Originally Posted by
plunet
I think the OP is correct to pursue BA Holidays. The OP didn't form a contract with AA. AA are a contractor to BA Holidays in this circumstance.
The OP paid BA Holidays and formed the contract with them for travel which included baggage and the baggage allowance was shown on their e-ticket. So following the money, it is for BA Holidays to refund their customer for the incorrectly levied luggage charges at check-in, and for BA Holidays to subsequently sort this out with AA as their subcontractor.
I suppose it depends on which money you want to follow. The OP did not pay $500 in improper baggage charges to BA Holidays; he paid it to the operating carrier, AA. And I believe that US DOT regulations require the operating carrier to honor the baggage allowance shown on the ticket receipt.
I wonder whether the OP ever showed the ticket receipt with the baggage allowance to the AA check-in agent.