A similar situation happened with my sister's dog. We were having her wedding "reception" (party?) at her house, the food was inside so her dog was outside. My 3 year old cousin was playing with the dog, dog and child bump heads, child has small scratch, aunt & uncle throw a stink and report it, whole nine yards. The kid didn't even need a band-aid, and we're talking about a 90-pound Akita - if the dog had attacked the child, it would definitely have done some damage! Anyway, we proved shots, etc, and essentially haven't spoken to my aunt and uncle in the last few years. She didn't have to do anything special with the dog, but I believe there is a report with animal control somewhere.

Anyway, not much advice, but I sympathize - it's a terribly unecessarily stressful situation. I wish you guys the best.