After a long legal battle, a federal court in California has ruled that a Spanish museum can keep an Impressionist painting, rejecting a claim by relatives of a German Jew who was forced to sell the painting before fleeing the Nazis.

The ruling, announced on Tuesday, is the latest in the longstanding ownership dispute over “Rue Saint-Honoré, Après-midi, Effet de Pluie,” an 1897 painting by Camille Pissarro.

The federal court held that ownership was governed by Spanish law, which allows buyers to retain works they purchased if they did not possess “actual knowledge” the works had been stolen, a position held by both the Madrid museum possessing the painting, the Thyssen-Bornemisza, and the prior owner.

But United States District Court Judge John Walter was critical of Spain, which owns the museum, noting that its position was “inconsistent” with an international agreement it had signed, the Washington Principles, that encourages governments to find “just and fair” solutions in cases where looted art is identified.

The German Jewish owner, Lilly Cassirer, had been forced to sell the painting to a Nazi art appraiser in 1939 for the equivalent of $360. The work eventually landed in the Madrid museum as part of the collection acquired by Spain from Baron Hans Heinrich Thyssen-Bornemisza, an industrialist.

The initial claim was filed in 2001 by Claude Cassirer, Ms. Cassirer’s heir, who lived in California. After his death in 2010, other family members took over as plaintiffs, alongside the United Jewish Federation of San Diego County.

Thaddeus J. Stauber, a partner at Nixon Peabody, an American law firm representing the Thyssen-Bornemisza Collection Foundation, welcomed Tuesday’s ruling. A court had previously found in favor of the foundation in 2015, but this latest ruling differed in that it focused on the plaintiffs’ argument that the foundation had actual knowledge, when the painting was acquired in the early 1990s, that it had been stolen, Mr. Stauber explained in an email response.

In its ruling this week, the California court found that Baron Thyssen-Bornemisza paid “fair market value” when he acquired the Pissarro painting for $300,000 in 1976 but should have done more to discover the exact ownership history of the painting and trace it back to Nazi looting, because some details hinted at a complicated provenance.

“Although the “red flags” should have raised the baron’s suspicions, they fall well short of demonstrating the baron’s actual knowledge, i.e. that the baron had certain knowledge that the painting was stolen, or that there was a high risk or probability that the painting was stolen,” according to the ruling.

A law firm that has represented the Cassirer family, Kendall Brill & Klieger, did not immediately respond to a request for comment. In 1958, Lilly Cassirer received financial compensation from the German government for the loss of her painting. But as part of the settlement, she did not waive her right to seek its return.

The court this week said that in 1976, Baron Thyssen-Bornemisza was given “minimal provenance information” by the Stephen Hahn Gallery, which sold him the work. But the judge pointed out possible indicators that a “sophisticated art collector” like Baron Thyssen-Bornemisza overlooked, such as that “some of the labels on the verso of the painting appear to have been intentionally torn off or removed.” The baron also ignored “the well-known history and pervasive nature of the Nazi looting of fine art during World War II” as well as the more specific fact that “Pissarro paintings were often looted by the Nazis,” the court said.

Overall, the court found, “there is no evidence that the baron made any inquiries regarding the painting’s provenance or conducted any investigation of the painting’s provenance before purchasing it.”

When Spain took over the Thyssen collection, it conducted no investigation into the origins of artwork that the industrialist, who died in 2002, had acquired before 1980.

The Pissarro painting has been on display in Madrid since the Thyssen museum’s opening in 1992. The museum now ranks among the most visited places in the Spanish capital, within walking distance of the Prado, Spain’s flagship art museum.

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