As far as I know, there's no public info on exactly what AA considers to be conflicting. Obviously, reservations for two DFW-LAX flights an hour apart is impossible, But what if they are on adjacent days? Some people actually commute daily. And on short routes, mileage and segment runners have been known to actually fly back and forth between the same city pair 2 or even 3 times in one day.

Yes, AA is within their CoC to cancel conflicting holds, but they could certainly make some big improvements in how it's done.
1. Detect at time of the 2nd booking and prevent it then, rather than canceling later. Assuming the AAdvantage number is on both bookings, this shouldn't be hard. No need to wait for a big slow overnight computer batch run.
2. Rather than block the second booking, offer the customer the ability to cancel the first one when the second one is made, as part of the same transaction.
3. And if 1 & 2 are too costly to implement, the common courtesy of an email when the cancellation occurs should be pretty simple, and offer the less-informed customer more time to correct things to their desired.