Group Owner Responsibilities/Behavior?

It's up to each owner to make the rules for their group, as long as they don't violate the Yahoo! Terms of Service agreement. It's perfectly fine for an owner to remove a member due to complaints from other members or even just because they want to. The removed person is free to start their own group or join another group instead. So, you were fine. For an owner, it's usually easier to remove someone when the rest of the group isn't getting along with them.