You should consult with a local education law attorney immediately.
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Obtain the school's written policy on bullying. They are obligated to follow it, but if their investigation does not turn up anything actionable in their opinion, they are not obligated to act further. I know you already complained to the school--but I'm saying get their policy and make sure they followed it.
Hire a lawyer to send a legal letter to this other kid's parents. As long as he/she is a minor, they will be liable for everything he/she does as long as they know, or should know, he/she has this propensity---the letter will officially put them on notice. You can sue the parents for everything their child does.
You should hire an Educational Rights attorney to deal with the school if you don't think they followed their bullying policy and to make the school take action--the Educational Rights attorney will protect your son's rights at school. The school can't ignore the attorney. Use the "find a lawyer" tool on Avvo.
You should also call the cops every single time your daughter is threatened. If you can show the court a course and pattern of harmful conduct, you may be able to get a restraining order. Schools tend to be afraid of that because then they have to monitor and keep them apart. You can hire a personal injury attorney to sue the parents for injuries to your child. You can sue them yourself in small claims court (in many states, small claims court can only award money, it can not issue orders restraining behavior).
Suing a governmental entity such as the school board is very difficult, with many hoops to jump through, and without actual monetary damages to collect, very few lawyers will be willing to take the case. If you took the above steps and they still did not take action, you'd have a better case. Often times, doing all the above will take care of the problem without the need to sue the school.
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