Do I have a legal case if the listing agent accepts another offer after we have entered into escrow?

We have been in escrow now for a few months and the house that we want to buy was appraised for lower than the purchased price. We still want the property and are willing to negotiate with the seller. After the listing agent found out that the house was overpriced, she started to avoid our phone calls and faxes. I had a feeling that the seller will have to go into a short sale because he already owes more than he is selling the house for. We finally got a hold of the agent and she told us that the seller will have to enter into a short sale. She said that we would have to resubmit another offer and compete with other buyers. In the mean time, we found out that she had taken another offer to the bank while she was stalling with us. It was probably someone that she was representing. I do not understand how this can happen since we have not cancelled escrow. Do I have a legal case since we have a binding contract and escrow. It was my understanding that we have priority, even if the house goes into short sale while in escrow.