By Jonathan Stempel
(Reuters) - A federal appeals court on Monday revived a lawsuit seeking to force a Madrid museum to return an Impressionist masterpiece to the family of a Jewish woman who was compelled to sell it to a Nazi art appraiser for $360 in 1939 so she could flee Germany.
The 9th U.S. Circuit Court of Appeals said two of Lilly Cassirer's great-grandchildren may sue the Thyssen-Bornemisza Museum for the return of Camille Pissarro's 1897 depiction of a Paris street scene, "Rue Saint-Honoré, Après-midi, Effet de Pluie."
Monday's decision revived a 16-year legal battle that began after the Cassirers learned that the Pissarro, whose value may exceed $40 million, was on display in the Madrid museum, its home since 1992.
Applying Spanish law, the appeals court said it was an open question whether the museum knew the painting was stolen when it acquired it in 1993 in a $338 million purchase of Baron Hans Heinrich Thyssen-Bornemisza's art collection.
It said that price was well below the collection's estimated $1 billion to $2 billion value, and the baron may have known he also got a bargain when he bought the Pissarro from a New York art dealer for $275,000 in 1976.
"The Cassirers have created a triable issue of fact whether (the Thyssen-Bornemisza Collection) knew the painting was stolen from Lilly when TBC purchased the painting from the Baron," Circuit Judge Carlos Bea wrote. "There is a triable issue of fact as to the Baron's good faith."
Bea also said Lilly Cassirer did not waive her ownership rights when Germany's government paid her 120,000 marks for the loss of the painting in 1958, when its whereabouts were unknown.
The Pasadena, California-based appeals court returned the case to U.S. District Judge John Walter in Los Angeles, who dismissed the lawsuit in June 2015.
"We're obviously very pleased," said Stephen Zack, a Boies, Schiller & Flexner partner representing the Cassirers, in a phone interview. "This has been a scar they've had to deal with for generations."
David Boies, a prominent U.S. lawyer, had argued the Cassirers' appeal.
Thaddeus Stauber, a lawyer for the foundation that runs the museum, wrote in an email that the baron and the museum acquired the Pissarro in good faith.
"We remain confident that the foundation's ownership of the painting will once again be confirmed," Stauber said.
Both sides agreed that Lilly Cassirer's sale of the Pissarro to Berlin art dealer Jackob Scheidwimmer amounted to a forcible taking. Pissarro's works had been popular among European Jewish collectors.
The case is Cassirer v Thyssen-Bornemisza Collection Foundation, 9th U.S. Circuit Court of Appeals, Nos. 15-55550, 15-55977, 15-55951.
(Reporting by Jonathan Stempel in New York; Additional reporting by Angus Berwick in Madrid)