Nearly 40 former employees of Infinity Ward have got together to drop a monster 500 million dollar lawsuit on games giant Activision, alleging breach of contract and unpaid royalties. The move comes just a week before Activision's Q1 financial reports will be delivered.

The employees claim that they're owed half a billion in unpaid bonuses, royalties, profit sharing and future profits from games such as Modern Warfare 3, as well as punitive damages. They also claim that payments were withheld by the company to stop employees from leaving.

Activision reckons there's nothing in the claims, issuing a terse statement stating: "Activision believes the action is without merit. Activision retains the discretion to determine the amount and the schedule of bonus payments for Modern Warfare 2 and has acted consistent with its rights and the law at all times. We look forward to getting judicial confirmation that our position is right".

The lawsuit follows months of bad blood between the developers and the publishers of Call of Duty: Modern Warfare 2, culminating in the bosses of Infinity Ward either quitting or being fired, depending on whose account you read. They then promptly set up shop with Activision's arch-rival EA, calling themselves Respawn Entertainment.

Meanwhile, if you want to see exactly who's left at Infinity Ward and who's jumped ship to Respawn Entertainment, check out this video of the Modern Warfare 2 credits put together by PC Gamer. It makes for grim viewing...

Update: We're hearing that Activision CEO and President Mike Griffith has resigned...

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