Actually, the real story is that the passenger was flying standby on a "Buddy Pass" (the passes that employees can give to friends/family so that they can fly free). The guy wasn't going to be able to get onto the flight because a seat wasn't available. The flight attendant offered to give him her seat instead, and said she'd sit in the "jump seat" on the plane (used by the flight attendants).
About 90 minutes into the flight, apparently the flight attendant was so uncomfortable in the jump seat that she asked for her seat back. There were no other seats available but the passenger offered to sit in the jump seat. However the pilot said that they were reserved for airline employees only (I don't know if there is a law governing that or if it is just an airline rule). So, the pilot made the guy sit in the bathroom because there were no other seats available on the plane.
IMO, the flight attendant should have been made to remain in the jump seat since she gave up her seat on the plane. Alternately, they should have allowed the passenger to sit in the jump seat because at least it had a seatbelt. The toilet, clearly, isn't a safe place to sit during a flight.
Having said all of that, this incident isn't likely to happen to any of the rest of us because very few of us fly on those freebie passes and this is the first I've ever heard of an airline employee giving up their personal seat to a passenger. So, you can't judge the entire airline based on this one, isolated incident.
As for the guy's lawsuit - I think it has merit but only based on the fact that his safety was in jeopardy. Saying he was "humiliated" is nonsense. If that's his sole reason for suing, I hope he doesn't get a dime.