jbtierney15 - Welcom to the site; sorry it's for such a bad topic!
I think all of us that have chimed in agree that, generally, you're getting screwed. I'm not going to duplicate what's been said; it's all sound. What helps is that you did not use a "non-approved filter" from Champ, so you have some addtional leverage.
Here is what I would suggest. This is based upon my personal experience many years ago of starting litigation against Ford via my state "lemon laws" in IN, with the assitance of the IN Atty General Office.
1) use the info we've given you, including printouts of the M/M act to speak with the dealer general mangager or owner. Remind them that GM is the warranter (not the dealership), and that you'll need to work with GM and not just the dealership. Often, a well prepared customer can avert further issues. If that fails, move forward. Remind GM that they have the burden of proof to show the filter is specifically at fault. This means the actual cause of failure must be determined; I would presume some sort of engine teardown is going to be needed. The mere use of an aftermarket filter is NOT proof of failure. The failure mode must be proven, and then cause determined. If GM can PROVE (not just suggest or insinuate) the Champ filter is the cause, then move to step #2 below. If they do NOT have sure, positive proof, then they must honor the warranty. And I would not hesitate to insist that the next conversation will include your State Atty General in regard to their denial if no proof exists, which would make move to both step #2 and #3 together. The mere presence of a TSB from GM is NOT proof of aftermarket filter causation. That is a great leverage tool them use, but it does not hold up in court or in arbitration. The need solid evidence, not conjecture. If the filter is truly at fault, then you can divert your claim to Champ and get them to pay.
2) contact Champion about the failed filter claims. Most all companies that warrant their products, have specific criteria to follow, including examining evidence. If GM is going to blame Champ for filter failure, then you'll want Champ involved. The can put pressure on GM that you cannot. Many times there is a window of opportunity that will close if you wait too long; get in with Champ now! Let them assist you. They will want to see the filter, the engine, the supposed evidence, and then they will speak with GM.
(NOTE: there is one caveot here; we are assuming that the article is genuine. If it is a counterfiet item, then hopefully you'll have the receipt from the place of purchase, and then you'll have to drag them into this ... Often, this isnt' the case though)
3) if step #2 fails, then it's time to get with your state Atty General office; most all of them have some form of consumer protection division. They can often help as well, but they most often will NOT intervene until you've tried and failed the above two steps (saves them time from bogus causes, understandably). They are slow as well, so don't hesitate to get them soon if it seems #1 and #2 are not moving along.
4) only after those are exhausted will you need a lawyer you'd have to pay for.
The upside is that you'll likely get the repairs covered at no cost to you.
The downside is that you're in for a long, drawn out battle. It can take weeks if not months to get this resolved. All while your ride is sitting idle in some dealer lot. In fact, it could take months to years if they really want to fight about it, and all while you get to make payments on a vehicle, while it depreciates.
Ford was stiff-arming me big time until I got our State Atty General involved, and after one letter from them, I was given full purchase value on my car as a trade in allowance toward another car (minus mileage allowance for what I had put on it; not a bad deal overall).
Bottom line is that you are not really prepared for this; this is a David/Goliath thing. But, you don't have to fight alone. Get the other big entites involved (Champ and Atty Gen), and GM will likely have a much different tune.
