UPDATE 1-IAC, Diller sue Liberty Media over voting rights

(Adds byline, details on Liberty Media countersuit)

By Gina Keating

LOS ANGELES, Jan 24 (Reuters) - IAC/InterActiveCorp (IACI.O) and its chief executive, Barry Diller, have sued IAC's controlling shareholder, Liberty Media Corp, in a dispute that threatens the Internet conglomerate's plans to spin off four units.

In their lawsuit filed on Wednesday, IAC and Diller, who is also chairman, asked a Delaware Chancery Court to rule that the spin-off may go forward as unanimously approved by IAC's board, which includes Liberty Media (LINTA.O) Chairman John Malone.

In a countersuit filed on Thursday, Liberty accused Diller and IAC's board of structuring the spin-off so as to "wrest eventual control of IAC's businesses away from Liberty" by diluting its voting power to 29.9 percent from nearly 62 percent.

In its lawsuit, Liberty asked the court to stop the proposed IAC spin-off, to find that Diller and the IAC board of directors breached their fiduciary duties and to award damages to Liberty.

Diller has long held the right to vote Liberty Media's IAC shares, and he said in the lawsuit that he intended to vote all of those shares in favor of the board-approved spin off.

But at a Jan. 8 IAC board meeting, Malone said he opposes Diller's plan for changing the voting structure at the new companies created by the spin-off to one tier of voting shares from the high-vote/low-vote structure at IAC, according to the Diller/IAC lawsuit.

Malone wants the companies to maintain IAC's two-tier structure with the result that Liberty would receive high-vote stock in the transaction and would control each of the newly formed companies, that lawsuit said.

The suit said Liberty "has also suggested that ... Diller may not vote (Liberty's IAC) shares" in favor of the board-approved spin-off.

Malone also indicated at IAC board meetings on Jan. 8 and on Jan. 16 that Liberty would challenge the proposed transaction in court, the lawsuit said.

In its countersuit, Liberty contends it can rescind the proxy it granted Diller to vote its IAC shares and "will ultimately have the right to exercise voting control over IAC."

Liberty accused Diller in its suit of trying to "entrench his hand-picked directors and other officers at the (spin-off companies), monetize a significant portion of his interest in IAC and rid himself of Liberty's influence" at those new companies.

IAC plans to spin off shopping network HSN, box office service Ticketmaster, its Interval vacation and time-share business and its LendingTree online mortgage service. The transactions were expected to close in the second or third quarter of 2008. (Additional reporting by Michele Gershberg in New York; Editing by Richard Chang and Braden Reddall)