Well, that person said he met her at a mustang rally. So i guess it`s more like some kind of getting together or a meetingThis is just a guess, but a very famous song is "Mustang Sally". If there is a woman, working with horses, someone very well could have called her "mustang sally".
You would not refer to a person/persons working with horses as a rally.
This was something that you heard; not something you saw written? If you only heard it, then we can not know for sure that you heard the word "rally".