Fighting in court probably wouldn’t have got them very far, Nintendo would likely just keep going until Yuzu’s LLC ran out of money. Even with $30k/mo in patreon donations, totalling around $2.5m since the switch release (assuming Yuzu devs didn’t eat or pay bills), it’s miniscule compared to Nintendo’s $15B value and lawyer army on standby.
They probably also saw what Nintendo did to Gary Bowser (he’s practically Nintendo’s property now) and decided this is the safest way out without having their lives destroyed, while they still have some protection under the LLC