First, anyone can sue anyone else over just about anything. The question is whether they can win or not. I suspect these people are scam artists. They have an attorney on retainer (probably just as crooked as they are) to try an intimidate people or slip pass a suit by a lazy judge. So we assume you have an attorney representing you to protect your interests. Now you just have to let the litigation run its course. The likelihood is that you will win, but it will be awhile.

I think the biggest mistake you made was not getting or properly checking references before you rented. You said you found they pulled something similarly previously. So you couldn't have checked before you rented. Yes being a landlord is a business. And you have to be very careful.