DSLReports has a pretty good summary with links to the relevant stuff here: Magic Jack Tries, Fails To Shut Up Boing Boing
The short version – MagicJack “generally works rather well” - the lawsuit is not about functionality – the whole thing is really about the goofy advertising and the overreaction of the somewhat oddball inventor / owner of MJ (it is privately owned) to a short web post poking fun at the company.