Applicant meets all requirements but has HORRIBLE past reviews

[Ryan Tall]

Hey BP, I'm fairly new to the RE investing and landlord business. I recently closed on my 2nd property and am in the process of screening potential tenants. I have an applicant who is the most qualified by means of credit score, income, no evictions, no criminal history, no pets, no smoking etc. She has communicated over the phone and via e-mail very professionally with me. In my application I require two previous landlords contact information. I reached out for information on this person and found out she is a nightmare tenant/ person to get along with. Her current and previous landlords had very little good to say and also informed me she is currently in a lawsuit against her current place, which is why is she moving out. Both parties said she had threatened multiple lawsuits against them over small and very manageable problems that could be resolved without a lawsuit. On top of that there was more negative information shared about this applicant. 

This is a concern to me and I do not want to rent to this person after her horrible reviews. As she seems like the type just looking for a way to sue, I want to be sure I deny her application legally. I'm thinking the less information the better in the denial letter? A simple document stating she has been denied and a more qualified tenant will be selected? Reimburse her application fee?

Just want to make sure I navigate this situation the correct and legal way so I don't end up as one of her lawsuit victims. Any tips, tricks, do's/do not's are appreciated!