FWIW I think you're getting ripped off. You bought a product out of good faith and confidence. The product proved to be inferior to the manufacturers published standards. So instead of replacing the complete bike, as was purchased, you just get the replacement of the frame.

Alright, so what happens, if the replacement frame turns out to be a dud, as well? Should you be expected to pay for the build on that one too! At this point, I say, this could become quite a liability for the OP and quite a lucrative situation for the LBS. The manufacturer most probably has a bunch of write off frames stacked up somewhere, just waiting for the next sucker willing to fork over another $150.

The industry really needs to clean this scam up right away. This smacks of double dipping!