I'm hoping some of you can provide some tactical expertise to a strange situation I find myself in with Lufthansa, Chase, and United.

1. Back in January, I booked an International itinerary from Austin to Olbia Sardinia via IAD and MUC, departing May 26th. I'm traveling with my wife, 6 year old, and what will be.a 5 month old baby. I was careful to pick out flights that had open Premium Economy bulkhead seats on the IAD to MUC leg (and corresponding return through FRA to IAH a month later).. I booked three Premium. Econ. tickets in the bulkhead, thinking we'd use the bassinet for the infant. I booked through Chase's UR portal with a combination of points and cash for about $8,600. The tickets were booked on Lufthansa, but United operated both transatlantic flights. I paid roughly $3K-$3.5K more for the 3 Prem. Econ. tickets than I would have for Economy.

2. A couple of weeks ago, I received a notice from Chase that Lufthansa had changed my fare from Premium Econ. to Coach and asking if I wanted to cancel. I checked the seat assignments on United's website, and it looks like United changed the plane flying the IAD to MUC route, so that there was no longer a premium. economy section. Lufthansa just reassigned us seats in Coach. Tickets are now $4K each just to sit in coach, so I quickly realized that just canceling and rebooking was not going to work.

3. I've spent 6-8 hours on the phone with Chase, United, and Lufthansa over the past couple of weeks, trying to get one of three solutions:
a. Upgraded to business on that flight
b. Just refunded the fare diff between what I paid for Prem. Econ. and what I would have paid for Economy
c. Booked on a similar itinerary that goes through EWR and has Prem. Econ. bulkhead open.

So far, the most I've been offered is a 20K Ultimate Rewards miles gratuity by Chase. A level 3 support person at Chase says she called Lufthansa and "The airline did not give much emphasis on the seat selection we provided them with from your complaint."

Has anyone faced similar issues? Can Lufthansa really just keep my money for a higher fare class without providing it?