EBay Attorney Says Craigslist Sought Criminal Probe

By John Letzing 
   Of DOW JONES NEWSWIRES 
 

SAN FRANCISCO (Dow Jones)--An attorney for eBay Inc. (EBAY) said Thursday that Craigslist sought the current criminal probe of the internet giant, as rancor between the companies plays out on multiple stages.

The eBay attorney, Mark Lambert, also pressed for a related civil trial with Craigslist to be put on hold.

During a hearing in federal civil court in San Francisco, Lambert said the deposition of eBay employees in the civil case could have a damaging effect on their standing in the criminal proceedings, which were revealed through a grand jury subpoena issued last week.

He asked that discovery in the civil case therefore be delayed.

Several eBay employees, including Chairman Pierre Omidyar, are named in a subpoena issued as a part of the criminal probe, which is related to alleged efforts to misappropriate confidential information from Craigslist in order to develop a competing online classifieds service at eBay.

"This criminal subpoena is a game changer," Lambert said during the hearing, while arguing that Craigslist has tried to publicize the criminal probe, after having lobbied for it. "They, to our understanding, sought it," he said of Craigslist.

Craigslist attorney Michael Clyde responded that Lambert's statements were "incredible," and argued that the criminal probe should have no impact on the civil proceedings.

Spokeswomen for Craigslist and San Jose-based eBay declined to comment.

A spokesman for the U.S. Attorney Melinda Haag did not respond to a request for comment.

Thursday's hearing comes as relations between eBay, which owns a stake in Craigslist, and the closely-held, San Francisco-based classifieds site reach a new low.

EBay, which purchased a 28.4% stake in Craigslist in 2004, sued Craigslist in a Delaware court in 2008, arguing that its investment had been unfairly diluted. That case ended with eBay losing its board seat, but having its stake restored.

Craigslist countered with its own suit in California, alleging that eBay sought to steal proprietary information in order to build a service that ultimately came to be known as eBay Classifieds.

The criminal investigation, revealed by a grand jury subpoena handed down last week in San Jose, takes up similar themes to the civil litigation now underway in California.

The criminal probe has also brought renewed attention to the civil case.

Judge Richard Kramer emerged over an hour after the civil hearing had been scheduled to start on Thursday, visibly weary and talking about administrative issues related to media attention being paid to the case.

Judge Kramer told the parties that the criminal probe will not put a stop to the civil trial, though its impact should be taken into account as they begin assessing which documents can be handed over as part of discovery.

The judge scheduled an informal discovery hearing for October 18, and assured Craigslist's attorneys that they still may have a chance to depose eBay employees as part of the civil case.

"I'm not saying you're not going to get what you want, which is to get these guys in a room and have at them," he told the attorneys.

-By John Letzing, Dow Jones Newswires; 415-765-8230; john.letzing@dowjones.com