The Welsh forward's lunging tackle on Blues midfielder Mateo Kovacic drew praise from some corners of Elland Road, but referee Anthony Taylor saw differently, brandishing a red card without hesitation.
The official had a clear view of the challenge, his vantage point unobstructed as James initially won the ball but followed through high on the Croatian's ankle.
"It's reckless," Souness said. "Yes he gets the ball but his studs catch the rest of Kovacic. We'll see the bench of Leeds United complaining about it."
"He gets the ball but he gets more of the player. That's a dangerous tackle and that's a red card."
Despite his insistence in the post-match press conference that he had not seen a replay of the tackle, Sky cameras appeared to show Marsch watching the incident back on a dugout iPad.
His reaction showed him remonstrating with the fourth official Kevin Friend that James had won the ball.
"In the heat of battle you see things differently when you're on the touchline like that, but I think he'll reflect on that when he sees it later and say that was a sending off," Souness said.
"He got a bit of the ball but he got a hell of a lot of Kovacic."
James will now miss the remainder of the season through suspension, along with Luke Ayling who was also sent off in United's previous fixture at Arsenal.