As a generalization that a lawyer can clear up for you...and that is guided by your state laws, you start with a certified letter objection to the application of your contract in such a fraudulent manner. Then you have a choice. You can decide to sue them in civil court on the basis of what is in your contract. You can take actions and let them sue you in civil court. OR you can go to your state's attorney and swear out a warrant for arrest and trial, charging them with various crimes.
Get over the idea you don't want to make trouble. Assert yourself and save your business.
Joe
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