There's sued and there's sued
Sue is such a loaded word. In reality what this person was talking about was an injunction to force you to stop. To actually sue you for money they have to show some sort of financial damages since a company can't really have "pain and suffering".
The bottom line is that as long as you don't charge for it then it's very difficult to sue for money. Especially as it's likely anyone playing your server probably already has purchased diablo.
However, companies have used strong-arm tactics in the past just by filing a lawsuit they can force you to hire a lawyer and defend yourself. even if you win you're likely to be out some money.
The key is the differences. Diablo doesn't own the story of someone possesed by a demon/devil and causing strife while being persued by a band of heroes. There are thousands of similar stories in the public domain. So, don't call it diablo, when creating critters choose a different name sor variations on the names. Do the same with items and don't charge.
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