The showdown between Vivendi Universal and Barry Diller is raging, after Vivendi sued a company run by the media mogul.

NEW YORK--The showdown between Vivendi Universal and Barry Diller is raging, after Vivendi sued a company run by the media mogul.

Diller is trying to delay the planned merger between Vivendi Universal Entertainment unit and NBC, Vivendi Uni alleges in the complaint.

Diller owns a stake in VUE directly, as well as via his Internet juggernaut InterActiveCorp. Ahead of the NBC Universal merger, which Vivendi Uni still expects to close in the second quarter, the company has tried unsuccessfully to negotiate with Diller a potential unwinding of the stake.

To satisfy a closing condition for the merger and a legal obligation to IAC's USANi sub-unit, Vivendi Uni last Wednesday said it recently put up letters of credit backed by U.S. Treasury securities. Such documentation is necessary to back and cover Diller's VUE shares as well as end certain veto or voting rights he has if VUE wants to raise its debt ceilings.

Via USANi, Diller rejected the letters as insufficient, but Vivendi Uni argues that he must accept them based on the contract that created VUE.

Diller's company is arguing that it should be allowed to draw on the letters of credit if Vivendi Uni's market value falls below a certain point, according to a source familiar with the matter.

To this end, Vivendi Uni last week filed a complaint against USANi in the Court of Chancery of the State of Delaware for a declaratory judgment that "certain covenants under the Vivendi Universal Entertainment partnership agreement are [eliminated] upon posting of letters of credit."

Vivendi Uni brass has asked the court to act quickly to allow them to close the NBC deal by the end of the second quarter.

In a statement, NBC said "this is a technical dispute between Vivendi Universal and InterActiveCorp, and NBC is not a party." NBC also reiterated previous comments from NBC brass that "we do not need InterActiveCorp's consent to close the transaction" with VUE.

Sources familiar with the situation say Vivendi Uni and NBC listed Diller's acceptance of letters of credit as a closing condition for their merger, but noted that the companies could change that quickly if the court doesn't rule in Vivendi Uni's favor.

Case: Vivendi Universal v. USANi Sub LLC, a unit of InterActiveCorp.

Georg Szalai is the business editor of The Hollywood Reporter.

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