I feel for you guys! Obviously you only posted your side of this but I know how expensive navigating the legal system can be for a small business owner.
Happy to offer some thoughts and advice from someone who is not a lawyer but has been sued before (and won by having the case thrown out with prejudice!).
Email me lane (at) joinjune (dot) com
Also, maybe setup a GoFundMe for having people help you raise funds to fight this?