Greg Ginn is going to have to prove that his former bandmates are committing some sort of fraud by calling themselves "Flag" and touring the country. He should have no problem doing so in the court of public opinion, but the legal one might be more difficult.
Never let the guy who owned the record label get ahead of you on legal matters. Someone made a calculated decision and they may have cost themselves a great deal of money.
This is similar to what happened when the former members of Pink Floyd went out and made a "Floydian" album called A Momentary Lapse of Reason and then toured the world; subsequent to that, they defeated Roger Waters in court and were able to go back out and make The Division Bell and make even more money, playing stadiums and confusing fans.
Ginn's legal team should not cite the Pink Floyd case; Waters went on to tour the world several times with backup musicians, playing Floyd albums and selling out his own stadium tours. He was not financially set back at all; in fact, he was able to do quite well.
This will come down to what the fans will tolerate. In most cases, they simply won't pay attention or care.