You can read the story here.
I'm not completely familiar with Too Human but I do remember them getting panned at E3 2006, and hearing about Dyack getting all in a huff about it. Seriously, I mean, WTF? I use Unreal all day at work, and yes, its quite a bitch some times. More importantly we are using it on SGW for something it really wasn't meant to be used for, an MMO.
So what! Its a bitch. We have a talented group of engineers tackling all of the hurdles the damned thing is throwing at us, and sure we complain. But are we going to fucking sue Epic over it? Come on now! I have been on the UDN for a bit over a year now and before Gears of War was released the standard reply for a new feature was pretty much: "That isn't being used for Gears, so its not going in until after Gears is done."
And guess what? Once Gears shipped, Epic started dropping all kinds of shit into the editor. I remember reading some posts on there from Silicon Knights (not sure if they were from Denis Dyack specifically or not); these posts were pretty much the same thing as the lawsuit. "We're going to miss our deadline because Epic won't fix the editor/implement Feature X."
Hire a fucking programmer and have him implement your fucking features. Have him fix your fucking bugs.
Unreal isn't meant to work with BigWorld but we got it working at CME. Unreal isn't meant to stream large open spaces for an MMO, but we got it working.
All I am saying is, when you license a large engine like that expect to have an engineer (or two; or five) on staff to handle this shit. Don't fuck around for a year and half and then blame the company you licensed from.