I don't think Max was kicked out of the band, he simply left.
The turmoil in the band did kind of escalate with the death of Dana, but there was already some animosity in place within the band even before then. I think Paulo, Igor, and Andreas were becoming rather upset with the way Gloria was running the band and promoting the band, especially since the release of Roots. Namely the way a lot of photoshoots and interviews with metal magazines would focus entirely on Max, and ignore the rest of the band. Roots was a massive hit in 1996, and many articles you would read about Sepultura at the time seemed to credit Max with coming up with the idea of releasing an album like Roots. The rest of the band felt left out, and blamed Gloria for this. Since their contract with Gloria was running out soon, Paulo, Andreas, and Igor decided that they would try and confront Max with the idea of simply not renewing the contract with her, and finding new management. They confronted Max about it a couple of months after Dana's death, and the suggestion that Max also fire his wife after both of them had suffered so much, was viewed as a huge betrayal by the rest of the band. Thus, Max left Sepultura, and formed Soulfly.
Really a pretty fascinating story. I read somewhere that VH1 was thinking about doing a Behind the Music on Speultura, centering around Max's departure from the band, but that never materialized, unfortunately. You could defend either side, but I can see why this would be a tough decision for Max. Choosing between his wife and the band was a rather tough situation to be put in.
