Don't let this go unchallenged. They are trying to blow smoke up your butt with legal bullying via a condescending letter. Let the small claims court decide the outcome. You have evidence of negligence.
When you block a person, they can no longer invite you to a private message or post to your profile wall. Replies and comments they make will be collapsed/hidden by default. Finally, you'll never receive email notifications about content they create or likes they designate for your content.
Note: if you proceed, you will no longer be following .