The War for Lugh started when President Halsey declared war against the Crimson State Group on the 13th of March 3301. Halsey decided to send the new Farragut Battle Cruiser FNS Nevermore to fight in Lugh for its maiden flight. 
The Crimson State group had lobbied for help from the Alliance of Independent Systems, to provide military aid and combat ready pilots. Alliance Prime Minister Edmund Mahon refused to aid the Crimson State Group, arguing that Lugh was legally ruled by the Federation, hence the Crimson State Group did not rule a functioning independent state that would be a legitimate target for Alliance military aid.
Core Dynamics postponed the maiden flight of the FNS Nevermore following an embarrassing systems failure. During a weapons test, its systems opened fire on Hudson Dock instead of the target drone ship. This caused the station to automatically fire back. The result was dozens of deaths and hundreds of millions of credits worth of damage to both structures. 
The Federation received false intelligence that Éamonn Uí Laoghire, leader of the Crimson State Group, was aboard an unarmed refugee convoy near Lugh 6. Halsey ordered Federal pilots to attack the convoy. An estimated 9,322 innocent Federal civilians died in the attack. Halsey's approval rating fell to 26% and Shadow President Hudson swore there would be an investigation into the attack. 
The Crimson State Group took control of Hartsfield Market, the station with the master controls of Lugh’s military defence network. 
Congress decided to withdraw the Federal Navy from Lugh. 
The Crimson State Group won the conflict, taking control of the system and freeing it from Federation rule. Although it was later revealed the event was scripted when it was realized that the vast majority of pilots fighting in combat zones were fighting for the Federation side and the combat victories leaned heavily (near unanimously) in favor of the Federal Navy, but the developers assure us that events are now player directed in recent civil conflicts and circumstantial evidence seems to support this.