It's a common basis on loot council - well a fundamental fact on what it is based on.
Basically the priority of loot is based on armor type first, then what category it goes under - be it tank, healing or DPS.
What I am seeing is armor type hierachy taking place with said loot. While a good argument can be said about gear being few and far between for some classes (clothie being the worst because of the one armor profiency), the same can be said if people adopt the whole "bigger upgrades, no matter what = overall improvement for all" mindset when it comes to divvying out loot.
Yes, the days of seeing pure "Clothadins" and clown-suits are all but dead in this expansion.
In regards to your question, there's massive debate. But ultimately it should be considered on what was the bigger long-term upgrade. Your paladin healer, judging by this story, should've gotten the upgrade purely to benefit your whole raid significantly rather than just a brief upping on DPS or otherwise.
But consideration should be given for other classes as well. Clothies only can wear cloth for that reason and therefore should get priority over anyone else due to the lack of other things they can wear. Same for people lower along the armor chain line.
Healing is the source of life. Without it, you're left with death.