The Spokane Transit Authority just apologized for the incident; I quote the Spokane Spokesman-Tribune article:
Two women in their 20s and a teenage boy were talking among themselves about a friend’s sexual orientation during a bus ride on Oct. 20.
After other passengers got off the bus, the young people got into a dispute with the driver about whether they could continue their discussion.
The bus driver told them the topic bothered her and she ordered them off the bus midway between stops and more than a mile from their destination ....
The driver apparently argued that the passengers’ speech violated STA rules of conduct, which bar “disturbing others by engaging in loud, raucous, unruly, aggressive, violent, harmful or harassing behavior” and “offensive, disgusting or insulting” language. But the STA concluded that the driver was in error (perhaps partly based on the on-bus videotape, which recorded the incident), and said that “the youth had not violated STA rules of conduct and should have been allowed to finish their ride on the bus.” And indeed the rules of conduct limit the ban on “offensive, disgusting or insulting” language to speech that
tends to create or incite, or creates or incites, an immediate breach of peace, including ... personally abusive epithets, or words or language of an offensive, disgusting or insulting nature, which epithets, words or language when addressed to the ordinary citizen are, as a matter of common knowledge, inherently likely to provoke a violent reaction of fear, anger or apprehension.
This seems intended to focus on personally directed “fighting words”; the language borrows heavily from Cohen v. California, which stressed that even vulgarities such as “fuck” are generally constitutionally protected. The prohibition thus seems likely not to cover speech that may offend some people who overhear it, even if the speech might be seen by some as dealing with a vulgar topic or discussing it using vulgar language (and I should stress that the speakers might well not even have been using vulgar language; the story doesn’t report on exactly what was said).
Some policies restricting speech on a bus — for instance, on the use of particular vulgarities — might be constitutional under the Court’s “nonpublic forum” doctrine, if they are seen as reasonable “in light of the purpose of the forum” and viewpoint-neutral. But it appears that in this case the speech didn’t even violate the existing policies.
The STA “did not provide any information about personnel actions that might have been taken against the driver.”