As someone who has been fighting in court for a number of years against an author and publisher who widely distributed blatantly false material, with plenty of hard evidence to support my claims, I think this will be a really hard lawsuit to win. Newsweek will argue First Amendment all day long. Defamation law varies by state and California's standard involves "special damage," which might be hard to prove for someone without steady employment. (See http://www.dmlp.org/legal-guide/california-defamation-law.) There might be some kind of emotional distress claim, which would make sense, but it's not going to be easy to put a number on.

You might expect to see a settlement given Newsweek's backtracking.

[I'm not a lawyer. This isn't even close to being legal advice.]