It was reported to animal control, and it occurred on our side of the unfenced lot.
If it was in your yard your neighbor is liable, not you.
Thank you very much for your help, we were extremely afraid our dog would be taken from us.
Let me just add this - that is not to say he can't sure you - anyone can sue anybody for anything - but his dog was off leash in your yard. You need to make sure that the report to AC reflects that.
If you are sued, you need to speak with a local attorney regarding your options.