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Is this in small claims court?
Did these tenants cause the infestation?
There is really no reason for them to settle.
First, the landlord has the onus of proof. That means the landlord must prove that they did this rather than they have to prove that they did not.
Secondly, if there is any cost order made in small claims court it is always very small because small claims court is set up so that the parties self represent.
Does that help?