eBay (NSDQ: EBAY) and Craigslist, never the happy brethren, have barely tolerated each other over the years since the former bought a stake in the online classifieds phenom in 2004. The two compete head on, after eBay started making a big push on classifieds with Kijiji.

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Now, eBay has sued Craigslist, alleging the Craigslist board of directors had diluted eBay’s 28.4 percent stake in the online classifieds site. The issues at stake:
—In 2004 eBay acquired a minority ownership interest in Craigslist of 28.4 percent, buying it from a former Craigslist executive who was seeking to sell his shares.
—According to the lawsuit, In January 2008, founder Craig Newmark and CEO Jim Buckmaster adopted measures that, among other things, “unfairly diluted eBay’s economic interest in Craigslist by more than 10 percent,” the company release says.
—eBay believes that Newmark and Buckmaster breached their fiduciary duties in violation of Delaware corporate law.
—The complaint is being filed under seal (meaning we can’t access the lawsuit) because some of the “information about Craigslist contained in the complaint is governed by confidentiality restrictions”.

Was Craigslist trying to raise a round that necessitated this dilution? Would be interesting to know…

More in the release.

Pic courtesy: Brian Solis