Cavalier v. Random House, Inc.
297 F.3d 815 (9th Cir. 2002) - full text opinion
You can find images of Good Night, Ernie and Good Night, Elmo (two of the works that the Cavaliers alleged were infringing) on Amazon.
Wanda Cavalier has since brought suit against the Children's Television Workshop, the Jim Henson Company, Simon & Schuster, and Viacom in California state court (case number BC251828).