Legal Question in Business Law in California

I am a licensed Esthetician and a certified Permanent Makeup artist. I have been practicing permanent makeup now for 3 years. A recent client from out of state is visiting her daughter here in California wanted to get her Eyeliner touched up while she was here. She said she had had it done 5 years ago. While touching up her eyeliner I noticed a dark ink implantation on her lower right eye the size of a say a beauty mark. When I saw the mark I thought "the last person really screwed up." In my profession I learned not to slander anyones work so I didn't mention anything. Thinking that she obviously knows this is on her face. The next day they called me claiming that I had created that mark. The third day we came to a conclusion that I will not accept blame for the mark but I will do whatever in my power to help remove this mark. Free of charge. I camouflaged it with skin coloring. She hugged me and seemed very happy and left. 5 days later they call very upset and told my managers they plan to sue me for dermatologist visits and babysitting hours and etc. I am 100% positive I did not create that mark for 3 reasons. 1)The machine I use is manual, I would have had to hold down the button and have purposely create this mark. It also makes a loud drilling sound so there is no way I would be holding it down and not know. 2)The needle I use is the size of a acupuncture needle and could not have "accidently" created this mark. I would have had to spend at least 15 min to create this size. 3) When I helped camouflage this mark I noticed that the skin was not broken (the epidermis would look like how a sunburn would look) since the initial procedure was just 2 days ago. Therefore confirming the dark mark was not recent.

I did not have them sign a consent form or a liability waiver on either occasions nor did I take before or after pictures of the initial procedure. Though I did take a picture of it before I helped camouflaged it.

The initial procedure was $250.

I have 3 questions. What is the likelihood of them taking me to small claims court? Or are they just trying to scare me into admitting I did this and pay them out. 2. What type of evidence or what would a solid argument be on my behalf? 3. Should I just pay them out and settle out of court and forget this whole headache? without admitting fault of course.

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