In a statement (in full after the break), Disney Interactive explains that a "restructuring" has occurred at Propaganda Games, "affecting one of the studio's two development teams." Propaganda is still working on this December's Tron: Evolution and its post-release DLC.
Disney Interactive statement:
Disney Interactive Studios confirms the cancellation of the Pirates of the Caribbean: Armada of the Damned video game which was scheduled to be released in 2011. As a result of this decision, Disney Interactive Studios completed a restructuring of Propaganda Games, its Vancouver, BC internal studio, affecting one of the studio's two development teams.
The studio is still in active production of Tron: Evolution, the video game, which will be released on December 7, 2010 with additional DLC (downloadable content) support following the game's release.