I can understand them being defensive about their project, but I didn't want to get into too much detail about my situation because I didn't want it to come off as a rant. But let me fill in the rest of the details:
We sent their leaders an email while their project was 2 days old, only having primary communications through a dedicated subreddit. At this point they had no ideas save the main one that was "it would be cool if we made a martial arts game! But lets make it the new big thing by adding water guns!" (it wasn't really martial arts, just an example). We contacted them proposing a 50/50 merge, and handed them the legal contacts that we have all signed (a collaboration agreement). We have an enormous amount of design done, but we only just started programming a few months ago. So we proposed that our two groups join up, and start over from scratch with our design as a foundation since they had little to nothing. We never once suggested that they join our project; we wanted to create something new inspired by both our projects, and we made that clear. A little more background, our team is 3 people, misc writer/artist, 3d artist, and programmer (all semi-pros), and their team is comprised of 1 semi-pro programmer and a number of hobbiest who have never worked on a game previously. In return to our proposal, we receive a counter-proposal from them offering to take our three members in under the leadership of their group and absorb our project into theirs (which still only has "martial arts, yeahh!" as their design). We turned them down on this 'offer' because frankly we were all insulted. In return we explained that we didn't feel their offer was fair considering the amount of work we had done (yeah it was like being asked to give up a baby) and it was rude considering what we had originally offered. Then their responses blew up. They accused us of trying to steal interest in their project by posting recruitment threads in reddit on public boards, and stealing their ideas, and breaking the trust they had 'bestowed upon us'.
I believe that their legal threats were simply empty threats. I talked to a lawyer that I personally know and he said they have no foundation for a case. They were talking about how our game had copied aspects of their game, and how we had copied business methods an example of which was 'creating a twitter'. These were people who obviously were pissed off and didn't know the law. I also don't believe that they have any internal legal files since they scoffed at our collab agreement.
I just find it interesting that some indie dev communities just want to make a game and put it out into the world, and others are really closed off and selective about other devs.
The whole experience just left an insanely bitter taste in my mouth, and I can't help but feel that everyone in the dev community is like this, selfish and douchebaggy (I realize it isn't true).