I don't think I'd call this a "trivial incident".
Meyer's attitude and comments were certainly inappropriate for someone who was in his administrative position with the university. There is no doubt that he deserved immediate dismissal with loss of all pay and benefits.
That said, I don't see where Williams is entitled to any financial compensation for this offense. I have to agree that, in this instance, the lawsuit only serves to aggravate racial tensions.
I live too close to DC and get to experience this kind of friction almost every day. It's a fact of life in a heterogenous culture. If every offensive comment received a reaction like this one did, society could not function and everyone would starve. The only way to keep things running at all is to trivialize problems as they crop up. The alternative is to make a mountain out of a molehill as happened here, and sooner or later the mountain will get big enough to derail the country.