It's a trademark suit, but among the allegations is that they used tasting and kiting (repeated 4.999 day registrations) to hide their identity.
I'm kind of surprised that the suit didn't name ICANN as an additional defendant. I did a short talk on tasting and kiting at MAAWG last month, and just from the stats that ICANN publishes, I pointed out these registars for their glaringly abusive behavior, registering millions of domains and refunding all but a few thousand of them. There's no question that ICANN knows what they've been doing.
I thought about that too. The problem is that ICANN is more a regulatory body than a party. In theory (though it is not done) a registrar can be sanctioned for not following the terms of the contract. Certain people at ICANN believes that the only sanction available is to terminate the registrar's contract, and the problem with that is that it could credit a registerfly situation. I believe that ICANN has the legal ability ability suspend the ability of a registrar to register new domain names -- which may be the big stick needed to get the registrar to clean up its act.