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At the beginning of World War II, the heir of a prominent German Jewish art collector was forced to surrender her family’s Camille Pissarro painting to the Nazis. Her heirs have been litigating for more than 15 years over rights to the painting, an Impressionist masterpiece once thought to be lost. Whether they will succeed depends on how the Supreme Court decides a very technical question: Must a federal court hearing state law claims brought under the Foreign Sovereign Immunities Act apply the state’s choice-of-law rules to determine what substantive law governs the claims at issue, or must it instead use federal common law to choose the source of the substantive law? The justices will hear argument on that question on Tuesday in Cassirer v. Thyssen-Bornemisza Collection Foundation.

In 1900, Paul Cassirer purchased Pissarro’s 1897 painting Rue Saint-Honoré, Afternoon, Rain Effect. Lilly Cassirer inherited the painting in 1926. In 1939, the painting was expropriated by the Nazis: Lilly was forced to give it up in exchange for permission to flee Germany.

Several members of the Cassirer family, including Lilly and her grandson Claude, ended up in the United States. Other members of the family, including Lilly’s sister Hannah, were murdered in the concentration camps.

In the United States, Lilly filed a claim with the U.S Court of Restitution, which, in 1954, declared her the rightful owner of the painting. In 1958, she reached a settlement with the German Federal Republic for compensation. Germany paid her approximately $ 13,000; the painting is estimated to be worth about $ 40 million today. Throughout this time, all parties assumed that the painting was lost or destroyed, although Claude – who remembered playing in the room in which it hung – continued to look for it.

Unbeknownst to the Cassirer family or the German government, the Pissarro was not lost. In 1951, it was acquired by a California gallery owner, who sold it to a Los Angeles collector. It eventually travelled to New York and then to Saint Louis, Missouri, where it remained until 1976.

That year, Baron Hans Heinrich von Thyssen-Bornemisza purchased the painting and had it shipped to his home in Switzerland. In 1992, he worked with the Spanish government to establish the Thyssen-Bornemisza Collection, a museum in Madrid. He eventually sold the painting to the museum. Neither the baron nor the museum fully investigated the painting’s provenance, despite red flags that it might have been stolen.

Claude Cassirer never stopped looking for the painting. In 1999, he found it listed in a Thyssen-Bornemisza Collection catalog. He promptly filed a petition with Spain and the museum to force the return of the painting. He also pursued diplomatic channels to persuade Spain to return it, but to no avail.

In 2005, after his petition was denied, Claude sued in federal district court in California, where he had lived since 1980. He sued both Spain and the museum, alleging California common law claims including conversion and unlawful possession of personal property, and sought both damages and the return of the painting.

The suit was brought under the Foreign Sovereign Immunities Act. That act both confers original jurisdiction on federal district courts over suits against foreign states (or their instrumentalities) to the extent that they are not entitled to immunity (28 U.S.C. § 1330(a)), and provides that a foreign state or its instrumentality is not immune from suit in any case “in which rights in property taken in violation of international law are in issue” and various other requirements are met (28 U.S.C. § 1605(a)(3)).

The defendants moved to dismiss. They raised numerous legal and factual issues, including whether the museum was an instrumentality of Spain, whether there was personal jurisdiction over the defendants, whether the elements of Section 1605(a)(3) were met, and whether the suit was timely filed. The district court rejected all of these arguments, and the U.S. Court of Appeals for the 9th Circuit affirmed. The Supreme Court denied certiorari twice. Along the way, Cassirer voluntarily dismissed Spain as a defendant, leaving only the museum.

Only one issue remained when the district court finally confronted both parties’ motions for summary judgment on the merits: Did the museum somehow acquire good title to the painting? That question turned on whether California law or Spanish law governed. Under California law, thieves of personal property cannot pass good title to anyone, even purchasers in good faith – and thus ownership of the painting was never validly transferred from the Cassirer family. But under Spanish law, good-faith purchasers can acquire valid title to personal property through adverse possession (“usucapio”) if they possess it openly for six years, as the court found that the museum did.

But how should the court decide whether to apply California law or Spanish law? Although choosing between American law and foreign law is seldom necessary, an analogous situation arises frequently when federal court jurisdiction is based on diversity of citizenship – that is, when the case raises only state-law claims but is in federal court because the parties are citizens of different states (or one party is a citizen of a state and the other is a citizen of a foreign country).

In such cases, the Erie doctrine, established in 1938 in Erie Railroad Co. v. Tompkins, requires the application of state law. The 1941 case of Klaxon Co. v. Stentor Co. tells federal courts to choose which state’s law to apply by looking to state choice-of-law doctrines. In other words, the federal district court must apply whatever law a state court in that same state would apply.

What Klaxon means, in short, is that if Cassirer had found the painting in a private gallery in Spain and had sued the owner in California federal court under diversity jurisdiction, the court would have asked whether a California state court would apply California law or Spanish law.

But that’s for cases brought under diversity jurisdiction. What about a case brought under the FSIA instead? Does Klaxon apply? Five U.S. courts of appeals have addressed that question. Four of them – the 2nd, 5th, 6th, and District of Columbia Circuits – have answered in the affirmative. Under the law of those circuits, the court would have applied whatever law a California state court would have applied. The 9th Circuit instead applied a federal common law doctrine (which it had created in an earlier case) regarding choice of law. Applying this 9th Circuit law, the district court held that Spanish law applied, and the 9th Circuit affirmed. The district court alternatively held that California choice-of-law doctrines would also result in the application of Spanish law, but that holding was not addressed by the 9th Circuit.

After 15 years, four trips to the 9th Circuit, and the death of Claude Cassirer (the case is now being litigated by his heirs), the Supreme Court will finally decide whether to apply California or federal common-law choice-of-law doctrines.

Cassirer’s heirs make three main arguments. First, the FSIA states (in 28 U.S.C. § 1606) that when not immune, “the foreign state shall be liable in the same manner and to the same extent as a private individual under like circumstances.” Because a private gallery would be subject to California’s choice-of-law doctrines, so should the Thyssen-Bornemisza Collection as an instrumentality of a foreign state. Second, Congress enacted the FSIA in light of the background principle of federalism that state law, including state choice-of-law doctrines, should apply to state causes of action, and nothing in the statute indicates any intent to deviate from that principle. Finally, federal common law regarding choice of law is woefully underdeveloped (with only 9th Circuit cases and only in this specific context) and entirely unconstraining.

The United States has filed an amicus brief in support of Cassirer, adding two primary arguments. First, the FSIA was meant to affect only a foreign state’s amenability to suit, not the substantive law applicable to that suit. Second, the brief draws an analogy to the Federal Tort Claims Act, which subjects the federal government to certain tort claims “in the same manner and to the same extent as a private individual.” In Richards v. United States, the Supreme Court interpreted that language as mandating the application of state choice-of-law rules – and Congress enacted the FSIA, with its identical language, after Richards.

The museum makes four main arguments. First, the jurisdiction conferred under the FSIA is more analogous to federal question jurisdiction than to diversity jurisdiction, making Erie and its progeny irrelevant. In support of this argument, the museum points to both the text of the statute and the circumstances of its enactment: Congress removed foreign states from ordinary diversity jurisdiction under 28 U.S.C. § 1332 and instead created 28 U.S.C. § 1330. The museum also points to Verlinden B.V. v. Central Bank of Nigeria, in which the Supreme Court upheld the FSIA against a challenge that it exceeded the scope of Article III, finding that cases under the FSIA “arise under” federal law. Second, the “like circumstances” requirement of Section 1606 is irrelevant here, because that applies only to a sovereign’s commercial acts and not to its public acts – acts that involve the exercise of powers peculiar to sovereigns – and “expropriation” is inherently a public act. Third, the application of federal common law is appropriate here because suits under the FSIA implicate foreign policy concerns. Finally, one of the primary purposes of the FSIA was to create uniform standards in suits against foreign sovereigns, which can only be accomplished by applying federal choice-of-law doctrines.

During oral argument, the justices will probably focus on the text of the FSIA and on precedent suggesting that subjects appropriate for federal common lawmaking are few and far between. There will also likely be questions about the remedy: Because the district court, but not the 9th Circuit, found that California’s choice-of-law doctrines would also result in the application of Spanish law, the court might remand for appellate review of that decision. Finally, there might be some discussion of whether to instruct the 9th Circuit to certify the state choice-of-law question to the California Supreme Court, asking that court what law a California court would apply.

And keep in mind that cases under the Erie doctrine have always made strange bedfellows – in the most recent significant case, Shady Grove Orthopedic Associates v. Allstate Insurance Co. in 2010, Justice Antonin Scalia’s plurality opinion was joined by Chief Justice John Roberts and Justices Clarence Thomas and Sonia Sotomayor; Justice Ruth Bader Ginsburg’s dissenting opinion was joined by Justices Anthony Kennedy, Stephen Breyer, and Samuel Alito.

Whatever the court decides will determine the fate not only of this Pissarro, but of all other litigation under the FSIA. It might also tell us something about the various justices’ attitudes toward federal common law – which is also at issue in another case this term, Egbert v. Boule.

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