Regardless of how LinkedIn is operating, the case seems to argue that potential employers should only look at the reference list provided by the applicant. And in real life, that doesn't happen. Nor should it. If you aren't doing a little due diligence on a hire, calling up old associates at other companies that may know the applicant or cold calling a likely former manager or two, then you are doing your company and its shareholders a disservice.
Will you bump into some folks who don't like the applicant? Maybe. And you should probably be a little suspicious if you don't. Making omelets requires breaking some eggs.
And does this mean the applicant's reference list is not worth anything whatsoever? Of course not. Someone listing a couple of Nobel laureates and a Fortune 500 CEO as references might be worth a look.
But if those are the only people you can talk to, well, that's a problem.