You don't think that this incident if true doesn't fall under just cause?
If the teacher believed the shirt violated the dress code, the kid refused to change, said, "do you want people to think you're in the KKK?", asked her to go out into the hall, said, "guys, can you believe she's wearing this shirt? tell her how racist it is!"
AND if the teacher doesn't have a history of crossing the line
AND if the kid doesn't have a history of social trouble at school (which doesn't appear to be the case)
then no, it isn't. This is business as usual in an American High School. You must have had an awesome school experience.
I had a teacher who told my parents I wasn't "very smart," my sisters both had teachers who targeted them directly, and all three of us had pretty easygoing times in high school. Full disclosure: that was in private school, but it was accepted as a normal part of being in high school. Many teachers get burned out and in response they dominate their students. Teacher will probably have to take some trainings, maybe an anti-bullying seminar or something. But this just isn't that unusual.
In my work in public schools, I've seen teachers teach untrue information, tell kids they were never going to get it right, talk homophobic shit about the gay kids, make fun of kids for their accents...the list goes on and on and on.
If a teacher got fired every time a line like this was crossed, not only would we run out of people who met state requirements really quickly, but we would only restock the ranks of people who shouldn't be teaching in the first place.
Teacher needs to be educated on better classroom management and reminded that her students are human beings with feelings. If she gets fired, it'll only be as a result of the media circus.