IAC/InterActive Corp. (NASDAQ: IACI) Chief Executive Barry Diller is one CEO who cannot be tamed by his corporate public relations staff or lawyers. He says what he wants when he wants, seeming not to care much for the potential ramifications.

Take his fight with fellow tycoon John Malone of Liberty Media Holding Corp. (NASDAQ: LINTA) over Diller's plan to split up his conglomerate that's been cobbled together through dozens of acquisitions of seemingly disparate companies. Liberty also happens to own majority stake in IAC. However, a long-standing agreement with Diller allows the mogul to control it through a proxy agreement. Well, at least that was the case until recently.

Liberty has asked a Delaware Chancery Court to remove Diller from IAC's board [subscription required] along with other members, and to have several of Liberty's nominees put in their place. The company also asked for Diller to be removed from BDTV, which the Wall Street Journal described as "a little-known entity through which Liberty owns most of its stake in IAC."

What once appeared to be a funny dust-up between a couple of older gentlemen has gotten nasty. John Malone's Liberty Media (NASDAQ: LINTA) has long held a controlling interest in IACI (NASDAQ: IACI), run by former Hollywood mogul Barry Diller. Diller has had the right to vote Liberty's shares giving him de facto control of IACI.

Diller had made the decision to take IACI and break it into five publicly traded pieces. That probably made some sense. The Home Shopping Network does not belong under the same roof as Ask.com and Lending Tree. But, Malone has not seen enough bang in the IACI share price since the spin-offs were announced. The stock trades at just over $27, near its 52-week low.

Mr. Malone today moved to push out Diller and most of the board that supports him at IACI. Whether Malone can take away the rights Mr. Diller has to vote Liberty's shares is unclear.

According to The Wall Street Journal, in a response to Liberty's actions Mr. Diller said in a statement: "After reading this new salvo, I am beginning to think these people are insane. Everything they cite is hogwash. First of all, we have never asked the board to take action on any specific proposal high, low or no-vote. What we have done, which we thought was the responsible thing to do given this conflict, is to go to the Delaware court and ask them to tell us what rights IACI has or doesn't have."

Wall Street will just have to wait a few weeks to see who is insane and who is not.

Douglas A. McIntyre is an editor at 247wallst.com.

IAC/InterActiveCorp (NASDAQ: IACI) and Liberty Media (NASDAQ: LINTA) have sued each other over IACI's planned breakup into five separate businesses.

IACI is recently up 20 cents to $24.60; shares near three-year low into company break up.

IACI is expected to report EPS on February 6.

IACI announced the plan to separate IACI into five publicly traded companies on November 5, 2007:

1. HSN, will include business comprising IACI's retailing segment.
   
2. Ticketmaster.
   
3. Interval International, which will include CondoDirect, Resort Quest Hawaii and VacationSource.
   
4. LendingTree, which will include RealEstate.com Domania, GetSmart, Home Loan Center and iNest, and
   
5. IAC media & advertising, Ask.com, Bloglines, City Search, Cursor Mania, Evite, Excite, insiderpages, iWon, My Fun cards, Black Web Enterprises Shoebuy.com, Match.com.
   

IACI February option implied volatility of 47 is above its 26-week average of 33 according to Track Data, suggesting larger risk.

Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com