It depends on the specifics of the contract. I haven't seen it, have you?
What was promised? What was delivered? I'm not going to take SK's word for it just because they think I should... and neither is a court of law. (I hope... the judicial system is pretty ridiculous these days.)
On the other hand, Epic's claims are pretty obvious from SK's complaint itself. They've developed a derivative engine. They want the legal rights to use it without Epic's IP hanging over their heads. They want to not have to pay anything, at all... and in fact want a cut of Gears profits.
Epic's support sucking? I don't doubt it at all. Epic's engine hard to use? I'm sure it is. But more than one thing troubles me about the SK lawsuit... starting with the fact that they want to keep using UE3 for free.
I don't like that the discussion is so polarized on this, really. "SK is incompetent" "Epic is incompetent" blah blah blah... like they can't both be a little bit true. It seems like both parties are at least a little wrong in this situation, but I imagine only one will win this lawsuit.