the employee contract depends on whether or not the employee were with the company before the company was bought by Activision
Probably not true, since most employment contracts contain a clause which states that the employee contract is assignable. Even if these contracts lacked such a term, there was apparently a contract extension after the first Modern Warfare, so the point is moot.
No, I think the two founders would have left anyway (even if they hadn't been fired), but they are the only ones who had control over the Modern Warfare IP at Infinity Ward. The rest would have to work on whatever Activision assigned them, which obviously would have been Modern Warfare 3.
That's the contradiction I'm talking about: IF the old IW chiefs had retained "creative control" of all CoD games from the Vietnam War and onwards, development of MW3 would have required at the very least their consent to proceed. Activision could not have assigned their team to make MW3 without materially breaching the contract.
It doesn't shut down the CoD machine, only the Modern Warfare machine. Remember that these agreements were made a long time ago when this team had brought boack CoD and only the the first MW was a success so it wasn't really a franchise yet. They might not have wanted to make yearly MW installments as well at the time since the different CoD would essentially cannablize each other.
My last statement was ambiguous: what I meant was that, if West and Zampella are being truthful and they had a valid contract with the terms they are alleging, the CoD series could only have contained pre-Vietnam War era games without first requiring West and Zampella's consent. In my mind, that means more WWII, and possibly Korean War, games. I don't think the series would last anywhere near as long if it limits itself to those terms.