To be a dependent, a minor child must have lived with the taxpayer more than 1/2 the year. This makes your grandchild your dependent, not the parents' dependent.
If you file first, all will be good.
If they file first and claim her, you should claim her on your return and file by mail (do not efile). The IRS will then sort it out as to who is entitled to the dependent. You should win.
As the child is your grandchild, you do not need any "legal custody" for any of this.
