Being sued for keeping security deposit.

[Jacob Mendrin]

Hello all, apologies if this question has been asked before but after searching through the forums for a while I found nothing to match my particular situation. 

We have recently sold our rental home to the renters. The day of closing, my agent calls me and explains to me that the buyers were asking for me to forgive their rent for the month so they could afford to close that day with their available funds. My response was I was fine with it only if I am not going to be held liable for any more money out of the deal. 

Long story short, we received our final statement from the escrow company and found that they deducted around $1,100 dollars from our profits. After seeing this, we opted to keep this amount from the renter's security deposit and returned the rest. After informing them of the reason, they are now threatening to sue us. So my questions are:

1) Do they have a case? The only thing they have going for them is the agent telling them they wouldn't have to pay rent. But nothing was ever mentioned about the security deposit. 

2) I live out of state (in Arizona), I would have to miss a few work days, pay for a plane ticket, hotel room and rental car just to defend myself in court. How are these situations normally handled? 

This feels like a complete scam, the agent I feel was working with the buyers to screw us out of the 22 days they owed for rent. Has anybody had any experiences like this? How did you handle it? Is it worth the fight? Normally I just give in to situations like this but this time it feels different. Appreciate any comments and feedback. Thanks!