Only time I have seen this happen on CO is when two people (a couple) were late connecting from a FLL-IAH flight to the IAH-SEA flight.

Gate agent had upgraded four of us from our coach seats to the FC cabin. I was #1 on the upgrade list and the person who sat down next to me was #2. Just as soon as #3 & #4 took their seats behind me the gate agent came on and apologized profusely and said that the original two people have showed up for the flight and that #3 & #4 need to go back to their originally assigned coach seats.

No on-board compensation was offered. The two pax just went back to their seats and had no problem with the situation.

Technically Continental can refuse to board the late arriving pax or even make them board in coach and not give them back their originally assigned FC seat.

-RM