I've no idea whether this school has ambiguous rules, or enforces them inconsistently (as is seemingly alleged) - but the lawsuit questioning whether the school should ban the use of AI to complete assignments (when such use of AI is banned in many college and professional environments) sounds like total BS.

And at some point, I'd say that schools needs to introduce a new grade - "A*" - for such situations. At the bottom of the student's transcript, it would explain that "student's otherwise-earned grade was replaced with a fiat 'A', under threat of legal action, per school district policy". 100% truthful, but some university admissions officers might choose to read it as a red flag. Better to spend the district's limited funds on student education, not lawsuits.