IAC says Liberty actions aim to "cripple" business

NEW YORK Jan 31 (Reuters) - IAC/InterActiveCorp (IACI.O) has asked a court to dismiss recent legal action taken by controlling shareholder Liberty Media Corp, saying the moves to remove Chairman Barry Diller and other directors are designed to "cripple" IAC and could threaten its earnings report.

In a Delaware Chancery Court filing dated Jan. 30, IAC accused Liberty (LINTA.O) of trying to create "management and market chaos" to disrupt its operations as the two companies dispute the structure of a proposed IAC spinoff.

Earlier this week, Liberty Media asked the court to remove Diller and six other IAC board members and strip Diller of long-held rights to vote the company's controlling shares.

"There was no legitimate cause whatsoever for this precipitous action, which was obviously calculated to create maximum confusion and market uncertainty as part of Liberty's campaign to extract benefits for itself," IAC said in its filing.

Liberty proposed to name three of its own nominees to the board, including its Chief Executive Gregory Maffei, and asked the court to bar IAC's current board from major transactions or spin-off plans while it deliberates on the matter.

IAC is due to report its quarterly financial results on Feb. 6, and the company warned that a court action to remove the existing board members would jeopardize its ability to meet U.S. regulatory deadlines for filing the results.

Nasdaq rules require a company board's audit committee must include three independent directors. Liberty's request to the court would remove two of the three audit committee members and replace them with directors who could not be deemed independent, IAC said in its filing.

IAC said in November it would spin off four of its largest business units, including the HSN shopping network, Ticketmaster box office service, Interval International time-share exchange and LendingTree mortgage service.

Liberty Chairman John Malone approved the spin-off plan initially, but raised objections after Diller proposed that the new companies operate under a single-tier share structure to make them more attractive to outside investors.

Liberty owns some 30 percent of IAC, but controls nearly 62 percent of its voting power. Diller's plan would dilute the control Liberty exerts over the spun-off businesses.

Liberty officials were not immediately available for comment.

IAC shares were 1.7 percent higher to $25.88 in late morning trade on Nasdaq. Liberty Interactive Class A shares were 2.4 percent higher to $15.98, also on Nasdaq. (Reporting by Michele Gershberg; Editing by Tim Dobbyn)