I'm not sure what the laws in Ky are, but in Tx, you are allowed to shoot any animal that makes you in fear for your life. (and believe me, that stallion would make me afraid.) If this is the case in your state, I would inform the neighbor of this fact and let him know that if his stallion gets out you will shoot to kill. (and then do it.) I know this sounds mean, but this animal is a menace, and should be put out of everyones misery. It's not his fault (sort of) he obviously has never been taught anything, yet alone manners. But that doesn't change anything now.
Unfortunately, to my knowledge (and I'm NOT an attorny) the only thing you can get is actual damages. You will not be able to sue for pain and suffering. (the law considers them only animals and won't let you sue for that.)
I don't mean to add to your concens, but were any of your mares in heat? You may want to give them a shot to abort. You definitely don't want a foal from that union.