Henry the Lion (a Guelf) was the most powerful duke in the Holy Roman Empire, only second to the emperor himself. His downfall lasted from 1077–1081, when he was convicted of high treason against the emperor Barbarossa (Frederic I) and had in a court process his feudal lands greatly diminished; his imperial fiefdoms were all confiscated.
The exact details for "why" are a bit unclear. Fred and Henry were said to be friends, and had a fallout. That Henry refused to follow him into battle seems to be the case. Official documents filed against Henry speak of gross misconduct and treason, against the emperor, the church and the people. Later historiographies paint more the picture of a grand conspiracy against Henry, led by rival aristocrats.
But Otto was not only loyal to Frederic but for a time also to Henry, but my teacher's rumour has it that Otto was also one of the main plotters. The Kaiser might just have been interested in 'orderly' affairs and 'power distribution' — after Henry becoming so powerful so that his family might be a threat to his own — to the second in line of office seniority. (Graham A. Loud & Jochen Schenk: "The Origins of the German Principalities, 1100–1350: Essays by German Historians", Routledge: Abingdon, New York, 2017, p54f.) It is often said that Henry was also quite unpopular with the other aristocrats under him in Bavaria.
Subsequently Westphalia and Bavaria were re-distributed and the former tribal duchy of Saxony split up.
This marks the rise of the house of Wittelsbach which ruled in Bavaria until 1918 (succession for the fiefdom much better explained in German Wikipedia). The biggest chunk of land taken from Henry was awarded to Otto I of Bavaria.
The archbishop of Cologne Philipp received from the western part of Saxony the newly created Duchy of Westphalia, the biggest part of eastern Saxony went to Bernhard of House Ascania who became the Duke of Saxony. Styria went to Ottokar IV..
As the emperor taketh, so the emperor giveth. After Henry and Frederic's family were reconciled some much smaller fiefdoms were granted again to the Guelf family.
This is partly illustrated for Saxony in before: