The NY Times’ Brad Stone has a nice summary of the details of the lawsuit complaint (redacted version here), which is about dilution of eBay’s interest and board strength following Kijiji’s entry into the US:
In 2005, eBay went into the classified ad business overseas, launching Kijiji.com. In 2007, eBay launched the site in the United States.
In June 2007, Craigslist notified eBay that it was engaging in competitive activity and that both parties had ceased being subject to the right of first refusal.
In July, eBay notified Craigslist that it was withdrawing Josh Silverman, now Skype’s chief executive, from the Craigslist board since he had worked on Kijiji. EBay tried to appoint Thomas Jeon, an eBay lawyer, to the Craigslist board, but Craigslist did not respond to the requests, according to the complaint.
In late July 2007, in an e-mail message to Jim Buckmaster, Meg Whitman said eBay had taken steps to “completely firewall” off Kijiji from its interest in Craigslist. She also reaffirmed eBay’s interest in buying all of Craigslist. “We would welcome the opportunity to acquire the remainder of Craiglist we do not already own whenever you and Craig feel it would be appropriate,” she wrote.
That triggered what appears to have been fear at Craigslist that the non-profit-minded company could somehow be subjected to a hostile takeover.
Craigslist then took unilateral actions that effectively diluted eBay’s interest from the original 28% share to 25% and eBay also lost its ability to seat a director. I wrote at the time that Kijiji entered the US that eBay’s board position now had a fundamental conflict of interest since Kijiji was directly competitive with Craigslist.
Casual public pronouncements from Jim Buckmaster to the contrary, it seems the folks at Craigslist took all this very seriously and moved to diminish eBay’s influence and potential control, which they have now done.
I don’t have the corporate governance expertise to opine (as they say in the law) on the outcome of the action.
Were other entrepreneurs in control of Craigslist, they might be inclined at this moment to sell to eBay (potentially for billions) but it would seem that is not the inclination of messers Buckmaster and Newmark.
Here’s more opinion and discussion on Techmeme.
Screenwerk 
December 7, 2009 at 4:45 pm
[…] eBay: What’s at Stake? By Greg Sterling The Craigslist vs. eBay trial going on over the alleged dilution of eBay’s ownership interest in the site is happening this week. There’s a provocative BusinessWeek article that spins out […]