From the Runic Games website:

Seattle, Washington - August 8th, 2008 - The former Flagship Studios Seattle team is proud to announce their reformation as Runic Games (www.runicgames.com). As the team responsible for the highly-anticipated Mythos at Flagship Studios, Runic Games intends to continue to use their expertise in the Action-RPG MMO genre to create the best games in this market.

The studio is headed by Travis Baldree and Max Schaefer. Travis served as Project Director for Mythos at Flagship Seattle, and previously created the bestselling Action-RPG FATE. Max was the Executive Producer for Mythos, and one of the original founders of Blizzard North, the creators of the bestselling Diablo franchise. He was also one of the founding members of Flagship Studios.

Announcements about Runic Games' forthcoming projects will be made in the coming days.

Good to see that some of the team survived.  I wish them the best of luck!!