Who is liable for the problems we have in our house if it wasn't disclosed and we have proof the sellers knew?

We bought the house in 2012. We got a home inspection. The inspector said that there was nothing major wrong with the house. Come to find out, the basement/foundation is completely unstable. We had an engineer come out after we were enlightened about our situation from some friends. The engineer said "Don't sleep in the two rooms above the basement during a large rain storm" That to me says our situation is pretty serious and I have a 3 month old infant. It terrifies me. Also, we did find a letter from an attorney we had hired shortly that we could no longer afford. The letter was an engineer report that the sellers got approx. 2 weeks before closing about the condition the basement was in. This was never disclosed to us or we would not have bought this money pit. Thank you.