It would seem equally likely that your original client was the entity that performed the white labeling. In which case they white labeled the site, and sold that cleaned product to AJ. In that scenario, AJ never saw a copyright, and your client is not only responsible for the issue, but also for distribution of copyrighted material for profit, which may not be in the best interest of your business. You have not mentioned any communication with the original client, which I doubt is the case, but I would tread lightly as the Dutch seem to be pushing for criminal pirated resale guidance from the EU, unless you are comfortable with that escalation.
We've given serious thought to this issue but it really does not seem to have been the case. All our contacts have behaved ethically, unless they're lying to our faces, which I find very hard to believe. It seems to have been a rogue developer at AJ who chose to ignore established practices, and is now being kept out of harm's way (while unfortunately leaving the situation to exist). As far as escalating--well that can never end well, can it? I'd be okay (not happy, just okay) if they just took it down or moved all remaining assets over from us to them, so that it's no longer costing us out of pocket.
It would seem equally likely that your original client was the entity that performed the white labeling. In which case they white labeled the site, and sold that cleaned product to AJ. In that scenario, AJ never saw a copyright, and your client is not only responsible for the issue, but also for distribution of copyrighted material for profit, which may not be in the best interest of your business. You have not mentioned any communication with the original client, which I doubt is the case, but I would tread lightly as the Dutch seem to be pushing for criminal pirated resale guidance from the EU, unless you are comfortable with that escalation.