A Delaware judge rescinded a change Craigslist made to dilute EBay’s quarter share of the company, but left in place a change that denied EBay a seat on Craigslist’s board.

Despite the split decision, it would seem the ruling tips in favor of EBay, which claimed it owned 28.4 percent of the popular classifieds site. Craigslist had diluted the share to 24.85 percent.

The 89-page ruling comes nine months after a trial in Chancery Court that saw testimony from Craigslist founder Craig Newmark and CEO Jim Buckmaster, as well as EBay founder Pierre Omidyar and former CEO Meg Whitman, who is now running for governor of California.

EBay had sued Craigslist  in that case. A countersuit is pending in a California court. Craigslist laid out its case in the Delaware trial. It’s unknown whether it will continue with the California lawsuit.

Craigslist contends that EBay bought the share in a takeover bid, something EBay didn’t deny in the Delaware trial. Craigslist’s Buckmaster and Newmark also hold that EBay didn’t tell them they planned to compete with its own classified service, Kijiji — now EBay Classifieds in the U.S. and similarly named in European countries.

Neither EBay nor Craigslist has commented yet on the verdict.

After the December trial, Judge William Chandler III admonished both sides for not trying harder to settle — and suggested that neither litigant would likely like his ruling. He then gave both sides several more months to file post-trial briefs, which they did.

The saga began in 2004 when EBay purchased its stake from a disgruntled former employee. When the deal was sealed, both companies suggested that it was an amicable agreement. It was anything but.

Trial testimony revealed that EBay paid Phillip Knowlton $16 million for his 28.4 percent share of 1010 Cole Street Inc., the precursor to Craigslist, and paid a special dividend of $16 million to Newmark and Buckmaster, with Newmark taking $9.5 million of it and Buckmaster the remainder.

Both sides characterized the transaction differently. EBay’s VP of bizdev Garrett Price called the payments to Buckmaster and Newmark “extortion.”

“This transaction was never publicly disclosed because they [Craigslist execs] felt it would taint their altruistic names and their reputation to the community as community-focused philanthropists would suffer,” Price testified.“ We wanted to have a good relationship with Craigslist and wished not to be involved in disputes [with the corporation].”

Newmark acknowledged that in his testimony. He said he agreed to do business with EBay because he thought it had core values similar to his own. .We decided EBay could be trusted and proceeded with the deal.”

He said then-CEO Whitman “convincingly insisted that she shared our values and was willing to move forward with the transaction.” He also said that Google was also seeking Knowlton’s share and EBay was the more palatable choice. At one point in the proceedings, the trial judge asked Buckmaster why he and Newmark didn’t buy Knowlton’s shares themselves. They couldn’t afford it, Buckmaster replied.

The honeymoon was evidently a short one. “EBay never made any offers of assistance with trust and safety [although] they talked about what they wanted to do and never delivered,” Newmark testified, which  contradicted  testimony from former EBay execs who were either part of the negotiation or had sat on Craigslist’s board.

When it became clear that EBay was moving ahead with Kijiji in the U.S., Newmark and Buckmaster – the only other board directors – quit sharing financial information with their minority partner.  In 2008, they revalued their holdings which diluted EBay’s share, thus removing its seat on the board.

Timeline:

•  January 10, 2005 – EBay founder Pierre Omidyar is given a seat on the Craigslist board of directors.

• March 8, 2005 – EBay launches Kijiji in non-English speaking countries.

• November 5, 2005 – Omidyar is replaced on the Craigslist board by Joshua Silverman, EBay’s VP of new ventures in Europe.

• June 29, 2007 – Kijiji launches in the United States; Craigslist serves EBay notice of engagement in competitive activity.

• Early July, 2007 – EBay announces Silverman’s board resignation and proposes EBay competition counsel Thomas Jeon as replacement.

• July 12, 2007 – Buckmaster e-mails Whitman his dismay of the U.S. Kijiji launch. He says the company no longer wants EBay as a shareholder and he wishes to explore his and Newmark’s repurchase options, or the option to find a new home for these shares.

• July 16, 2007 – Whitman responds that the Kijiji product is “firewalled” from the rest of its Craigslist-related business. She expresses her interest in maintaining personal rapport with Craigslist, and acquiring the remainder of the company “when Newmark and Buckmaster feel it would be appropriate.”

• April 22, 2008 – EBay files a complaint against Craigslist alleging “breach of fiduciary duties of care, loyalty, and good faith by implementing ….self-dealing transactions … designed specifically to benefit themselves to the detriment of EBay, the third and only stockholder in the company.” According to the EBay complaint, Newmark and Buckmaster engaged in “a series of clandestine transactions designed to …either impose new transfer restrictions on EBay or dilute its interests, and to dilute the interests of the employee holders of company stock options.”

• May 13, 2008 – Craigslist files a responding complaint against EBay in California Superior Court, alleging unfair and unlawful competition, false advertising, trademark infringement, unfair competition, and breach of fiduciary duty.

• Dec. 7, 2009 – The 10-day trial in Delaware Chancery Court begins.

More EBay v. Craigslist coverage (most of it is clients-only).