Are you the reason they failed inspection or the reason they had inspection? Obviously the reason they failed is because of what's in the pictures.
Based on what I see and what you say, you probably did the right thing. It's just a shame it had to be done in a way that might seem a little sneaky to your (ex)employer.
As far as the lawsuit.... I'd be curious to hear specifically what you'd be suing for? I'm sure a lawyer could make a case for something, how legitimate might me another story.
[This message has been edited by Jps1006 (edited 03-03-2005).]