The prompt discusses a situation where more than half of the students will out and out fail an assignment if the teacher sticks to his or her guns. Since a portion of the assignment is missing, the teacher is well within rights to fail the ones who did not comply, but the ultimate decision has to do with where the class is focused: On the punishment or the crime.
The punishment aspect of the class is geared toward the final product. Such classes are structured as a job. Late work carries a heavy price, and you might find yourself giving the, "You know, if you don't turn something in on time, you get fired from your job" speech. Reading quizzes are used to ensure that students read the assignments. If a student fails a reading quiz, he or she will read the assignments in the future. But students need to fail in order to be pushed to succeed. The ultimate goal in this sort of philosophy is that students will do better in a class in order to avoid negative outcomes. The negative outcomes are bad grades. Students learn by failing. They will do better on the next assignment if they fail this assignment.
The crime aspect is the actual act itself. Classes focusing on the crime are all about process. In a way, success and failure go hand in hand. Mistakes are seen in the same light as moments of brilliance. Each are opportunites for learning to take place. Since mistakes are not a negative thing, teachers are more forgiving in this sort of philosophy.
Classes have a subtle mix of the two, but all classes lean to one side or the other. I have aspects of each in my classroom. I have both cruel task-master and understanding coach in my genetic make-up. My father was big into support groups and my mother was a dominatrix, so it all evens out.
Personally, I would give the students a second shot. The students could email me the missing portions of the assignment or leave it in my mailbox by the end of the day or risk a lower grade. It's just the way I am. Now, this does have negative benefits... I could lose credibility in the eyes of the students. They may try and challenge me on future assignments. But, if that many students did nt follow instructions, there are really only two possible conclusions which could be drawn: The instructor did not explain the directions properly or there is a large amount of mercury in the water supply. A possible third option is that the students are banding together in order to see how angry the teacher can get, but sincerely doubt that is the case.