A little research has led us to the actual court filings in this matter, which appear to indeed be a breach of contract issue between Kensington Publishing Corporation and Heather Armstrong, aka Dooce.
It appears that Ms. Armstrong had been in negotiations with Kensington over a book that she was to deliver in early 2007. According to Kensington’s court filings, they claim to have reached an oral agreement with Dooce in November 2005. Negotiations continued into early 2006, when Armstrong abruptly chose not to sign the contract. Kensington then sued for breach of contract claiming that they had an oral agreement.
The settlement papers were not available to us through our sources, but we believe that we’ll be able to get ahold of them at some point in the near future.
In the meantime, here’s the full court filing (PDF) for your viewing pleasure.
MediaBistro has more.