Agree a host has the right to delete especially if it warranted a DMCA complaint. However it generally is a good rule of thumb to at least give the client some warning prior before taking action and give the client the ability to take care of any violations on their own. If they don't do it, as others said suspend then terminate.

If there was nothing wrong with the files, and you told your host this and they don't want to work with you then its best to move on.