I need some advice.

I have ( had) a daycare boy age 3 who turns 4 in a few days.

I started looking after him in July. He is a only child with two cousins that he rarely sees. His nonna provided care for him while his parents worked. He was brought to me because I live a block from the the public school he attends and his nonna lives too far from the school to provide care ( She lives close to dads work).

From day one he has been a handful. Spoiled does not begin to describe this child. He had everything done for him and when I absolutely refused to do it he would throw a fit. He constantly wets his pants, expects to be dressed, and is as slow as molasses getting him to do anything.. His parents/nonna never make him do anything and set no boundaries..
He can not listen and wants his own way 1000% of the time. His kindergarten teacher has the same complaint. Which does not happen here.

Daily timeouts are part of the care routine. (4 minutes on the chair once he is sitting quietly)

Last week he threw a fit when the other girl I provide care for wanted to play something else and not what he wanted to play, he got so mad he threw a heavy toy at her hitting in her in the head.. Luckily she was more scared than anything and he earned a hour on the timeout chair for that.

Yesterday he had another fit, resulting in his normal screaming. As usual I removed him from the play area to the bedroom to have him quiet down. I do this by taking him by the hand and walking him down. It took him a long time to calm himself and he did scratch his face in the process.

Once he was able to return to play I emailed mom to let her know. Her response ( as always) was that they would talk with him. That is all they ever do with this child.

Last night dad called me after pick up to ask about the scratches.. I only knew about one and I explained it happened during his fit.. He also wanted to know why his son's shirt was all stretched out. I said the kids had been playing rambunctiously and that was possibly why it happened. ( it was very cold and rainy here so no outdoor play to burn off energy) My 14 month old constantly pulls herself up on the kids as well.

Well it turns out the boy told dad.. I grabbed him and dragged him down the hall so NOT true.. but its my word against his and as a parent he wants to believe and protect his child. I completely understand that. He told me on the phone he did not believe I did that and as for the other scratch it could have happened during play or even at school. I do not recall seeing any other marks on the child other than the one scratch that he did himself.

This morning I woke up to the following email.

" After much discussion with ------ ( child) and my wife the decision has been madeto remove ----- from your care. While we are not accusing you of anything at this point, given the unexplained injuries and what our child is saying. we feel it necessary to seek legal counsel and will advice you in due course"

WTF? This email was sent at 1133pm. Anything legal will have to wait until this morning.

I am absolutely sick to my stomach about this. I have never ever had this happen before. It could very well ruin my livelyhood. For the most part I absolutely LOVE ( we all have days we do not lol) what I do.

Should I get a lawyer or wait and see? My husband is being awesome about this ( or as awesome as he can be via text he is already at work).
What do I tell the other parent ( I only have one other child in care right now). That child is a dream come true to look after and this is the same child the toy was thrown at.
Should I stop advertising for children?

I am very confused and scared at what all this means for my family.

Any advice would be welcomed.