A professor assigning a textbook that he or she wrote happens fairly often as people tend to write texts for courses that they teach often, and tend to write texts when they are not happy with what options are already out there, and they generally think that they cover things in the best way possible, since they wrote it. Often a text evolves from course notes and is shopped around to various publishers, one of which is happy to accept it and polish it up and charge extortionate prices for it. If it gets adopted on its own merits at other institutions, great for the publisher and author.
But there is an obvious conflict of interest when a faculty member requires a text that he or she wrote for a course at the home institution, as the author/instructor gets some of the money (not much, though, even for a $180 text, I'm afraid.) At a normal university with standards and ethics, there generally is a mechanism for making textbook adoption decisions revenue-neutral for the instructor. I know of places where the part of the proceeds from the sale at the home institution of the author is sent directly from the publisher to something like the department colloquium fund, or sometimes if the publisher can't cope with the complexity, the author just donates the apportioned proceeds from sales at the home institution to a student support fund or tutoring lab or something like that.
Apparently, in this department, there is no such mechanism for the revenue (or the authors are not worried about the conflict of interest) and the authors apparently do get money from the text being required at their own institution. It is easy to see how another faculty member, now tenured, can feel that it is unfair for the text to be required, if the text isn't that great (most aren't) and if the money is going to his or her department members despite the fact that it is not the best value book. When the people profiting in question are part of the department administration (chair, assistant chair) that makes resistance more difficult, as department staff can retaliate in various obvious and subtle ways and there can be pressure to comply with unethical practices.
At a normal university, there would be conflict-of-interest policies that apply and would probably prevent a department from forming a policy to require a course purchase which benefits a faculty member financially. At Cal State Fullerton, either there aren't any strong policies, or they are being ignored, apparently. The instructor who is not following this unethical policy does have tenure (his wife is also tenured in the same department) so though he can't be readily dismissed or denied tenure, but still because the people who are financially impacted by this make decisions which can affect him and his wife, this is big headache.
There has been support from faculty in other departments which is a good sign but the fact that it got this far is one sign of an unhappy dysfunctional math department. There are hundreds of commodity linear algebra and differential equations textbooks out there, with lots of different approaches. Most of them are terrible, but there are enough good ones that this kerfluffle seems pretty ridiculous.