Order 2011

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UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY WASHINGTON, D.C.

Issued by the Department of Transportation

O n the Seventeenth day of June , 2011

Deutsche Lufthansa AG Docket OST 2011

- 0003

Violations of Article 19 of the

Montreal Convention and 49 U.S.C. § 41712 Served June 17 , 2011

CONSENT ORDER

This consent order involves violations by Deutsche Lufthansa AG ( Lufthansa ) of Article

19 of the Montreal Convention and the statutory prohibition against unfair and deceptive trade practices, 49 U.S.C. § 41712

, in connection with monetary claims resulting from its delay in delivering checked baggage

. It directs Lufthansa to cease and desist from future

similar violations of Article 1 9 and section 417 12

, and assesses the carrier a compromise civil penalty of $ 50 ,000.

Applicable Law

Article 19 of the Montreal Convention (Montreal) provides that a carrier is liable for damage occasioned by delay in the carriage by air of baggage, except to the extent that it proves that it took all reasonable measures to prevent the damage or that it was impossible to take such measures. 1 Article 22 currently sets the liability limit for damages associated with delayed passenger baggage at 1,131 Special Drawing Rights (SDR s) for each passenger. 2 Furthermore, Article 26 states that any provision tending to

relieve a carrier of liability or to fix a lower limit than that which is laid down in the

Convention is null and void. Violations of the Montreal Convention constitute unfair or deceptive business practices and unfair methods of competition in violation of 49 U.S.C. § 41712.

1 Convention for the Unification of Certain Rules for International Carriage by Air , adopted on May 28, 1999.

2 Inflation Adjustments to Liability Limits Governed by the Montreal Convention Effective December 30, 2009, 74 FR 59017, available at http://airconsumer.dot.gov/ruleslNotice_ll_09_09.pdf (November 9, 2009).2

B ackground

Based on a consumer complaint, t he Office of Aviation Enforcement and Proceedings (Enforcement Office) investigated Lufthansa ’s policies and practice s in connection with its handling of monetary claims for delay in delivering checked baggage. That investigation showed that in a number of instances arising out of flights to and from the

United States Lufthansa was limiting reimbursement to 50 percent of the claimed expense against original receipts for damages associated with a delay in returning checked baggage. That investiga tion also determined that on some occasions Lufthansa was using language in letters to claimants reflecting this practice and had accordingly advised

numerous claimants who had requested reimbursement for their expenses associated with the delay in returning checked baggage that Lufthansa would reimburse only 50 percent

of the cost of clothing items a nd 100 percent of the cost of toiletries and underwear. The practical effect of using this language in the letters was to limit in some instances Lufthansa’s liability for damage occasioned by delay to less than the minimum 1,131 SDRs required by the Mon treal Convention.

Mitigation

In mitigation, Lufthansa states that it responds to passenger claims on a case by case basis and takes note of the particular circumstances surrounding each claim and tries to assist the passengers in the best possible manner. Lufthansa asserts that it never had any intention of purposely misst ating its policies to passengers or establishing limits of liability below allowable legal standards. Lufthansa states that r esponse letters to customers over a period of time contained language that may have been somewhat ambiguous but certainly th ere was no intent on denying its valued customers anything less than they deserved under the law. Lufthansa states that it has revised the language for passenger communications under such circumstances making it clearer to the passenger and consistent with appli cable law.

Decision

The Enforcement Office has carefully considered the information provided by Lufthansa

but continues to believe that enforcement action is warranted. T he Enforcement Office

and Lufthansa have reached a settlement of this matter in o rder to avoid litigation.

Lufthansa consents to the issuance of an order to cease and desist from future violations

of Article 19 of the Montreal Convention and 49 U.S.C. § 41712 of the Department’s regulati ons, and to the assessment of $ 5 0,000 in compromise of potential civil penalties otherwise due and payable pursuant to 49 U.S.C. § 46301.

This compromise assessment is appropriate considering the nature and extent of the

violations described herein and the size and sophistication of t he carrier, and serves the public interest. It represents an adequate deterrence to future noncompliance with the

Montreal Convention by Lufthansa

, as well as by other air carriers and foreign air

carriers.3

This order is issued under the authority cont ained in 49 CFR 1.57a and 14 CFR 385.15.

ACCORDINGLY,

1. Based on the above discussion, we approve this settlement and the provisions of this order as being in the public interest;

2. We find that Deutsche Lufthansa AG violated Article 19 of the Montreal Convention by limiting its reimbursement to 50 percent of the claimed expense against original receipts for damages associated with a delay in returning checked baggage;

3

. We find that by engaging in the conduct and violations described in ordering paragraph 2, above, Deutsche Lufthansa AG

, has also violated 49 U.S.C. § 41 712 ;

4

. We order Deutsche Lufthansa AG , and all other entities owned or controlled by or

u nder common ownership with Deutsche Lufthansa AG , and their successors and assignees, to cease and desist from violations of Article 19 of the Montreal Convention and 49 U.S.C. § 41712

. Failure to comply with this cease and desist provision shall subject Deutsche Lufthansa AG , and their successors and assignees to further enforcement action;

5

. We assess Deutsche Lufthansa AG , a compromise civil penalty of $5 0,000 in lieu of civil penalties that might otherwise be assessed for the violations described in

orde ring paragraphs 2 and 3, above. Of this total penalty amount, $2 5

, 0 00 shall be due and payable within fifteen (15) days of the date of issuance of this order. The remaining $25

, 0 00 shall be due and payable immediately if Deutsche Lufthansa

AG violates this order’s cease and desist or payment provisions during the twelve (12) months following the service date of this order; and

6. We order Deutsche Lufthansa AG , to remit the payment ordered in paragraph 5

above , by wire transfer through the Federal Reserve Communications System, commonly known as “Fed Wire,” to the account of the U.S. Treasury in accordance with the instructions contained in the Attachment to this order. Failure to pay the penalty as ordered sha ll subject Deutsche Lufthansa AG , to the assessment of interest, penalty, and collection charges under the Debt Collection Act and to further enforcement action for failing to comply with this order.4

This order will become a final order of the Depart ment 10 days after its service date unless a timely petition for review is filed or the Department takes review on its own

motion.

BY:

ROSALIND A. KNAPP Deputy General Counsel

(SEAL)

An electronic version of this document is available at www.regulations.gov