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Okay, court cases aside, and let's say for the sake of argument that Gamma Phi's HQ disciplined them, I think the punishment does not fit the crime.
Why not put the chapter through some sort of PC sensitivity training? Bring in some native Americans to speak to the group, etc. That seems much more in line with educating young people who made an error in judgement.
Their "crime" was not an out of control, alcoholic binge where people were arrested, injured. This form of punishment is just reinforcing the "we must punish these non PC fools swiftly and forcefully" mindset.
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