Moshe, this case did not take place in a Bais Din where Talmudic halacha applies. No frum attorney would make a living if s/he used halacha to win a case rather than the law of the government.
There are many criteria for Chillel Hashem. One is when your actions could cause someone to say, “If this is how a frum Yid behaves, then I don’t want to be a frum Yid”.
The teacher was obnoxious and rude and could have created a Kiddush Hashem by being polite and cooperating with the court. From the story, it seems that the courts have preconceptions about frum yidden and for good reason.