There seems to me to be a gray area here. As an outside Realtor, stepping into a nest that two other Realtors do not seem to be dealing with, I'd have to carefully pull the strings apart and see what went wrong. Sorry you are having this problem.

This is so unfair and it seems there is no protection for buyers at all. If the seller decides not to sign the release of deposit ever w/o any cause, the only option buyer has is to go throught the lengthy and expensive legal process to get his/her money back. And by that time, the house could be already long gone.

Slee,
Yes the seller can open another escrow.
Since you and the seller cannot agree on the disbursement of the eescrow deposit, you can request that your escrow company interplead the funds with the court. Then escrow will turn over the funds to the court and a judge will determine who gets the money. However there will be some fees involved...

Good luck~~

Yes it is legal. If you cancelled escrow while you still have contingencies in place, the Seller should have no right to keep your deposit. You may have to hire an attorney to get it back.