Believe it or not, there is grounds for this lawsuit. Heat from the rear cylinder is a very real problem on newer Harley's. I used to spend a lot of time over on HD forums and there were posts pretty much daily asking about how to reduce the heat. One guy, in particular, said he burned his leg bad enough on his 30min ride home from the dealer (after buying a brand new bike) that his leg blistered, THROUGH HIS PANTS. He was riding in jeans and still blistered his right leg (without touching the exhaust). That's not just "a normal air cooled motor", that's a design flaw. Guys with shorter legs seem to be particularly troubled by the heat as their legs get too close to that rear cylinder. It's not the exhaust that's the problem, per sey, (exhaust heat is ALWAYS a problem) but the heat from the cylinder head itself.
The real problem is a piss-poor engine design by Harley (GASP!). I've ridden a number of air cooled twins and have never been burned without doing something stupid like touching the pipes. My Buell was HOT (especially in that heat wave we had this year) but I never felt like I was in danger of being burned, just uncomfortable. I've ridden a couple of Yamaha Warriors and depsite having a 102" air cooled pushrod motor (very similar to Harley's current 103 except the Yamaha makes more power) and barely even noticed the heat off of them. Victory has a 106" air cooled motor making about 15hp more than Harley's 103 and there are no lawsuits against them (although I hear they do run hot).
The problem lies in Harleys design. Read up on the history and development of the "twin cam". Cylinder heat was a major devopmental problem from the beginning. They were overheating the oil in test engines so to fix the problem they simply restricted the oil to the head to the bare minimum needed for the valvetrain. This kept the oil cooler by keeping most of it out of the screaming hot top end but it allowed the heads to get HOT. Adding an oil cooler was dismissed as an option because they felt it wouldn't "look right" on the bike. Once again style won out over functionality with Harley.
The heat wasn't a huge issue with the older bikes as emission requiements were less strict and the old 88's made about as much hp as your average lawn mower.
Personally, I hope they win big. I hope it's a swift kick to the nuts for Harley and will force them to stop thinking their invincable and can do whatever they want (GM anybody???) and start making some decent bikes with some decent power instead of the uncompetitively powered butt jewlry their currently cranking out. It took a lawsuit from several police depatments and some bad press to make them upgrade their "hinged in the middle" touring bike frames in 09 (I think). Maybe this will produce a competitive engine from them for once.
Do some research on HD sometime. There's a LOT more to hate about them that the whole "closing dwon Buell" fiasco.