Escalated to a lawsuit because they don't know how to use their site and resolve without lawyers. Hell they don't even listen to their community past the vitrol. There are plenty of reasonable responses (unlike the VS Code SantaGate). It is hilarious that they needed to defend against one of their own unpaid moderators who broke no guidelines. Great example of stumbling under your own feet.
They offered her a way to apply for possible reinstatement, instead of just doing it or offering it outright for the mistake that they now acknowledge. Garbage. It is a big FU.
Bad management = lawsuits. This is easily measured and lawsuits like this are easily preventable by proper management. Who is running the site?
I don't have a horse in this shtick, but Stack Overflow/Exchange has been great because of the community. Those moderators and community will eventually move on past Stack Overflow too other things. It is too bad.
How the whole thing started: https://judaism.meta.stackexchange.com/questions/5193/stack-overflow-inc-sinat-chinam-and-the-goat-for-azazel
Lol, bad response: https://meta.stackexchange.com/questions/334551/an-apology-to-our-community-and-next-steps