If you already went through all that, were denied, and want to continue contesting, see if you can find a mediator before you turn it over to your attorney.

Almost like a therapist, a good mediator can really help people come to terms because they help take some of the emotion out of conflict.

The first step is to contact a county appointed mediator which I have done. 

Have you tried mediation?

That attorney will offer mediation because they have the evidence of no permits and believe they can squeeze you in court as an unethical  individual.

I had one last year that took 12+months to finally go to trial after a lot of mediation and Covid payments etc.

You may have an insurance company that will cover this if you get lucky.If your tenant slipped down some stairs you would probably be covered, but when you hire someone to repair a roof most states have laws that requires every homeowner, property owner and contractor to make sure and verify that every worker, whether working directly for you, or whether working for a company those employees must be covered by worker compensation insurance.The same laws apply to onsite property managers and landlords get hit with multi-million dollars civil lawsuits that are not covered by property insurance for working overtime, injuries, retaliation, harassment, etc. and the costs landlords pay for an attorney are about $80,000 to get to the first mediation attempt to settle, no less than $300,000 to get to a jury trial and the landlord still has to pay for damages awarded.

The slur was not directed at them, I believe it was simply overheard (although I was not able to make out full context from the message).This building is rented by the room and our renters don't always get to choose their roommates, so we do feel like we have a slightly higher responsibility to help mediate interpersonal issues.

In my state, there's a mediator that would try to work things out between landlord/tenant.

From the info you provided, if this went to small claims court and was before a mediator/ arbitrator I'm assuming they would side with the tenants and find you to be unreasonable.