The legal issues are a little convoluted (which is no surprise), so I'll try to summarize as best as I can. It seems Activision paid Double Fine Productions the sum of about $15 million to develop Brutal Legend, but Double Fine ended up missing a crucial deadline last year. According to the suit, Double Fine then claimed that they would need another nine months and $7 million to complete the game.
Activision claims that they were still in negotiations with Double Fine to continue the development of the game, but no agreement was ever reached. Which is strange because although Activision merged with Vivendi (the company who held the game's publishing rights) they did not acquire the publishing rights. Thus, Double Fine ended up going to EA to publish the game and planned a release on October 13, 2009.
Activision now contends that they never relinquished the rights to the game, were under the impression that they were still in negotiations with it and that Double Fine improperly transferred Brutal Legend to EA.
When reached for comment, Double Fine President Tim Schafer said:
"Hey, if Activision liked it, then they should have put a ring on it. Oh great, now Beyonce is going to sue me too."