Cassirer and FSIA Choice of Law

Today the Supreme Court unanimously resolved an important case about choice of law under the Foreign Sovereign Immunities Act (FSIA). Cassirer v. Thyssen-Bornemisza Collection Foundation is a lawsuit about the ownership of a Camille Pissarro painting, surrendered by Lilly Cassirer to the Nazis and now held by a foundation created and controlled by the Government of Spain. Lilly’s grandson Claude found the painting in a museum catalogue and sued the foundation in federal court in California seeking its return. Because the foundation is an instrumentality of Spain, the FSIA applies.

The FSIA itself rarely provides the relevant cause of action, instead providing jurisdiction and exceptions to foreign sovereign immunity. So where foreign sovereigns are not immune, typically it is state (or foreign) law that provides the cause of action. As a result, choice-of-law questions are ubiquitous in FSIA cases.

In Cassirer in particular, a key issue in the lower courts was whether Spanish or California property law would apply. In the Ninth Circuit, where this case was filed, federal courts apply federal common law to choose the applicable law in FSIA cases. Other circuits typically follow the choice-of-law rule of the forum state, tracking the approach of Klaxon Co. v. Stentor Electric Manufacturing Co.

The Supreme Court granted cert to resolve this question about choice of law. More specifically, once it is determined that federal law does not apply to an issue in a FSIA case, how should a federal court decide what law (potentially state or foreign) should apply?

In a unanimous opinion authored by Justice Kagan, the Supreme Court reversed the Ninth Circuit. The Court focused primarily on the language of the FSIA, which provides that “the foreign state shall be liable in the same manner and to the same extent as a private individual under like circumstances.” Justice Kagan explained that in order for the foreign state to be liable “to the same extent” as a private party, the court must apply the choice-of-law rule that would apply in an analogous case against a private defendant. Here, because a lawsuit against a private museum would proceed under diversity of citizenship jurisdiction, the choice of law would be determined by reference to state law under Klaxon. Justice Kagan did not equivocate: The choice-of-law rule “must mirror the rule that would apply in a similar suit between private parties. For only the same choice-of-law rule can guarantee use of the same substantive law—and thus . . . guarantee the same liability.” Following Klaxon “is the only way to ensure” that the FSIA’s command is obeyed.

Justice Kagan added that the same result would obtain under the Court’s jurisprudence on federal common law, which cabins federal judge-made law to limited circumstances, none of which obtains here. In reaching this conclusion, Justice Kagan referred to the Government’s contention that it is aware of no case in which the application of state choice-of-law rules in a FSIA case created any foreign relations concerns.

In sum, therefore, federal courts are not permitted to create federal choice-of-law rules for FSIA cases. Instead, they must follow the choice-of-law approach that would apply in an analogous case against a private party.

I’ll end with an exclusive observation for TLB readers: Outside of the Ninth Circuit, federal courts in FSIA cases have followed state choice-of-law rules, but they have sometimes suggested that they are not compelled to do so. The Supreme Court’s unequivocal language in Cassirer suggests that these courts are compelled. This is important because if applying state choice-of-law rules were a matter of discretion, then it might invite federal courts to consider exceptions in individual cases. As I have written, these exceptions would be inconsistent with Klaxon, which permits no such deviation. A no-exceptions rule, in my view, is consistent with the text of the FSIA and the policies of Erie and its progeny. It also has the benefit of simplifying choice-of-law in FSIA cases. Parties and courts should look to the standard choice-of-law rules, period. No special federal common law. No exceptions.