I wonder how much detail the complaints to the California AG's office went into regarding the issue?
I can see a scenario in which a bunch of folks write in saying, "LJ violated their contract with us!" and the AG decides to look into it. "Ok, tell us the whole story." And eventually the pictures that sparked the deletions come into it. "Well, what were the pictures of?" "Um, well, one was a (obviously unlicensed) picture of Severus Snape fingering Harry Potter." *AG backs away slowly*
The argument is that this is about consumer law and not fandom and that's true but politicians are politicians and I wonder how willing they're going to be to align themselves with such a controversial issue. If it's ever picked up by major media (which it might be if the AG officially gets involved) they WILL make an issue of the sexual nature and potential illegality of the fanart (from a licensing perspective, not a porn one) and I worry that the consumer rights issue will be lost in the noise.