The latest update in Activision and Infinity Ward's legal battle (previous posts are here and here) is Activision's search for internal documents pertaining to Infinity Ward's alleged "insubordination" and "breach of contract". An internal memo that was in circulation around Activision before the lawsuit was filed details what they are looking for, exactly:

Documents regarding past, current or future IW projects, including but not limited to any and all businesses analyses of future projects (e.g. Modern Warfare 3)

Documents regarding any potential 'spin out' of IW, including but not limited to any communications with IW employees, West or Zampella regarding forming a new studio independent of Activision

Documents regarding West and Zampella's communications with Activision's competitors, including but not limited to Electronic Arts

It's a safe bet to say even if Modern Warfare 3 was in development, it would be in the very early stages. Seems to me that since this memo was sent prior to the lawsuit being filed, that Activision may have planned, on the contingency of their winning, that they would obtain any and all materials Infinity Ward had already worked on for MW3. Meaning, Activision would have all this material to work with that they didn't have to come up with. Of course, that's just my theory.

The memo goes on to talk about Activision's steadfast stance on their not doing anything wrong.

The Dispute involves West and Zampella's management of IW, as well as the development and marketing of Call of Duty: Modern Warfare 2  ("MW2"), and potential subsequent games developed by IW. Activision believes that it has done nothing wrong and intends to vigorously defend any claims asserted by West and Zampella.

Realistically, this is going to be a long drawn-out situation that will result in one of the companies taking a big hit on both the fiscal and business side of things. I don't want to pick favorites, but from the initial looks of things, big companies who fire small studios because they don't want to pay them is pretty damn low. Also, it doesn't serve Activision to not have proof of this insubordination or contract breaching prior to the firing of Jason West and Vince Zampella.

Game Rant will continue to report updates on this story as they come in.

Source: G4