How does suing a company work? Is it functionally just like a forced dividend, or is it more complicated than that?

It's like any other class action lawsuit. Nothing to do with a dividend.

But if it's the stock holders that are suing the company, and they are receiving compensation from the lawsuit based on the size of their holdings, it's a cash payment from the company to the holders, which is exactly what a dividend is.

Not all stock holders will be part of the lawsuit, and some non stock holders (say people who have already sold) can be part of the lawsuit. There can also be people who claim second and third degree damages without actually holding any stock. And there is no rule that compensation has to be in proportion to anyone's holdings. All of this will be up to the court to decide.

The latter. It is functionally closer to a speculative investment. Litigation is expensive and notoriously uncertain.

Is it not possible to go back in 4 years and explain in 4 years that the market is more competitive than expected?

"sorry, we misunderestimated the market"

That's very unlikely. In each case the change would be backed by an analysis which justified the change, nefarious intent would be pretty difficult to prove.