This case got to the U.S. Court of Appeals for the Sixth Circuit, which held against the school. Then the case moved to the U.S. Supreme Court, which unanimously held against the EEOC and against the teacher. The Supreme Court stated that churches and church organizations enjoy a virtually absolute right to fire individuals under the so-called "ministerial exception" to employment laws, and religious employers are protected under the First Amendment from being second-guessed by judges for their employment decisions about "who will preach their beliefs, teach their faith, and carry out their mission."
And here's another surprise. This Supreme Court decision, written by Chief Justice Roberts, was unanimous.
Listen to the radio commentary here: