ui.select2 listens to the $destroy event:
elm.bind("$destroy", function() {
elm.select2("destroy");
});
and apparently this event is fired after a reorder (which should't happen).
Luckily, this issue seems to be fixed by using the latest version of angular-ui-sortable. Here's the modified plunkr, which works as expected: http://plnkr.co/edit/nSZIZNsrHX0KBppYbYoF?p=preview