance measures” to protect against “eBay’s exploitation of its position as stockholder to harm craigslist and obtain unfair commercial advantage.”

In its original lawsuit, eBay claimed that the defendants sought to indemnify themselves from future liability even while preventing eBay from being able to elect a director or sell its shares to any others besides Newmark and Buckmaster.

Craigslist filed its own lawsuit against eBay in San Francisco a month later, in which it claimed that eBay used its shareholder status to gain confidential competitive information as it developed its own online classified site.

That lawsuit claims unfair competition, trademark infringement, false advertising and breach of fiduciary duty.

The issues still remaining in eBay’s original complaint involve a right of first refusal agreement adopted by the defendants and a share issuance that eBay claims was dilutive.

(Editing by Andre Grenon, Gary Hill)