I am so sorry this happened to you and your poor little puppy!
Did you get this person's name? The only recourse you have is to take him to small claims court. I doubt he would have to pay the full amount, since his dog was tied up, and this was an accident, but he may have to pay half!
It's certainly worth a try.
As for him being bitten by your dog - anyone who sticks his hands into a dogfight does so at his own risk.