It pretty much shows that the argument that "he wasn't hired yet, therefore wasn't fired" argument is bogus. (Thanks to Natalia for sending me a link to this through my fb account.) He was assigned classes, in which students were enrolling, invited to new faculty reception, asked about computer needs, and all the rest of the normal stuff that goes on with a new job. His offer said that when the trustees approved his appointment, etc..., but not "if." He was using that affiliation to publish already.
The lawsuit is weaker in entering into the merits of his actual speech. After all, we could disagree with him about Hamas and still think he has solid case. I suppose he had to cover all the bases. If it comes down to a hermeneutic battle over what his tweets mean, he might have an uphill fight, because people don't interpret them the same way. I've wavered myself several times on whether they are anti-Semitic.
Another weak point is going after the donors for tortious interference. They have the perfect right to decide not to give money to Illinois if Salaita is hired, and to make their views known in advance. The response of the university should have been: ok, I'm sorry you feel that way, but if we fire him / refuse to follow through with this then the multi-million dollar lawsuit will also be a financial hit for the university. We'd prefer to lose your donations than to pay him millions because we made a mistake.
The lawsuit also says that he is a scholar of American Indian studies, which I can see is a weak(er) point. The idea that he can't publish without institutional affiliation is also bogus.
A settlement can protect the university reputationally. Salaita would have to accept money but probably couldn't speak out anymore. If it goes to trial, both parties will look bad. The most offensive-sounding tweets get debated over and over again. The fact that an American Indian studies dept. hired someone who has marginal qualifications hurts both Salaita (and his followers) and the university itself. The kowtowing to donors looks awful from Wise's standpoint, etc...
The damages should be substantial. Not only lost earnings for this year, but for his entire career. Reputation damage, etc...
It will be interesting to see whether this is settled or goes to court.