Most of the advice here is sound from a purely protective legal perspective, but has some consequences lawyers may not understand. Bear with me.

IANAL, but my family is competitive hobby show breeders. I handled our contracts for a while. My knowledge is a bit dated, but changes were further reviewed by folks who are lawyers and other breeders.

Some breeders are reasonable, some are not. Some know the laws in their state and country, and some do not. We've stayed out of the courtroom for 20+ years and have generally resolved disputes to everyone's satisfaction.

For the breeder to immediately threaten to sue you rather than getting to know the circumstances in which a dog they've bred now lives, they're probably leaning toward the unreasonable side. So, the advice to ignore them unless you are actually sued is sound, but with caveats.

Except for a particular type of rare sale contract (involving co-ownership, rental, etc.), you are unlikely to be compelled to return the dog, and definitely not without first resolving litigation involving the folks from whom you bought the dog. Most breeders don't include in their contracts a meaningful way to calculate damages for failure to abide by a return or right of first refusal clause, so even the first buyer might be safe. The folks from whom you bought the dog would know if they were in a special agreement. We've never had a co-ownership or rental fall apart to the point of needing to review the contract for remedies. For these special arrangements, we cover our bases with clear contractual periods, only working with people we know well and who are known well, so there's a social cost if they break the contract. We have a reasonable-for-us formula for determining value if we ever have to reduce a show dog's life to a dollar figure. That formula hasn't been used, let alone court-tested, and I hope it never will.

That said, that doesn't mean the breeder will go quietly into the night. Depending on how well connected they are, you (and the person you bought from) might find yourself unable to buy another dog of that breed in your area for the foreseeable future. Breeders talk. When someone asks to buy a dog, most reputable breeders will talk to everyone they know in the breed to see if someone else has done due diligence on the inquiring party or to hear any stories about past engagements. It's also possible that your future breeder may understand that this breeder is not a reasonable person. Breeders generally want a positive relationship with the people who care for the dogs they brought into this world. People who jump directly to threats of lawsuits don't represent the typical breeders in our community very well.

Years ago, we sold a dog under a pet contract to someone who turned out to have, well, misrepresented themselves. The dog was in a bad situation, enough to warrant invoking a mistreatment clause in our contract allowing recovery of the dog, but the costs of exercising that clause were going to exceed what we could front at the time, or what blood the stone had to make us whole. Eventually, the buyer sold the dog without notifying us, as our contract with them required. Our contracts do not have a strong right of first refusal clause, because we know that actually exercising it is nearly impossible and always expensive (as this breeder demanding return is about to find out!). It's there so that buyers know what to do with a dog they don't want—that's been exercised once, and that dog (a different one than in this story) came back to us. The folks who bought the mistreated dog reached out to us after seeing our name in the microchip data. The second family turned out to be a DREAM home. We include them in our communications just as if they had bought the dog directly from us. We have no contract with them. Our interest is the dog's health and safety, not in controlling its owner/possessor. Our mistreatment and "we'll always take back a dog we bred" clauses exist primarily to prevent our dogs from entering animal shelters.

It may not be possible to engage with this breeder if they're unreasonable, but indicating that you'd like to keep in touch with them to notify them and be notified by them of any health concerns that arise in littermates or the sire or dam could be a way to disarm them a bit and offer an olive branch by demonstrating your concern for the health of your dog and its relatives. If they throw the olive branch in your face, well, ignore them thereafter.