The court denied the request for an injunction and granted Svenson's motion to dismiss the case. Remember that because New York does not recognize a common law claim for invasion of rights of privacy, the lawsuit was predicated on the statute prohibiting unpermitted use of likenesses for commercial purposes, plus intentional infliction of emotional distress. Plaintiffs also sought an injunction on the ostensible grounds to prevent potential harm to the children.
The court ruled (as it should have) that use of a likeness in a work of art is not use for "commercial purposes" under the satute and protected First Amendment conduct in any event. The court did not address the intentional infliction claim. As to the injunction, since Sevenson had pulled the two photos of the children from the show and sale, and had sworn in his declaration he was not going to take any more pictures of the neighbors, the court denied the injunction. So, except for having to pay his lawyers a bunch of money, it looks like Svenson is off the hook. The plaintiffs might appeal, but I believe it would be a losing proposition. The judge got New York State law right.
I will say that it's quite likely that Svenson dodged a legal bullet by virtue of living in New York. In a state that does recognise "invasion of privacy" as a legal claim, the case could well have gone against Svenson in my opinion.
If you're interested in the court's opinion, you can find it here: http://www.ahfairley.com/misc/Svenson_Opinion.pdf