I feel badly for you and your daughter -- but you say your dogs have gotten loose several times, even though you don't agree with letting them run free.
I guess I think that this is a problem -- I have managed to own dogs (including 4 GSDs) all of my adult life and have not had one out of my control since 1987 when an intact male got loose for about 15 minutes while I chased him down. I have not had a fenced yard until 2001 ....and I have done a lot of off-lead work with all of my dogs and am an *average* dog trainer - nothing special and two of the four GSDs have had plenty of prey drive.
Regardless of whether or not the cats should have been allowed to be loose (and they are legally allowed to be at large in many states), I think you were responsible for all that your dogs did. I do think having to euthanize them for a first offense was very harsh, but the owner of the cats probably thinks it was quite fair.
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