Uhh, yeah, I don't think LBs are weakened by having dead party members... I've had many instances in the game where I've had a last-ditch melee LB win a fight with nearly everyone else dead, and I've never noticed a significantly lessened amount of damage dealt than normal.

Test before you speak. Some of us do LB over and over easily see a trend, compare logs, and it's pretty easy to even eyeball the results after so many runs.

Good titan group:
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Bad titan group
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LB damage does take everyone's gear into account (dunno if it's the average ilvls of the group or just their weapons in particular) so yeah, you will still notice a difference in damage dealt based on that. But whether they are alive or dead should not factor in.