His shit timing and this frivolous lawsuit just suggests the timing of his own sacking was forced by his self-absorbed and incompetent man management.
Clarke once meant unproven, anointed, NSW, media friendly, image conscious, pretty boy. That was when, and why he and Katich had their problem.
Since then he's been humbled by fame with his neurotic WAG flushing her $150,000 ring down the toilet, become captain, and delivered some of the best batting you will ever see. I still have my doubts about his character in the dressing room but I'd be inclined to say Watson just has to swallow this beef and shut up. Which he seems outwardly to be doing, even as Arthur tries to stir the pot again. But if Clarke's animosity has directly blocked Katich's Test career then that was a mistake - although a mistake that happened when we still had a relative wealth of alternative talent to rely on.
As for Arthur he's a white South African, obviously that doesn't make him a racist, or responsible for apartheid, but it does instantly problematise a $4m suit for racial discrimination against Australians and probably pisses off a bunch of people.
All that said, there's a problem of authority in the Australian national cricket setup that goes back way before Arthur. Bob Simpson was probably the last national coach with a real foundation of respect.