Received fake legal letter from contractor.

Stop twiddling your thumbs and file a civil suit

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daring them to take me to court.

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Dependant upon what State you live in. If contractors and suppliers don’t get paid on a construction project they can file a lien to secure payment. A mechanics lien is a legal tool that provides the unpaid party with a security interest in the property.

This is not legal advice I’m offering, but more basic rules of contracting. If you signed a contract with the contractor, you should refer to the language in the contract for guidance on how to remedy issues related to lack of performance. It is always prudent to formally notify a contractor in writing that you will be defaulting them.
The main issue I would tell you to look into is whether or not the contract was recorded with the clerk of courts in your county/parish. You need to look through the contract to see what lien rights the contractor has, if any.
My advice is to hire an attorney who specializes in construction contracts and find a way to quickly default the contract for a one-time fee.
If there is no signed, recorded contract, I’m not sure what to tell you.

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taking him to small claims court for the shoddy work

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Or do what I did in this situation.

Realize it isn't worth your time to go after him. Realize this dude is a shite bag who won't have the money to pay you when you win in court. So just laugh right in his face when he "demands" payment and tell him to get fricked. He will disappear with the quickness.

If he used a nonexistent lawyer call the bar association and district attorney.

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Go over to his house and bend his wife over to get even.

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Pics first, por favor.

Congrats on the new lien on your house!

Expect a lien

How long since he last worked in the property? Was the letter send certified/registered? Are you aware of any subcontractor or supplier that wasn't paid?

I had a roof contractor walk off the job because his contract called for new felt on the roof shingle replacement and he had his crew remove shingles and leave the old felt up w/o putting down new. They had nailed in about four squares when I came home, caught them and shut them down. The contractor got pissed he was caught, pulled his crew and tried to remove the roofing materials in my driveway. I told him he was trespassing and to get off my property. He refused and told his crew to keep loading. I called the police. They arrived and stopped him and I said I was pressing charges for trespassing and theft of materials. The contractor told the police I hadn't paid for labor or the materials yet. I explained to the police officer that the materials "on my property" are my property. Whether I paid for them or labor yet was a civil matter. He agreed, made the guy remove the materials from his truck and restack while they watched. I chose not to press charges.

The next day, I hired another contractor, who did the job correctly. I called up the first contractor, told him to bring me the invoice for the materials and I would pay the materials suppliers directly. When he arrived, I took the total original price we had agreed upon, deducted the materials he had brought over and deducted the cost from the other contractor, plus the cost of the new felt I had the other contractor supply. When I did that, there was about $650 left over. I handed him a waiver of lein to sign, already filled out and told him to sign it and I would pay him or don't sign it and he could take me to court. He was pissed off and complained that didn't cover his labor costs. Told him to pound sand. He shouldn't have walked off the job and left my roof open and exposed and he was lucky it didn't rain or I'd have been suing him for damages.

He signed it. I handed him his check and he left. But boy was he pissed. He was pissed so much that later that night he showed up at my house near midnight, drunk, drove his truck up into my yard, clipped my brick mailbox and destroyed it and was pounding on my door to pay him the full amount. I called the police and they showed up and arrested the guy for DUI, criminal trespass and property damage. He copped a plea deal and paid restitution for the mailbox to be rebuilt. Never saw or heard from him again.

Good luck with yours, though.