Sorry to hear you sad tale. Losing a pet is awful and a horrific experience so my heart goes out to you.
With respect to the breeders responsibility:
Did you have any contract or agreement from the breeder? A health guarentee or similar?
How long did you keep the two separate?
How long had you had Iggi when you lost Luigi?
We're you able to visit the breeder before purchasing you new baby?
Sorry for the questions, I realise you wrote a lengthy post but these things may help to clarify some points.
I am to a fan of breeders who breed irresponsibly, i am often very vocal on here about this. i do not agree with breeding in cages and pens, i know these are commonly used initially but i feel 6-13 week old kittens should be running around experienccing textures and noises. However a few points are worth mentioning.
$400 is actually on the cheaper side for a US Bengal however he was a little older so that may explain why.
Tapeworm is a very common infection in cats. Especially those from multicat households. For Tapeworm to be obvious it would need to be an adult worm so would no doubt have come from the breeder. I am surprised that the breeder s kittens are not routinely wormed as this would have minimised the issue. However, tapeworm often needs fleas to help the issue. So she may worm sporadically but not de flea. All this said, it is not possible for Luigi to be sick from Tapeworm as it takes a much longer time than it had to grow into an adult worm. It is worth checking out the medication that the vet gave you as the side effects might have a rare complication. It is possible, although rare, that this may have caused Luigi's problem. I suspect not, but do look into it before taking any legal action.
Campylobacter is actually a fairly common bacteria found in the gut of healthy cats and humans for that matter. It is more common in cats from multicat areas such as rescue, shelter, Catteries and breeders. It is very rare for it to cause such issues that affected Luigi. Check out this:
http://www.wormsandgermsblog.com/upload ... 20Owner(11).pdf
Unfortunately I don't think there is any legal cover for you regarding the loss of Luigi. It is commonly recommended to keep new cats separated from existing cats for 1-2 weeks until the new cat is considered healthy after a vet check and time to allow them to settle and their overall health assessed. Any legal action against the breeder will provide experts to testify to this.
The issue of you vet bills for Iggi. I am surprised at the amount that it is to be honest. It would cost not cost anywhere near that for me to treat a cat for the infection and tapeworm. I realise that US vet bills are often very different though. But I am sure the breeder feels the same given her response to get her vet to treat him. It is probable that she doesn't have the money for it as breeding doesn't always make money. The money you paid for him will have gone towards the cost of breeding him. That said, I do not know the breeder and how many cats she has and how big scale she is.
A lot of shelters here in the UK are very anti breeders so will often claim to want to shut down ones when people ask for advice. Not sure if that applies here, but worth mentioning. I would hope that the breeder acts on your advice and looks into why/how this has spread through her cats. Selling kittens with these issues is not necessarily a red flag to the breeder. It's how they deal with the information that is important. I don't want other people to assume a breeder is automatically bad if their kitten has a particular problem. If they are as bad as the humane society says then they should be stopped. Legal action may help, but may not. If you go through it then it is possible that it will bankrupt them as they will have to pay your money plus all legal fees which will amount to a lot. It just won't cost them the $500 or so that you would sue for. So think very carefully about this before you go down this route.
I would think carefully about what you want from it.maybe gets some legal advice.
Again, I am very sorry for you loss.