The Seventh Circuit Issues Its Second Opinion Questioning the Enforceability of EU Regulation 261 in U.S. Courts

On February 2, 2016, the Seventh Circuit Court of Appeals issued its second opinion rejecting passengers’ efforts to obtain compensation for flight delays under Regulation EC (No) 261/2004 (“EU 261”) in U.S. courts.1 Last year, the court ruled in Volodarskiy v. Delta Air Lines2 that passengers cannot assert claims in U.S. courts against airlines for alleged direct violations of EU 261 because the power to enforce EU 261 resides exclusively with the courts of EU Member States. In the combined opinion issued in Varsamis v. Iberia and Baumeister v. Deutsche Lufthansa AG,3 the Seventh Circuit held that the plaintiffs could not use claims for alleged breach of contract as a means of obtaining EU 261 compensation.

Similar to Volodarskiy, the Varsamis and Baumeister cases were brought by passengers whose flights were cancelled or delayed causing them to arrive at their final destinations more than three hours late. In Varsamis v. Iberia, the district court had granted Iberia’s motion for summary judgment and dismissed the breach of contract claims based on evidence that the plaintiffs had purchased their tickets from American Airlines and their flights were designated American flights by virtue of the fact that they were given an “AA” designator code pursuant to a codeshare agreement between American and Iberia.4 The district court held that, although the flight that was cancelled was to have been operated by Iberia, plaintiffs did not a contract with Iberia for their transportation and therefore could not pursue a breach of contract claim against Iberia. Furthermore, under the codeshare agreement plaintiffs were considered American’s passengers and American agreed to be responsible for the entirety of their trip. On appeal, the plaintiffs argued that the relationship between Iberia and American was not a codeshare arrangement but, rather, an interline arrangement pursuant to which American was acting as Iberia’s agent when it sold plaintiffs their tickets on “AA” flights operated by Iberia. The Seventh Circuit rejected this argument and held that plaintiffs had contracted with American, not Iberia. The Court noted that plaintiffs’ decision not to sue Iberia in the EU for alleged direct violation of EU 261, which Volodarskiy recognized as the appropriate means to recover EU 261 compensation, did not change the fact that plaintiffs’ only contractual remedy was against American.5

In Baumeister v. Lufthansa, the district court had entered summary judgment in favor of Lufthansa based on its finding that Lufthansa was not the operating carrier of plaintiff’s canceled flight. Because EU 261 places responsibility for payment of compensation solely on the operating carrier and Lufthansa agreed in its conditions of contract to pay compensation only “in accordance” with EU 261, the district court held that Lufthansa had no contractual obligation to pay EU 261 compensation to the plaintiff.6 On appeal, plaintiff argued that Lufthansa agreed in its conditions of contract to assume the responsibility of the operating carrier under EU 261 for all Lufthansa-designated flights (i.e., flights with an “LH” designator code) and to pay EU 261 compensation regardless of whether Lufthansa actually operated the flight. The Seventh Circuit disagreed, holding that plaintiff was only entitled to EU 261 compensation from the operating carrier, which was Lufthansa’s regional airline partner.7

Although the Seventh Circuit’s disposition of these appeals was fact specific, the court’s decision may discourage the further proliferation of claims seeking EU 261 compensation in U.S. courts. Judge Posner, who wrote the opinion, specifically questioned “how a promise to abide by [EU 261] could be enforced in U.S. courts given our holding in Volodarskiy that the regulation can be enforced only in European courts or agencies.”8

1 Baumeister v. Deutsche Lufthansa, AG, Nos. 14-2414 and 14-2633, 2016 WL 385375 (7th Cir. Feb. 2, 2016).

2 784 F.3d 349 (2015).

3 Nos. 14-2414 and 14-2633, 2016 WL 385375 (7th Cir. Feb. 2, 2016).

4 Giannopoulos v. Iberia Lineas Aereas de Espana, S.A., No. 11 C 775, 2014 WL 551589, *1 (N.D. Ill. Feb. 12, 2014).

5 Id.

6 Polinovsky v. Deutsche Lufthansa, AG, No. 11 C 780, 2014 WL 983255 (N.D. Ill. Mar. 13, 2014).

7 No. 14-2633, 2016 WL 385375 at *2.

8 Id. at *1.