As far as sueing goes.....
I think maybe you should call a lawyer. They'll usually give you advice over the phone and tell you whether they think it's a strong case, (which I think it is) as far as the bylaw thing goes, I'd tell your lawyer about you having animals that are under the by-law, (it's only a bylaw, bylaw infractions aren't a felony, they're the equivalent of a misdemeanor offence) it's better to have your lawyer prepared to deal with it than have someone mention it in court and screw your entire case. I say bawlz to the wall and take 'em out with a malpractice suit.
"One hour from now, another species of life form will disappear off the face of the planet, forever, and the rate is accelerating.." - excerpt from Megadeth's Countdown to Extinction
And it's up to us to stop it - Gorelith