Court Opinion

ID: 3173991
Source: CourtListenerOpinion
Date Created: 2016-02-05 08:28:44.132953+00
Date Added: 2024-06-11T07:38:41.925889
License: Public Domain

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.
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 sub-
stantial the delay may entitle the passengers to damages.
The question presented by these two appeals is in what cir-
cumstances 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 sum-
mary 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 Mu-
nich 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 Augs-
burg Airways. But that flight, the first leg of Baumeister’s
journey, was cancelled, and though Lufthansa arranged sub-
stitute air transportation for Baumeister from Stuttgart to
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 (offi-
cially “Regulation (EC) No. 261/2004 of the European Par-
liament 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 Euro-
pean 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 in-
stead. Lufthansa’s contract with its passengers—its General
Conditions of Carriage—incorporates EU 261, and Baumeis-
ter 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 as-
sume for purposes of this appeal that Baumeister can indeed
bring a breach of contract suit to enforce that regulation, alt-
hough it can be questioned how a promise to abide by it
could be enforced in U.S. courts given our holding in Vo-
lodarskiy that the regulation can be enforced only in Europe-
an courts or agencies. But the parties haven’t briefed the is-
sue; nor would its resolution change the outcome of this ap-
peal.
    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 cancella-
tion of a flight, the passengers concerned shall … have the
4                                       Nos. 14-2633, 14-2414

right to compensation by the operating air carrier.” Regula-
tion 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 accord-
ing 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 “responsi-
ble 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 noti-
fied 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 Condi-
tions 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 carri-
er, LH is responsible for the entirety of the Code Share jour-
ney for all obligations to Passengers established in these
rules.” A “Code Share” flight is defined in the General Con-
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 de-
scribes Baumeister’s (cancelled) flight from Stuttgart to Mu-
nich; and he argues that this provision obligates Lufthansa
to compensate him even though it wasn’t the operating car-
rier. The kicker, however, is the phrase in the General Condi-
tions 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 relation-
ship of some sort. By way of comparison, we point out that
Piedmont Airlines is a wholly owned subsidiary of Ameri-
can Airlines—does that mean that when one flies on Pied-
mont 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.
6                                           Nos. 14-2633, 14-2414

   There is logic to EU 261 in placing liability on the operat-
ing 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, Var-
samis v. Iberia (as we’ll call the carrier for the sake of brevity),
is interestingly different. For the suit is not against the carri-
er 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 tick-
ets from American Airlines: outbound from Dallas to Ma-
drid 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 de-
lay, 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 pro-
vide 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 dif-
ferent terms and conditions applicable to their flights.”
Nos. 14-2633, 14-2414                                        7

    The Varsamises point to a statement in American’s Inter-
national 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 [Ibe-
ria] 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 nei-
ther 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 spec-
ifies that “the Conditions of Carriage of the Marketing Carri-
er [American] … shall govern the transportation of
Codeshared Passengers, and the Conditions of Carriage of
the Operating Carrier [Iberia] … shall apply to those passen-
gers 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 operat-
ing 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
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 Air-
lines. 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 in-
curred by American. The application submitted jointly by
American and Iberia to the U.S. Department of Transporta-
tion for approval of their code-sharing arrangement was ap-
proved 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 of-
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 re-
spect to a Codeshared Flight, the Operating Carrier shall …
at its own cost and expense, accommodate and/or pay de-
nied boarding compensation or otherwise compensate
Codeshared Passengers.” Having agreed with American that
“the Conditions of Carriage of the Marketing Carrier [Amer-
ican], including its limits of liability to passengers, shall gov-
ern 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 & Thom-
as, 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 agree-
ments. In any event Iberia did nothing to create an impres-
sion that American was authorized to create a contract be-
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.