What Should Happen Next in Cassirer?

Most of the procedural questions that arise in domestic litigation have a counterpart in transnational litigation. In Cassirer v. Thyssen-Bornemisza Collection Foundation, the Supreme Court confronted the transnational counterpart to Klaxon v. Stentor Electric Manufacturing Co., a much-debated choice-of-law case decided in 1941.

As Justice Kagan noted in her opinion for a unanimous Court, “[a]lthough the legal issue before us is prosaic, the case’s subject matter and background are anything but.” In 1939 Lilly Cassirer, the heir of a prominent German Jewish art collector, was forced to turn over her Camille Pissarro painting, Rue Saint-Honoré, Afternoon, Rain Effect, to the Nazis in exchange for permission to flee Germany. Lilly and her heirs have been trying to recover it ever since.

In 1999, Lilly’s grandson Claude Cassirer discovered the painting in a catalogue for the Thyssen-Bornemisza Collection Foundation, an instrumentality of the Spanish government. After unsuccessful diplomatic and other attempts to force the museum to return the painting, in 2005 he filed suit against the museum in federal district court in California, his home state.

Suits against foreign sovereigns or their instrumentalities are governed by the federal Foreign Sovereign Immunities Act, passed in 1976 to ensure some uniformity in cases involving foreign sovereigns. The FSIA provides that foreign sovereigns and their instrumentalities are ordinarily immune from suit. But it also creates exceptions to that immunity, and, if a sovereign is not immune, confers jurisdiction on federal courts to hear such suits.

The courts below had previously held that the Cassirers’ suit against the museum did fit into an exception for expropriation of property in violation of international law, and the Supreme Court had denied certiorari. (This case has been in litigation for more than 15 years, has made four trips to the Ninth Circuit and has been denied certiorari twice. Claude died in the interim and his heirs continued the litigation.) The only question left was whether the dispute would be governed by Spanish law or by California law. Under California law, thieves cannot pass good title even to purchasers in good faith, and thus ownership of the painting was never transferred from the Cassirer family. But under Spanish law, good-faith purchasers can acquire valid title, and the lower courts found that the museum had satisfied the requirements for doing so.

For purposes of determining whose law applies, the most important part of the FSIA is § 1606, which provides:

 As to any claim for relief with respect to which a foreign state is not entitled to immunity . . . the foreign state shall be liable in the same manner and to the same extent as a private individual under like circumstances.

Let’s consider how a “private individual” would be treated in “like circumstances.” Here’s a Civil Procedure final exam question: Claude Cassirer, a citizen of California, sues a private Spanish museum to recover a painting he alleges was illegally expropriated. He sues in California federal court on California common-law claims (think unlawful conversion and the like). What jurisdiction’s property law will govern those claims?

The answer is easy. This is a diversity case under § 1332(a)(2), so the Erie doctrine requires the court to apply state (or foreign) – but not federal – substantive law. And Klaxon held that the court must use the forum state’s choice-of-law doctrines to determine which state’s substantive law to apply. In our hypothetical case, then, the court would apply California choice-of-law doctrines to decide whether California or Spanish property law should govern the dispute.

Many scholars have criticized Klaxon, suggesting that it encourages forum-shopping, reduces predictability, and adds another layer of complexity to the litigation. They have argued that a uniform federal choice-of-law rule would be preferable. Nevertheless, the Court has never wavered from Klaxon – although several of the Justices did seem perplexed about it during the oral argument in this case.

The Ninth Circuit, however, held that when it comes to suits brought under the FSIA rather than in diversity jurisdiction, federal common-law choice-of-law doctrines do govern; in other words, that Klaxon does not apply in FSIA cases. (The four other circuits that have confronted the question have held that Klaxon applies.) The Ninth Circuit therefore affirmed the district court’s holding that federal choice-of-law rules dictated the application of Spanish property law, which meant the museum owns the painting.

The Supreme Court unanimously reversed. It held that the plain meaning of § 1606 required the application of the same choice-of-law rules in FSIA cases as in diversity cases. As Kagan’s opinion explained, “only the same choice-of-law rule can guarantee use of the same substantive law – and thus . . . guarantee the same liability.”

The opinion also noted that even in the absence of the clear language of § 1606, the Court would reach the same result, because “[j]udicial creation of federal common law to displace state-created rules must be ‘necessary to protect uniquely federal interests,’” a requirement not met in this case. The museum had argued that the potential impact on foreign relations when sovereigns are sued in U.S. courts justified the creation of federal common law. Kagan’s response was that the federal government – which participated in the case in support of the Cassirers – disclaimed any necessity for a federal choice-of-law rule in FSIA cases and that cases in the four other circuits had never raised any foreign relations concerns. As Kagan put it, “the Ninth Circuit’s use of a federal choice-of-law rule in FSIA cases has been a solution in search of a problem.”

Unfortunately for the Cassirer family, the Supreme Court ruling in their favor is no guarantee that they will get the painting back. The Court held only that the federal courts must apply whatever substantive law a California state court would apply, but did not reach the question of whether that would be Spanish or California law. So back it goes to the Ninth Circuit for resolution of that question.

And here the Cassirers have a problem. The federal district court, out of an abundance of caution, held that Spanish substantive law would apply under either federal or California choice-of-law doctrines. Because the Ninth Circuit concluded that federal choice-of-law doctrines governed, it did not review the latter holding. So the Ninth Circuit is free to reach the same bottom line – that the museum owns the painting – by simply affirming the district court’s ruling about what California choice-of-law doctrines require.

My own view is that although this is a likely result, it is not the best course of action. Choice-of-law questions are notoriously difficult and state-specific. Federal courts are notoriously prone to interpreting state law – especially novel or difficult questions of state law – in ways that are congenial to the federal court’s substantive views even if not wholly faithful to the state court’s positions. (I tell my students that these courts are paying lip service to Erie but applying Swift v. Tyson.)

The better approach, therefore, would be for the Ninth Circuit to certify the choice-of-law question to the California Supreme Court. Instead of trying to guess what law a California court would do, why not simply ask the highest California court?

Whatever happens on remand, at least the Court has resolved a circuit split. And it is notable that it did so unanimously, a rare occurrence in cases with choice-of-law issues (the most recent significant Erie case, Shady Grove Orthopedic Associates v. Allstate Insurance Co. in 2010, produced a 4-1-4 split and lower courts are still in disagreement about how to apply it), or in cases raising questions about whether to create new federal common law.

Finally, it’s always a joy to read a Kagan opinion, especially on a procedural issue. She writes clearly and with flair, and often produces nice short opinions like this 9-pager that includes, in the appendix, a close-up of the Pissarro painting and a picture of it hanging in Lilly Cassirer’s home in pre-war Germany.