MOORED to the west end of Manhattan’s 18th street, the headquarters of internet group IAC is arguably the most exciting new building in New York for a generation. The 10-storey, Frank Gehry-designed, white and glass structure faces the Hudson River with walls that mimic wind-whipped sails.

Until recently, getting innovative buildings past New York’s planning laws had seemed impossible – as previous Gehry ventures had found. But if there’s a man to get the impossible done, it’s IAC boss Barry Diller.

Diller is an industry veteran. He was president of Paramount Pictures at the age of 32 and can take some of the credit for launching The Simpsons while he was at Fox studios. He was also one of the first media moguls to spot the true potential of the internet.

Today IAC owns some of the web’s biggest brands, including Ask.com, match.com and Ticketmaster. Tomorrow Diller could lose it all. The man who could take it from him is the very one who made it all possible in the first place.

In a Delaware court tomorrow, Diller squares up against John Malone, boss of Liberty Media.

Malone is a fearsome operator, a taciturn man who brings out the loudmouth in his critics. Former American vice-president Al Gore called Malone Darth Vader and Vanity Fair media commentator Michael Wolff described him as “an exceptionally rich man who stalks and then tortures other exceptionally rich men”.

At first glance the pair seem polar opposites. Diller lives his life in the same high register as his building. He was born in Beverly Hills, lives in Manhattan, holidays on his yachts (note the plural) and is married to fashion designer Diane von Furstenberg.

Malone, 66, runs Liberty from a nondescript office in Colorado. He avoids the spotlight and, reportedly, stays at truck-stop motels while holidaying in his – luxury – camper van.

But when it comes to business, Diller and Malone have much in common. Both men love a deal, and the more complicated the better. Both love being in control almost as much as they hate being controlled. And both have been accused of putting their own interests before those of their shareholders. Now one of their deals, and one they concocted together, has led from a nasty bout of public name-calling to a courtroom showdown.

The pair first worked together in the 1990s. Diller had lost out in a bid to take over Paramount and turned to Malone, then America’s biggest cable owner, for support in building a new venture. Malone gave Diller control of the Home Shopping Network (HSN), a 24-hour shopping channel that Diller eventually transformed into IAC through a dizzying series of deals.

Malone’s Liberty is the largest shareholder in IAC, which has two classes of shares, ordinary and “supervoting” shares with far more voting power. Liberty’s stake represents 30% of the shares and 62% of the voting power. Diller owns less than 4% of the company, but Malone gave him power over Liberty’s votes in a move that must have made sense at the time but now looks like a recipe for disaster.

Ill winds have dragged on IAC’s share price of late. Last month the firm announced a $369.9m (£183.6m) loss for the fourth quarter after being pulled down by Lendingtree.com, the company’s online mortgage company. Over the past year IAC’s shares have dropped from a high of over $41 to a low of less than $20.

Diller’s answer is to break up the company. It’s a move that would strip Liberty of its voting premium and land the tax-averse Malone with an estimated tax bill of $450m. Needless to say, Malone does not think this is a good idea. He is arguing that Diller should not be able to wield Liberty’s shares against Liberty’s interests.

In court papers Liberty refers to Diller’s “misconduct” and accuses him of wanting the sell-off to “provide himself liquidity”. Malone has attacked Diller’s “record-breaking” compensation – $295m in 2005 – and wants Diller out and his wife off IAC’s board.

Diller’s camp have called Liberty’s actions “beyond comprehension” and “truly desperate”. Diller said he was “beginning to think these people are insane”.

Charles Elson, of the University of Delaware’s Centre for Corporate Governance, said Diller’s control of Liberty’s shares meant he was “effectively overseeing himself. It’s a very complicated position. Would he vote to get rid of himself if he didn’t think he was doing a good job?”

By pressing his case against Diller, Malone at a minimum may delay IAC’s break-up while he plans his next move, and could even win control of IAC.

Many analysts are expecting a settlement. Last year the warring moguls discussed giving HSN to Malone in a tax-free swap for his stake in IAC but talks broke down. Liberty owns HSN’s larger rival, QVC.

Malone’s real target may be Ticketmaster or Expedia, the online travel company. But like unwinding the assets after the end of a long marriage, all the options are complex. Liberty owns 23% of Expedia which used to be part of IAC and is now chaired by Diller, who also happens to be the largest individual shareholder.

In a note to investors Bern-stein Research analyst Jeffrey Lindsay said IAC shares looked cheap, but warned the break-up plan was likely to stay in litigation “for the foreseeable future”.

Diller seems to accept that legal action may not be the best option for either party. “It’s very odd that two people who don’t want to give up control of anything are giving control to a judge in Delaware,” he said at a Variety event last week.

The stakes are far higher for Diller. For Malone and Liberty, this is just another day mogul-baiting. If Diller loses, Gehry’s building may be his most lasting monument.

THE PLAYERS

IAC HQ: Frank Gehry-designed landmark building, New York Chairman and chief executive: Barry Diller, whose personal wealth is estimated at $1.3 billion Business: owns and operates more than 60 specialised and global brands Sales: $6.3 bn last year

Liberty Media HQ: nondescript offices in Englewood, Colorado Chairman: John Malone, whose personal wealth is estimated at $2.2 bn Business: holding company whose assets include the shopping channel QVC and interests in Expedia, IAC/InterActiveCorp, Motorola, Time Warner and Viacom Sales: $7.8bn last year

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