Tolkien is dead, of course, but his estate is suing because he's in the book. Their claim is that the novel violates his publicity rights. This is a rather odd section of law, and it's a little too complicated to cover here. But let me give you one example of publicity rights: You can't use someone's image or persona to promote a product without permission (and some money usually).
What's odd about this is that he's being used as a character, not for the sake of publicity. The Tolkien estate don't have a strong case here. And it's even weaker considering that the legal concept (of dead people having publicity rights) is not all that well established.
At this point there is no lawsuit - yet. The only legal proceeding was filed by Mr. Hillard, and he's seeking a judgment that says he didn't do anything wrong. If you want, you can find a copy of his lawsuit on Scribd. It's interesting but straightforward.
But as you probably know, Amazon have pulled ebooks from Kindles before. If this case goes against the author, Amazon will be pressured to take back the Kindle edition you bought.
I really do want you to go buy it, and it's only $3 on the Kindle. I figure that if the Tolkien estate get their way, the print edition will get pulped. When Amazon try to yank the Kindle Edition we can cause an uproar.
Plus, I don't like that law in principle, and I really don't like how the Tolkien estate is being a bully.