EA says Pandemic closed because it was too expensive.

G4 writes;
Did you play Lord Of The Rings: Conquest or Mercenaries 2?
Neither game was particularly well-received critically or commercially, so when Electronic Arts announced Pandemic Studios as a studio was being axed, the news was unfortunate but not necessarily surprising. EA CEO John Riccitiello said Pandemic's closing had nothing to do with the quality or sales of either game, however, despite Kotaku poking him in that direction. Riccitiello placed much of the blame on the state California fault, calling the state "bloody expensive" to keep employees in. Compounding matters was having the larger EA LA studio just 10 miles down the road, explained the executive. Key ex-Pandemic staff are now located there.