Heywood Smith, author of The Red Hat Club, is being sued by Vicki Stewart, who claims that the character SuSu in the novel resembles herself in numerous ways. Smith and Stewart have known one another for over 50 years. Defamation suits based on characters in novels usually get dismissed based on the work being fictional, but not this time. The Georgia Court of Appeals has agreed to hear the case. Smith and her attorneys will likely appeal the decision or ask that it be heard by the state supreme court.
If the decision goes against Smith, it could set a dangerous precedent and leave authors vulnerable to libel suits. Here's a link to more information on the case.