This has actually been in the back of my mind. My sister's boyfriend had the presence of mind to take pictures, but I wouldn't know how to tell if they're good enough to show if there was shoddy workmanship to begin with.
If the water soaking your carpet came from the neighbor's pipe he is liable, whatever the cause of the leak (if he want's to place he blame on some pluber or other, that's his problem).
Note - I'm no lawyer, but I suspect I'm right on this one.
der Brucer