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I agree with what some others have said; it's hard to judge whether or not the publisher is in the wrong without knowing the contents of the contract.
I suppose it is possible that the contract she signed mentioned some sort of 'exclusivity' clause, preventing her from publishing (or self-publishing) elsewhere without their consent.
If this is one of the Big 6, then I assume the termination of the contract had legal grounds. Big companies usually have top-notch legal advisors, and I doubt they would make a rookie mistake like terminating her contract when she was not, in fact, in breach of it.
Of course, whether it was ethical or not is a different question.
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