As mentioned in the article his "fellowship carries no stipend" which is a little different than an employment contract. Under these circumstances, dismissal for cause isn't a stretch and fighting it might be difficult to justify financially. The whole incident reeks of political correctness run amok but that's the mollycoddled snowflake generation, thin-skinned and ill-prepared for the real world. The students in question evidently have little appreciation for irony, though the comment was certainly an awkward attempt at humour the reaction borders on abusive.