According to the suit, the iPhone works fine when an AT&T SIM card is in it, but if it is replaced by a SIM card from another wireless carrier, it will not work. Holman and Rivello both claim they purchased iPhones and wanted to be able to switch service providers. Apple terms any attempt to change the SIM card to other service provider as "hacking" attempt!
"Apple expressly designed its software release 1.1.1 expressly to disable Third Party Apps and to disable any unlocked SIM cards, and to create technical barriers to install new Third Party Apps or to unlock the SIM cards," allege the lawsuit. Link