"The entire Blue Omega team was laid off today (well, starting Friday)," wrote former Omega programmer Geoff Rowland on his Twitter account last week. Legal documents dug up by Shacknews also show that Blue Omega's demise was prefaced by an ugly period involving multiple subcontractors and lawsuits.

Blue Omega had hired two developers in 2007, Velvetelvis Studios and Point of View, to do contract work on Damnation--relationships which both ended in legal disputes.

One lawsuit filed by Blue Omega on January 20 shows that Damnation publisher Codemasters had at one time forcefully removed the developer from the project. The suit--which was voluntarily dismissed by Blue Omega five days later--alleged that Point of View was continuing work on the game for Codemasters, and asked for damages of $75,000 or more from POV.

23. On January 14, 2009, Codemasters sent Blue Omega a letter dated January 13, 2009, terminating the Development Agreement..

26. Blue Omega, however, has obtained documents and other evidence which proves that (i) POV is continuing to work on the Game, and (ii) POV is uploading code from the Game to a 3rd party (reasonably believed to be Codemasters). Blue Omega also has received a copy of an e-mail between POV and Scot Kramarich, the Codemasters' employee assigned to oversee the development of the Game, regarding POV's ongoing work on the Game.

Prior to the termination of the agreement with Blue Omega, Codemasters and POV had asked the studio to put them in contact with one another for direct payments. "At the time that this arrangement was proposed by Codemasters and POV, Blue Omega had paid POV timely for all amounts owed.. under that contract," reads the suit. "Codemasters, however, remained significantly in arrears in amounts it owed to Blue Omega."

In an additional suit filed on February 25, Blue Omega alleges that Velvetelvis' "unacceptable," "unfinished" and "untimely" work caused Blue Omega to miss its own deadlines with Codemasters. The suit similarly asks for damages in excess of $75,000.

"16. VES's failures forced Blue Omega to divert resources, incur costs, and retain another contractor--all in an effort to complete and remedy the unfinished and unacceptable work product provided by VES."

17. VES's untimely provision of 'Deliverables' also rendered it impossible for Blue Omega to meet its deadline with Codemasters, thereby causing Blue Omega to incur additional costs and expenses."