Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca7-14-02414/USCOURTS-ca7-14-02414-0/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 

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In the

United States Court of Appeals

For the Seventh Circuit ____________________

No. 14-2633

HANS-PETER BAUMEISTER,

Plaintiff-Appellant,

v.

DEUTSCHE LUFTHANSA, AG,

Defendant-Appellee.

____________________

Appeal from the United States District Court for the

Northern District of Illinois, Eastern Division.

No. 11 C 780 — Sharon Johnson Coleman, Judge.

____________________

No. 14-2414

JAMES VARSAMIS & LAUREN MITCHELL VARSAMIS,

Plaintiffs-Appellants,

v.

IBERIA, LÍNEAS AÉREAS DE ESPAÑA, S.A. OPERADORA,

 SOCIEDAD UNIPERSONAL,

Defendant-Appellee.

Case: 14-2414 Document: 45 Filed: 02/02/2016 Pages: 10
2 Nos. 14-2633, 14-2414

____________________

Appeal from the United States District Court for the

Northern District of Illinois, Eastern Division.

No. 11 C 775 — Thomas M. Durkin, Judge.

____________________

ARGUED NOVEMBER 10, 2015— DECIDED FEBRUARY 2, 2016

____________________

Before POSNER, EASTERBROOK, and ROVNER, Circuit Judges.

POSNER, Circuit Judge. It is not uncommon for the airline 

that sells the tickets for an international flight to arrange for 

another airline to provide service over part of the route. 

Sometimes that other airline--the bridge carrier, we’ll call 

it—experiences delay in its segment of the flight, and if substantial the delay may entitle the passengers to damages. 

The question presented by these two appeals is in what circumstances the bridge carrier is liable for those damages,

and in what circumstances the originating carrier, which

sold the tickets, is liable. In both cases the plaintiffs sued on 

behalf of a class, but the suits were dismissed at the summary judgment stage before any classes were certified.

In the first case we discuss, plaintiff Baumeister had 

bought a ticket from Lufthansa for a pair of flights: from 

Stuttgart, his place of origin, to Munich, and then from Munich to San Francisco, his destination. The first flight was, as 

indicated on his itinerary, to be flown not by Lufthansa but 

by a regional German airline (since defunct) named Augsburg Airways. But that flight, the first leg of Baumeister’s 

journey, was cancelled, and though Lufthansa arranged substitute air transportation for Baumeister from Stuttgart to 

Case: 14-2414 Document: 45 Filed: 02/02/2016 Pages: 10
Nos. 14-2633, 14-2414 3

San Francisco he arrived more than 17 hours after he was 

originally scheduled to arrive.

A regulation of the European Union called EU 261 (officially “Regulation (EC) No. 261/2004 of the European Parliament and of the Council of 11 February 2004,” unofficially 

the “Flight Delay Compensation Regulation,” Wikipedia, 

https://en.wikipedia.org/wiki/Flight_Delay_Compensation_

Regulation (visited January 31, 2016)) specifies damages for 

certain cancelled or delayed flights into and out of the European Union. The regulation is enforced by administrative or 

judicial proceedings in nations that belong to the European 

Union. Volodarskiy v. Delta Airlines, Inc., 784 F.3d 349, 352–57 

(7th Cir. 2015). Baumeister tried that approach but failed, as 

we’ll see, and so brought suit in a federal district court instead. Lufthansa’s contract with its passengers—its General 

Conditions of Carriage—incorporates EU 261, and Baumeister argues that the airline is therefore contractually obligated

to pay any damages that the regulation would impose were 

enforcement of it sought in the European Union. We’ll assume for purposes of this appeal that Baumeister can indeed 

bring a breach of contract suit to enforce that regulation, although it can be questioned how a promise to abide by it

could be enforced in U.S. courts given our holding in Volodarskiy that the regulation can be enforced only in European courts or agencies. But the parties haven’t briefed the issue; nor would its resolution change the outcome of this appeal.

EU 261 states that “the obligations that [it] creates should 

rest with the operating air carrier who performs or intends 

to perform a flight,” and moreover that “in case of cancellation of a flight, the passengers concerned shall ... have the 

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4 Nos. 14-2633, 14-2414

right to compensation by the operating air carrier.” Regulation 261/2004, 2004 O.J. (L 46) 1(EC) preamble, art. 5(1).

Lufthansa argues that not it but Augsburg Airways was the 

operating carrier for the first leg of Baumeister’s journey—

Stuttgart to Munich. That’s correct; his ”itinerary receipt,”

issued by Lufthansa, states that the Stuttgart to Munich 

flight is to be “operated by Augsburg Airways,” and according to the charter agreement between the two airlines this 

meant that on flights such as Baumeister’s, Augsburg not 

only “own[ed] all aircraft deployed” but also was “responsible for the operational management of the aircraft deployed” 

and “provide[d] the necessary cockpit and cabin personnel 

for the operation of each agreed upon flight program.”

(Augsburg actually leased rather than owned many of its 

aircraft, but the German Federal Court of Justice has ruled

that ownership versus lease is irrelevant to determining

whether an airline is an operating carrier.) The regulatory 

body in Germany charged with enforcing EU 261 dismissed 

Baumeister’s regulatory claim after Lufthansa’s counsel notified it that Lufthansa had not operated the flight between 

Stuttgart and Munich.

In short, Baumeister cannot sue Lufthansa—or so at least

the district judge found when granting Lufthansa’s motion 

for summary judgment. But according to Baumeister the 

judge overlooked a provision in Lufthansa’s General Conditions of Carriage which states that “if in case of a Code Share 

flight LH [i.e., Lufthansa] is indicated as the carrier these 

Conditions of Carriage also apply to such transportation. ... 

For Code Share services on flights operated by another carrier, LH is responsible for the entirety of the Code Share journey for all obligations to Passengers established in these 

rules.” A “Code Share” flight is defined in the General ConCase: 14-2414 Document: 45 Filed: 02/02/2016 Pages: 10
Nos. 14-2633, 14-2414 5

ditions of Carriage as “carriage by air which will be operated 

by another carrier as indicated in the ticket”—and so describes Baumeister’s (cancelled) flight from Stuttgart to Munich; and he argues that this provision obligates Lufthansa 

to compensate him even though it wasn’t the operating carrier. The kicker, however, is the phrase in the General Conditions that Lufthansa “is responsible for ... all obligations to 

Passengers established in these rules.” If a flight is cancelled,

the Conditions require the airline to “offer assistance and 

compensation to the concerned passengers according to the 

Regulation EC 261/2004,” which says that “the passengers 

concerned shall ... have the right to compensation by the 

operating air carrier.” EU 261 art. 5(1). This provision covers 

Baumeister’s situation: a passenger affected adversely by the 

cancellation of a flight has a right to compensation from the 

operating carrier, which was Augsburg rather than

Lufthansa.

Baumeister also argues, very weakly as it seems to us, 

that Augsburg was not a real operating carrier but merely a 

puppet of Lufthansa. Well, suppose Lufthansa was indeed

pulling strings in the background. Still it was Augsburg that 

was scheduled to fly Baumeister to Munich. Augsburg was 

not a subsidiary of Lufthansa and one company cannot be 

sued in place of another just because they have a relationship of some sort. By way of comparison, we point out that 

Piedmont Airlines is a wholly owned subsidiary of American Airlines—does that mean that when one flies on Piedmont one really is flying on American, so that if Piedmont 

loses your baggage you can sue American? No, any more 

than if you find a defect in your IPhone 6S you can sue not 

Apple but Apple’s shareholders, or its CEO, Tim Cook.

Case: 14-2414 Document: 45 Filed: 02/02/2016 Pages: 10
6 Nos. 14-2633, 14-2414

There is logic to EU 261 in placing liability on the operating carrier rather than on the carrier that issues the tickets. 

Often the cause of a delay is some error committed by the 

operating carrier—rarely, one imagines, is it the fault of the 

carrier that issued the ticket—and placing liability on the 

maker of the error is likely to have the salutary effect of 

causing him or it to be more careful the next time.

Enough about Baumeister’s case. Our other case, Varsamis v. Iberia (as we’ll call the carrier for the sake of brevity),

is interestingly different. For the suit is not against the carrier that issued the tickets but against the operating carrier. 

Yet again the passenger plaintiffs lost in the district court.

The two plaintiffs in the case had bought roundtrip tickets from American Airlines: outbound from Dallas to Madrid to Venice and return from Rome to Madrid to Dallas, 

with the Rome to Madrid leg to be flown by Iberia Airlines. 

All was fine on the outbound journey, but on the return a 

delay of the Rome to Madrid flight caused the plaintiffs to 

miss their flight from Madrid to Dallas. Re-routed on a flight 

through Amsterdam, they arrived in Dallas almost 21 hours 

later than they’d been due to arrive. Suing like Baumeister in 

the Northern District of Illinois for compensation for the delay, they argued that American Airlines had been acting as 

Iberia’s agent when it sold them their tickets and that Iberia 

was a party to a contract to fly them from Rome to Madrid. 

They point out that American’s Conditions of Carriage provide that “American will act as an agent to issue tickets ... 

for transportation via other carriers which have interline 

agreements with American. [Those] carriers may have different terms and conditions applicable to their flights.”

Case: 14-2414 Document: 45 Filed: 02/02/2016 Pages: 10
Nos. 14-2633, 14-2414 7

The Varsamises point to a statement in American’s International Tariff, also incorporated in the contract between the 

airline and the passengers, that “a carrier [American] issuing 

a ticket ... for carriage over the lines of another carrier [Iberia] does so only as [its] agent.” But this provision did not 

create a contract between Iberia and the Varsamises. The 

record does not make clear whether the quoted provisions of 

American’s contract with the Varsamises applied to the 

flight from Rome to Madrid, but in any event American’s

statements could not bind Iberia: according to the Code

Share agreement “neither party is intended to have, and neither of them shall represent to any other person that it has, 

any power, right or authority to bind the other ... except as 

expressly required by this Agreement.” The agreement specifies that “the Conditions of Carriage of the Marketing Carrier [American] ... shall govern the transportation of 

Codeshared Passengers, and the Conditions of Carriage of 

the Operating Carrier [Iberia] ... shall apply to those passengers traveling ... under the Code of the Operating Carrier.” 

Only when Iberia sold tickets on its flights were the ticket 

purchasers traveling under Iberia’s code and governed by

Iberia’s conditions.

We said earlier that there is a practical logic to imposing

liability for a flight delay on the carrier whose flight it was 

that was delayed (Iberia in this case). But the practical logic 

fails to carry the day for the Varsamises because they had no 

contract with Iberia. Their contract was with American.

Although Iberia was fully subject to EU 261 as the operating carrier, the Varsamises did not seek compensation from 

Iberia under that regulation in a European court or agency

for the delay they experienced; nor do they argue that their 

Case: 14-2414 Document: 45 Filed: 02/02/2016 Pages: 10
8 Nos. 14-2633, 14-2414

contract with American Airlines incorporates the regulation. 

They argue rather that they have a contract with Iberia and 

that it incorporates EU 261—which indeed is incorporated in 

Iberia’s Conditions of Carriage—but the Varsamises had no 

contract with Iberia; the contract was with American Airlines. American had a contract with Iberia that entitled 

American to sell tickets for specific seats on Iberia’s flights

and also to affix an American flight number to those flights,

pursuant to the two airlines’ code-sharing arrangement—

“an arrangement whereby a carrier’s designator code is used 

to identify a flight operated by another carrier.” 14 C.F.R. 

§ 257.3(c). A block of seats (including the Varsamises’) was

thereby reserved for American customers, the price of those 

seats was set by American, and the profit or loss was incurred by American. The application submitted jointly by 

American and Iberia to the U.S. Department of Transportation for approval of their code-sharing arrangement was approved with the condition that “the carrier selling such 

transportation (i.e., the carrier shown on the ticket) accept[s]

responsibility for the entirety of the code share journey for 

all obligations established in its contract of carriage with the 

passenger; and that the passenger liability of the operating 

carrier [will] be unaffected.” The Department’s approval of 

the code-sharing agreement was thus conditioned on the 

marketing carrier’s acceptance of that responsibility. That 

was American Airlines, so the Department was requiring it 

to contract with, and take full responsibility for, the

codeshare passengers.

Although the Varsamises say they thought they had a 

contract with Iberia because they checked in for their Rome

to Madrid flight with Iberia and were rerouted with the help 

of Iberia employees after the flight was delayed, Iberia ofCase: 14-2414 Document: 45 Filed: 02/02/2016 Pages: 10
Nos. 14-2633, 14-2414 9

fered these services pursuant to its code-sharing agreement 

with American, which provides that “in the event of any 

flight cancellation or other schedule irregularity ... with respect to a Codeshared Flight, the Operating Carrier shall ... 

at its own cost and expense, accommodate and/or pay denied boarding compensation or otherwise compensate 

Codeshared Passengers.” Having agreed with American that

“the Conditions of Carriage of the Marketing Carrier [American], including its limits of liability to passengers, shall govern the transportation of Codeshared Passengers,” Iberia 

was complying with its contractual obligations to American, 

not to the Varsamises, in helping them cope with the delay

in their return trip to the United States.

The Varsamises argue in the alternative that the doctrine 

of apparent authority establishes that they had a contract 

with Iberia. Under Illinois law, which both parties agree 

governs this diversity suit, “apparent authority arises when 

a principal creates, by its words or conduct, the reasonable 

impression in a third party that the agent has the authority 

to perform a certain act on its behalf.” Weil, Freiburg & Thomas, P.C. v. Sara Lee Corp., 577 N.E.2d 1344, 1349–50 (Ill. App. 

1991). Thus “only the words and conduct of the alleged 

principal, not the alleged agent, establish the authority of an 

agent.” C.A.M. Affiliates, Inc. v. First American Title Ins. Co., 

715 N.E.2d 778, 783 (Ill. App. 1999). The Varsamises claim

that their contract with American led them to believe that 

American was acting as Iberia’s agent because American’s

Conditions of Carriage refer to other carriers’ terms and 

conditions. Those references may just be to interline agreements. In any event Iberia did nothing to create an impression that American was authorized to create a contract beCase: 14-2414 Document: 45 Filed: 02/02/2016 Pages: 10
10 Nos. 14-2633, 14-2414

tween Iberia and the Varsamises. The Varsamises could have 

sued Iberia in Europe for violation of EU 261, but did not.

Alternatively the Varsamises invoke ratification of an 

unauthorized agent’s making an agreement on behalf of the 

principal. See Sphere Drake Ins. Ltd. v. American General Life 

Ins. Co., 376 F.3d 664, 677 (7th Cir. 2004). But Iberia did not 

ratify any contract with the Varsamises.

The judgments in both cases are 

AFFIRMED.

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