That makes sense to me. She made the first contact/pitch and got the publisher interested. Why should another agent make the commission on the work she'd done initially?
I'd understand it if I dropped her and was trying to make a quick buck by excluding her.
She dropped the ball, she's been terrible about keeping up to date, and she's the one who decided not to pursue it further. She shouldn't get a dime.
Otherwise all she has to do is sign every author with even a long shot of getting published, send their manuscript to all the decent publishers, then drop them and let them or their new agent do all the work while she collects.