Schoeps v. Sompo Holdings: No Federal Common-Law Cause of Action Under the HEAR Act and Narrow Limits on Specific Personal Jurisdiction in Nazi-Looted Art Litigation

Schoeps v. Sompo Holdings:
No Federal Common-Law Cause of Action Under the HEAR Act and Narrow Limits on Specific Personal Jurisdiction in Nazi-Looted Art Litigation

I. Introduction

This Seventh Circuit decision, Julius H. Schoeps v. Sompo Holdings, Inc., sits at the intersection of Holocaust-era art restitution, federal common law, and modern personal jurisdiction doctrine. The plaintiffs—heirs of the prominent German-Jewish banker and art collector Paul von Mendelssohn‑Bartholdy—sought the return (or value) of Vincent van Gogh’s Sunflowers, now owned and displayed in Japan by Sompo Japan Insurance and related entities.

The case posed two core legal questions:

  1. Federal subject-matter jurisdiction / federal law: Does the Holocaust Expropriated Art Recovery Act of 2016 (the “HEAR Act”) or U.S. foreign policy concerning Nazi-looted art support:
    • a federal common-law cause of action for restitution or unjust enrichment, or
    • an implied federal “equitable” cause of action under Article III?
  2. Personal jurisdiction: Can an Illinois federal court exercise specific personal jurisdiction over Japanese and Bermudian insurance entities, based primarily on:
    • a four‑month 2001–2002 loan of Sunflowers to the Art Institute of Chicago, and
    • a Chicago office of an indirect subsidiary selling insurance under the “Sompo International” name?

The Seventh Circuit affirms dismissal of the suit, holding (1) that the HEAR Act does not create, authorize, or justify a federal common‑law or “plenary equitable” cause of action, and (2) that Illinois courts lack specific personal jurisdiction over the Sompo entities for these claims. Importantly, the court deliberately declines to decide whether the HEAR Act’s statute-of-limitations provisions, as applied to state-law claims, themselves give rise to federal question jurisdiction. Instead, it resolves the appeal on personal-jurisdiction grounds.

II. Summary of the Opinion

A. Key Holdings

  1. No federal cause of action under the HEAR Act or Article III:
    • The HEAR Act explicitly states it does not create a civil claim or cause of action.
    • Federal courts cannot use “plenary equitable authority” under Article III to create a cause of action where Congress has not.
    • There is no federal common-law cause of action for restitution or unjust enrichment in this context, because the strict conditions for creating federal common law are not met.
  2. Federal common law and foreign policy:
    • Although U.S. foreign policy favors restitution of Nazi-looted art, that policy does not conflict with state-law causes of action in a way that would require federal common law to displace state law.
    • Congress, through the HEAR Act, affirmatively chose to rely on state-law claims, merely extending their limitations periods.
  3. No specific personal jurisdiction in Illinois:
    • Defendants’ contacts with Illinois (a short-term loan of Sunflowers for exhibition, and an indirect subsidiary’s unrelated insurance sales) did not sufficiently “relate to” the plaintiffs’ ownership claims within the meaning of Ford Motor Co. v. Montana Eighth Judicial District Court.
    • The alleged injuries—forced sale under Nazi persecution, later conversion, trover, unjust enrichment, and slander of title—occurred in Europe (or at the plaintiffs’ domiciles), not in Illinois.
  4. Leave to amend: Even though the district court applied the wrong standard to deny leave to file a second amended complaint, the error was harmless because the proposed changes could not cure the jurisdictional defects.

B. Disposition

  • Counts IX–XII (federal common law and “plenary equitable” claims): properly dismissed for lack of a federal cause of action and lack of subject-matter jurisdiction.
  • Counts I–VIII (state-law claims for replevin, conversion, trover, constructive trust, unjust enrichment, breach of fiduciary duty, and slander of title):
    • The Seventh Circuit avoids deciding whether there is federal-question jurisdiction over these claims.
    • It affirms dismissal on the independent ground that Illinois courts lack personal jurisdiction over the defendants.
  • Judgment: Affirmed.

III. Factual and Procedural Background

A. The Painting and the Nazi Era

Vincent van Gogh painted Sunflowers in 1888. It was later acquired by Paul von Mendelssohn‑Bartholdy, a leading Jewish banker and art collector in Germany. Following the Nazi rise to power, Mendelssohn‑Bartholdy endured escalating persecution:

  • He was removed from prominent financial positions, including the Berlin Stock Exchange and key banking associations.
  • His family bank, Mendelssohn & Co., one of Germany’s largest private banks, was forcibly transferred to non‑Jewish ownership.
  • His financial position deteriorated, compelling him to liquidate his art collection under duress.

In 1934, Mendelssohn‑Bartholdy consigned Sunflowers to Paris dealer Paul Rosenberg, who sold it to Edith Beatty, a British‑American heiress. Decades later, Christie's in London auctioned the painting in 1987; it was purchased for $40 million by Yasuda Fire and Marine Insurance Company (Yasuda), later renamed Sompo Japan Insurance, Inc.

B. Sompo, the Chicago Exhibition, and Provenance Concerns

After purchasing Sunflowers, Yasuda/Sompo Japan kept it in Japan until 2001. That year, it loaned the painting to:

  • the Art Institute of Chicago, for approximately four months (September 2001–January 2002), in the exhibition “Van Gogh and Gauguin: The Studio of the South,” and
  • the Van Gogh Museum in Amsterdam, also for several months.

As part of the loan arrangements, Yasuda/Sompo Japan received reciprocal promises from both institutions to lend Van Gogh works to a 2003 exhibition in Tokyo.

Significantly, internal Yasuda emails show concern about potential Nazi-looting issues and provenance:

  • Yasuda was "deeply concerned" about whether its Van Gogh and Gauguin works might be Nazi-looted art, though it believed they were not and sought advice.
  • Yasuda insisted that loan contracts include terms to prevent any change in ownership in case a Nazi-confiscation issue arose in the U.S. or the Netherlands.

Plaintiffs alleged that Yasuda and the Art Institute colluded to submit a false application to the U.S. Department of State to obtain immunity from seizure as Nazi-era contraband. Sompo Japan filed a declaration denying this assertion.

C. The Sompo Corporate Family and Illinois Contacts

The “Sompo family” of companies includes:

  • Sompo Japan Insurance, Inc. – Japanese corporation, owner of Sunflowers.
  • Sompo Holdings, Inc. – Japanese parent company (over $100 billion in assets), headquartered in Tokyo.
  • Sompo International Holdings Ltd. – Bermuda corporation, principal place of business in Bermuda.
  • Sompo Fine Art Foundation – Japanese public-interest corporation that runs the Sompo Museum of Art in Tokyo, where Sunflowers is on permanent display.

Sompo Holdings promotes a “One Sompo” brand, and some executives hold positions in multiple Sompo entities. Sompo Holdings and Sompo International maintain globally accessible websites; Sompo Holdings’ site features an image of Sunflowers.

Sompo International’s website lists a Chicago office. However:

  • The Chicago office is operated by an indirect subsidiary, Endurance Services Limited, doing business under the trade name “Sompo International.”
  • Endurance sells insurance in Illinois; none of the defendants themselves directly write insurance or conduct business in Illinois.
  • Defendants submitted unrefuted declarations that corporate formalities are respected and they do not exercise unusual control over Endurance.

D. The Lawsuit and District Court Ruling

In 2022, the plaintiffs—heirs of Mendelssohn‑Bartholdy residing in Germany and Sweden—demanded a meeting with Sompo Holdings to resolve their claim to Sunflowers. Sompo Holdings refused, questioning U.S. jurisdiction and the applicability of U.S. law. Plaintiffs filed suit in the Northern District of Illinois.

They asserted:

  • State law claims (Counts I–VIII):
    • Replevin (recovery of the painting)
    • Conversion
    • Trover
    • Constructive trust
    • Unjust enrichment
    • Breach of fiduciary duty (two counts)
    • Slander of title
  • Federal-law-based claims (Counts IX–XII):
    • Unjust enrichment (federal common law)
    • Restitution (federal common law)
    • Unjust enrichment and restitution under the court’s purported “plenary equitable authority” under Article III, Section 2

Recognizing that the alleged wrongful dispossession occurred in the 1930s, plaintiffs relied entirely on the HEAR Act to avoid statutes of limitations, contending that the Act:

  • preempted otherwise applicable state and federal limitations periods for art lost due to Nazi persecution between 1933 and 1945, and
  • provided a six‑year window from “actual discovery” of both the artwork’s identity and location and the plaintiff’s interest, within which to sue.

The defendants moved to dismiss on multiple grounds: lack of standing, lack of subject-matter jurisdiction, lack of personal jurisdiction, and forum non conveniens. The district court:

  • found standing,
  • dismissed Counts IX–XII for lack of federal-question jurisdiction (no valid federal cause of action),
  • assumed, relying on Holtzman v. Philadelphia Museum of Art, that the state-law claims (Counts I–VIII) fell within federal-question jurisdiction because their timeliness depended on the HEAR Act, and
  • dismissed Counts I–VIII for lack of personal jurisdiction over the defendants.

The court also denied leave to file a second amended complaint. Plaintiffs appealed.

IV. Analysis of the Opinion

A. Subject-Matter Jurisdiction and Federal Law Claims

1. Plaintiffs’ Theories: Federal Common Law and “Plenary Equitable Authority”

Counts IX–XII attempted to recast what is essentially a property and restitution dispute into federal law claims:

  • Counts IX & X: asserted unjust enrichment and restitution under “federal common law.”
  • Counts XI & XII: asserted the same substantive relief based on a freestanding “plenary equitable authority” of Article III courts, allegedly available unless Congress clearly displaced it.

The Seventh Circuit rejects both theories.

2. No “Plenary Equitable Authority” Without a Cause of Action

The court starts from a basic but critical distinction: a cause of action is analytically distinct from the remedy. Citing Davis v. Passman, 442 U.S. 228, 239 (1979), the court notes:

“[T]he question whether a litigant has a 'cause of action' is analytically distinct and prior to the question of what relief, if any, a litigant may be entitled to receive.”

In other words, a court cannot simply invoke “equity” to award relief unless the plaintiff has a recognized legal basis—statutory, constitutional, or common law—for bringing the claim. Article III does not itself generate substantive rights or causes of action.

The HEAR Act makes this especially clear:

“Nothing in this Act shall be construed to create a civil claim or cause of action under Federal or State law.” (HEAR Act § 5(f))

Given that Congress expressly disclaimed the creation of a federal cause of action, the Seventh Circuit holds it would be “inconsistent with the text and design of the statute” to infer either:

  • an implied federal cause of action, or
  • an equitable cause of action manufactured by the courts under Article III.

If there is no federal cause of action, the court has no authority to craft a remedy (equitable or otherwise) under federal law. The notion of inherent “plenary equitable authority” is therefore rejected.

3. Limits on Federal Common Law: Rodriguez and Texas Industries

The plaintiffs’ backup argument was that federal common law should govern unjust enrichment and restitution in Holocaust art cases because foreign policy is implicated. The court responds with the Supreme Court’s modern, highly restrictive view of federal common law, as articulated in Rodriguez v. FDIC, 589 U.S. 132 (2020), and Texas Industries, Inc. v. Radcliff Materials, Inc., 451 U.S. 630 (1981):

  • Federal courts may create federal common law only under “strict conditions.”
  • Federal common law must be:
    • authorized by Congress, or
    • “necessary to protect uniquely federal interests.”
  • Uniquely federal interests typically exist where:
    • “the authority and duties of the United States as sovereign are intimately involved,” or
    • the “interstate or international nature of the controversy makes it inappropriate for state law to control.”

Here, Congress has spoken directly via the HEAR Act. It did not authorize a federal cause of action; instead, it explicitly chose to preserve and facilitate claims under state law by extending limitations periods. That legislative design undercuts any argument that federal courts should step in and create parallel, competing federal common-law claims.

4. Foreign Policy, Garamendi, Ungaro-Benages, and Von Saher

Plaintiffs tried to move the case into the “uniquely federal interest” category by invoking U.S. foreign policy regarding Holocaust-era restitution, citing American Insurance Ass’n v. Garamendi, 539 U.S. 396 (2003), and Ungaro‑Benages v. Dresdner Bank AG, 379 F.3d 1227 (11th Cir. 2004).

  • Garamendi: The Supreme Court invalidated a California statute that conflicted with specific Executive Branch agreements with Germany and Austria on Holocaust-era insurance claims.
    • The Court emphasized the President’s authority over foreign affairs and held that state law must give way in the face of a clear conflict with federal foreign policy.
  • Ungaro‑Benages: The Eleventh Circuit applied federal common law because an Executive Agreement between the U.S. and Germany created a comprehensive mechanism for resolving Nazi-era claims against German companies.
    • State law claims would have undermined that agreement, so federal common law displaced state law.

But another major Nazi-looted art case, Von Saher v. Norton Simon Museum of Art at Pasadena, 754 F.3d 712 (9th Cir. 2014), supports the opposite conclusion in the context of private disputes over artwork:

  • Von Saher held that the plaintiff’s state-law claims for conversion and restitution regarding Nazi-looted art were *not* preempted by federal foreign policy.
  • It stressed that there was no Holocaust-specific state law at issue, no direct challenge to foreign sovereign determinations of ownership, and the museum defendant was not itself involved in the wartime wrongs.
  • U.S. policy favors just and fair resolutions of restitution claims, but that policy can be implemented through state law claims.

Following this line, the Seventh Circuit concludes:

  • Yes, U.S. foreign policy strongly supports restitution of Nazi-looted art and facilitation of heirs’ claims.
  • No, plaintiffs have not shown that applying state law in private art claims conflicts with that policy so as to require a new body of federal common law.

The court also considers the Terezin Declaration (2009), a nonbinding multilateral statement in which participating states—including the United States—commit to facilitate “just and fair solutions” for Nazi-confiscated art. The Declaration recommends legal systems that allow claims to be resolved on the facts and merits, but:

  • It does not mandate a federal forum or federal causes of action.
  • It is fully compatible with the HEAR Act’s approach, which relies on state-law claims but extends their limitation periods.

5. Congress’s Design in the HEAR Act

The court treats the HEAR Act as an express congressional judgment that:

  • state-law causes of action (replevin, conversion, unjust enrichment, etc.) are the primary vehicles for recovering Nazi-looted art in U.S. courts, and
  • the main federal intervention needed was adjusting time bars, not creating new federal substantive rights.

The statute’s purpose clause reinforces this view, stating that one aim is to “ensure that laws governing claims to Nazi‑confiscated art…further United States policy as set forth in the Washington Conference Principles on Nazi Confiscated Art, the Holocaust Victims Redress Act, and the Terezin Declaration.” (HEAR Act § 3(1)).

The Seventh Circuit reads this as an “explicit congressional expression of confidence in the capacity of state law” to address these disputes without imperiling foreign policy. Accordingly, the stringent tests for creating federal common law are not satisfied.

6. Resulting Rule on Federal Common Law and the HEAR Act

The opinion effectively establishes this principle within the Seventh Circuit:

In Holocaust-era art restitution cases, the HEAR Act does not authorize or support the creation of a federal common-law cause of action for restitution or unjust enrichment, nor does it permit courts to invoke inherent Article III “plenary equitable authority” to create such claims. Absent a concrete conflict between state law and specific federal foreign policy instruments, state law remains the substantive basis for relief.

B. Specific Personal Jurisdiction: Applying Ford and Walden

1. Legal Framework

With no dispute about the absence of general jurisdiction, the key question was specific personal jurisdiction. Under well-established doctrine:

  • Due process requires that a defendant’s forum contacts make it reasonable to be haled into that forum’s courts: International Shoe Co. v. Washington, 326 U.S. 310 (1945).
  • Specific jurisdiction focuses on “the relationship among the defendant, the forum, and the litigation” (quoting Walden v. Fiore, 571 U.S. 277, 283–84 (2014), and earlier cases like Shaffer v. Heitner).

The Seventh Circuit, following Curry v. Revolution Laboratories, 949 F.3d 385 (7th Cir. 2020) and B.D. ex rel. Myers v. Samsung SDI Co., 143 F.4th 757 (7th Cir. 2025), applies the familiar three-part test:

  1. The defendant must have purposefully availed itself of the privilege of conducting activities in the forum state.
  2. The plaintiff’s claim must arise out of or relate to the defendant’s forum contacts.
  3. The exercise of jurisdiction must comport with fair play and substantial justice.

Illinois’ long-arm statute allows jurisdiction to the full extent permitted by the federal Constitution, so the federal due process analysis is decisive.

2. The “Arise Out of or Relate To” Requirement After Ford

Following Ford Motor Co. v. Montana Eighth Judicial District Court, 592 U.S. 351 (2021), the Seventh Circuit stresses that the second element—“arise out of or relate to”—is not purely causal:

  • “Arise out of” captures claims where the forum contacts are a but‑for cause of the injury.
  • “Relate to” allows jurisdiction even absent strict causation, but only where there is a sufficiently close relationship between the defendant’s forum activities and the specific type of claim at issue.

In Ford, the car manufacturer heavily advertised, sold, and serviced vehicles in Montana and Minnesota. Even though the accident vehicles were originally sold out-of-state, the Supreme Court held that Ford’s extensive in‑forum activities—aimed at encouraging precisely the sort of product use that gave rise to the claims—made jurisdiction fair.

The Seventh Circuit in Samsung reads Ford as limited by a core requirement of “fair warning”: the defendant’s contacts must give it clear notice that it could be sued in the forum for this kind of claim. It is not enough that the defendant does some business in the forum; the business and the litigation must be “litigation‑specific.”

3. The Sompo Defendants’ Contacts with Illinois

Plaintiffs argued several Illinois connections:

  • The 2001–2002 loan of Sunflowers to the Art Institute of Chicago.
  • Sompo International’s website representing a Chicago office.
  • Insurance sales in Illinois by Endurance, an indirect Sompo International subsidiary doing business as “Sompo International.”
  • Websites accessible in Illinois featuring Sunflowers.
  • The theory that Sompo’s purchase and global use of Sunflowers was integral to its marketing and insurance business (“burnishing its corporate image”), thereby relating the art ownership dispute to Sompo’s insurance activities in Illinois.

The court left open whether Endurance’s activities could be imputed to Sompo International, noting that due process generally bars jurisdiction purely on corporate affiliation where formalities are respected (Central States, Southeast & Southwest Areas Pension Fund v. Reimer Express World Corp., 230 F.3d 934, 943 (7th Cir. 2000)). But it held that even if Endurance’s insurance sales and Chicago office were attributed to Sompo International, the claims still did not “arise out of or relate to” those contacts in the sense required by Ford and Samsung.

4. Why the Claims Do Not “Relate To” Illinois Contacts

The key analytic move is to focus on the locus of the alleged wrongs and the nature of the forum contacts:

  • Conversion and trover: The alleged wrongful acquisition/retention of the painting occurred when Yasuda bought Sunflowers in London in 1987, and thereafter held it in Japan.
    • Under cases such as Charash v. Oberlin College, 14 F.3d 291, 297 (6th Cir. 1994), the place of injury for conversion is where the defendant exercises wrongful dominion over the property.
    • That is not Illinois.
  • Slander of title: The injury is typically felt at the plaintiff’s domicile (e.g., Peacock v. Merrill, 2009 WL 10704516 (S.D. Ala. Nov. 17, 2009)).
    • Plaintiffs live in Germany and Sweden, not Illinois.
  • Unjust enrichment: The injury is located where the benefit is conferred on the defendant (see In re Sears, Roebuck & Co. Tools Marketing & Sales Practices Litig., 2006 WL 3754823, at *2 (N.D. Ill. Dec. 18, 2006)).
    • The main alleged benefits to Sompo from possessing Sunflowers—cultural prestige, museum traffic, branding in Japan—arise in Japan and globally, not specifically in Illinois.
  • Exhibition in Chicago: The Chicago exhibition was temporary and occurred long after Sompo Japan’s acquisition of the painting.
    • The alleged Nazi-era forced sale and later London transaction predate the exhibition.
    • As in Graff v. Leslie Hindman Auctioneers, 342 F. Supp. 3d 819 (N.D. Ill. 2018), the presence of wrongfully obtained art in the forum for exhibition or auction does not, by itself, establish that the injury “arose” there.
    • Similarly, Barzilai v. Israel Museum (N.Y. Sup. Ct. 2022) rejected jurisdiction over a Nazi-looted manuscript despite a prior New York exhibition; the real injury was the theft and subsequent foreign possession, not the exhibition.

Consistent with Walden, the Seventh Circuit emphasizes that the relevant conduct must occur in the forum or be “connected to the forum in a meaningful way.” Merely being displayed in a forum museum, or having a corporate affiliate sell insurance there, does not transform a foreign art-ownership dispute into a forum-related controversy.

5. Rejection of the Plaintiffs’ Marketing-Based Theory

Plaintiffs argued that, under the “prudent investor rule,” Sompo could only have purchased Sunflowers if it calculated that the painting would help market its insurance business, including in Illinois; thus, they claimed, all of Sompo’s insurance sales in Illinois, and the Chicago exhibition, “relate to” their unjust enrichment claims.

The court finds this logic far too broad:

“If such were the rule, then specific personal jurisdiction would exist over a corporation anywhere it did any business because its business would 'relate to' all other acts of the corporation. Such reasoning simply cannot live in peace with Walden, Ford, and Samsung.”

In other words, not every corporate act is related to every other corporate act for jurisdictional purposes. Specific jurisdiction demands a targeted, claim-specific connection.

6. Websites and Online Presence

Plaintiffs also pointed to globally accessible websites:

  • Sompo Holdings’ site displaying an image of Sunflowers.
  • Sompo International’s site depicting a Chicago office.

The Seventh Circuit is skeptical that passive or even semi‑interactive websites alone can establish the necessary relationship between the forum and the litigation, especially where:

  • The websites are not shown to be specifically directed at Illinois consumers for the purpose of exploiting the painting at issue; and
  • Even if the sites were used to sell insurance to Illinois residents (cf. NBA Properties, Inc. v. HANWJH, 46 F.4th 614, 624 (7th Cir. 2022)), the sale of insurance has no substantive connection to the plaintiffs’ ownership claims in Sunflowers.

Thus, the online presence does not move the needle on the “arise out of or relate to” analysis.

7. No Need to Reach Fairness Factors

Because the plaintiffs failed the second prong of the specific-jurisdiction test—insufficient relationship between forum contacts and the claims—the court finds it unnecessary to analyze the third prong (fair play and substantial justice).

It concludes that there is “simply an inadequate connection between the forum (Illinois) and the litigation” to support jurisdiction over the Sompo entities, echoing Bristol‑Myers Squibb Co. v. Superior Court, 582 U.S. 255 (2017) and Walden.

8. Denial of Leave to Amend

Plaintiffs argued that the district court abused its discretion by denying leave to file a second amended complaint under the more liberal standard of Federal Rule of Civil Procedure 15(a)(2). The Seventh Circuit agrees that the wrong standard was formally applied but holds the error harmless:

  • The district court’s opinion made clear that no additional allegations could cure the lack of a meaningful claim‑specific connection to Illinois.
  • Thus, amendment would have been futile, and denial was within the court’s discretion.

C. The HEAR Act and Embedded Federal Questions (Left Open)

On the state-law counts (replevin, conversion, etc.), the district court had followed a line of reasoning from Holtzman v. Philadelphia Museum of Art, 2022 WL 2651851 (E.D. Pa. July 7, 2022):

  • Because the HEAR Act preempts state statutes of limitation and imposes a federal six‑year discovery window, deciding whether a state‑law claim is timely requires interpreting the HEAR Act.
  • Such a timeliness question may present a “substantial federal issue” sufficient to create federal-question jurisdiction under the “embedded federal question” doctrine (e.g., Grable & Sons, Gunn v. Minton).

The Seventh Circuit notes that this is an “unruly” area of law, borrowing the Supreme Court’s description in Gunn v. Minton, 568 U.S. 251, 258 (2013), and explicitly pretermites (declines to decide) whether federal-question jurisdiction exists over these state-law claims. Because personal jurisdiction is more straightforward and dispositive, the court follows Ruhrgas AG v. Marathon Oil Co., 526 U.S. 574 (1999), which allows courts to resolve personal jurisdiction before subject-matter jurisdiction where appropriate.

As a result, the Seventh Circuit leaves unresolved in this circuit whether the HEAR Act’s limitations provisions, standing alone, support federal-question jurisdiction over otherwise state-based restitution suits.

V. Simplifying Key Legal Concepts

1. The HEAR Act in Brief

  • Enacted in 2016 to address the problem that many Holocaust-era claims were time‑barred by state statutes of limitations.
  • What it does:
    • Preempts shorter state (and some federal) limitation periods for civil claims to recover art lost between 1933–1945 due to Nazi persecution.
    • Provides a uniform six-year limitations period running from “actual discovery” of:
      • the identity and location of the artwork, and
      • the plaintiff’s possessory interest in the artwork.
  • What it does not do:
    • Create any new cause of action or substantive rights.
    • Specify what claims (conversion, replevin, unjust enrichment, etc.) plaintiffs must bring—that is left to state law (or preexisting federal law, if applicable).

2. Cause of Action vs. Remedy

  • A cause of action is the legal basis on which a court is asked to grant relief (e.g., “conversion” under Illinois law).
  • A remedy is what the court can award if the claim succeeds (e.g., return of the painting, damages, injunction).
  • Courts cannot award remedies in a vacuum; there must first be a valid cause of action authorized by law.

3. Federal Question Jurisdiction vs. State Law Claims

  • Federal courts can hear:
    • Federal-question cases (arising under the Constitution, federal statutes, or treaties) under 28 U.S.C. § 1331.
    • Diversity cases between citizens of different states or foreigners vs. U.S. citizens, with an amount in controversy threshold, under 28 U.S.C. § 1332.
  • A state-law claim can sometimes be heard as a federal-question case if it “necessarily raises” a disputed and substantial issue of federal law that can be decided without upsetting the federal–state balance—this is the “embedded federal question” doctrine (from cases like Grable and Gunn).

4. Federal Common Law

  • Most law applied in U.S. courts is either:
    • state common law (e.g., torts, contracts), or
    • federal statutory law.
  • Federal common law exists, but only in narrow areas, such as:
    • disputes between states,
    • cases involving uniquely federal interests (e.g., foreign relations, rights and duties of the U.S.), or
    • areas where Congress has directed courts to develop uniform federal rules.
  • Courts are very cautious about creating federal common law, especially where Congress has already legislated in the area—as it has with the HEAR Act.

5. Specific vs. General Personal Jurisdiction

  • General jurisdiction: A court can hear any claim against a defendant, regardless of where the claim arose, but only where the defendant is “at home” (typically its place of incorporation or principal place of business, as in Daimler AG v. Bauman).
  • Specific jurisdiction: A court can hear only claims that “arise out of or relate to” the defendant’s contacts with the forum state.
  • Key requirements for specific jurisdiction:
    • Defendant purposefully directed activities at the forum (no accidental or purely random contacts).
    • The claim is sufficiently connected to those activities.
    • Exercising jurisdiction is fair and reasonable.

6. Unjust Enrichment and Restitution

  • Unjust enrichment: A doctrine that prevents a defendant from retaining a benefit at the plaintiff’s expense when it would be inequitable to do so.
  • Restitution: The remedy that corresponds to unjust enrichment—requiring the return of the benefit or its value.
  • These are generally creatures of state law unless Congress or federal common law provides otherwise (which, per this opinion, is not the case under the HEAR Act).

VI. Impact and Implications

A. For Holocaust-Era Art Restitution Litigation

  • State-law claims remain central: Plaintiffs must frame their suits in terms of state causes of action (conversion, replevin, unjust enrichment, etc.) even when invoking the HEAR Act’s timing rules.
  • No federal common-law shortcut: Claimants cannot circumvent state law by asserting federal common-law restitution or broad Article III equitable authority.
  • Forum selection becomes more constrained:
    • To sue in U.S. courts, heirs must identify a forum where the current possessor’s contacts are closely connected to the contested artwork.
    • A short-term exhibition or incidental marketing in a forum may not be sufficient if the alleged wrongful acquisition or retention occurred abroad.
  • Pressure toward forums with stronger ties: Many future claims are likely to be brought where:
    • the museum or entity is headquartered or “at home” (supporting general jurisdiction), or
    • core acts of purchase, transfer, or persistent possession took place.

B. For Interpretation of the HEAR Act and Federal Foreign Policy

  • The decision confirms a narrow reading of the HEAR Act:
    • It is a statute about timeliness, not about creating new substantive rights.
    • Heirs must rely on pre-existing legal theories; the Act only keeps those claims alive longer.
  • The Seventh Circuit treats Congress’s reliance on state law as a deliberate policy choice that harmonizes with U.S. foreign policy commitments (Washington Principles, Terezin Declaration, etc.).
  • It aligns with the Second Circuit’s refusal in Zuckerman v. Metropolitan Museum of Art, 928 F.3d 186 (2d Cir. 2019), to infer a federal common‑law cause of action under the HEAR Act.

C. For Personal-Jurisdiction Doctrine

  • Reinforces a disciplined reading of Ford:
    • “Relates to” cannot be stretched to cover any and all business the defendant does in the forum.
    • The relationship must be close enough to give the defendant fair warning that it could be sued there for the specific kind of claim at issue.
  • Corporate families and branding:
    • Use of a common name or logo (“One Sompo”) and overlapping executives does not automatically create jurisdiction over all affiliates wherever a subsidiary operates.
    • Respect for corporate separateness remains central to the due process analysis.
  • Temporary art loans and exhibitions:
    • Short-term display of artwork in a forum, without more, is unlikely to support specific jurisdiction over ownership claims when the alleged wrongful acts occurred elsewhere.

D. Unresolved Questions

  • Federal-question jurisdiction over HEAR‑Act‑based state claims:
    • The Seventh Circuit leaves open whether suits that hinge on interpreting the HEAR Act’s statute-of-limitations provisions “arise under” federal law.
    • District courts in this circuit will have to confront the Grable/Gunn analysis in future cases.
  • Alternative forums:
    • Given jurisdictional and forum non conveniens barriers, future plaintiffs may look more often to European courts or to negotiation/ADR mechanisms recommended in international instruments like the Washington Principles and Terezin Declaration.

VII. Conclusion

Schoeps v. Sompo Holdings is a significant appellate decision in two respects. First, it firmly rejects efforts to transform the HEAR Act and U.S. Holocaust-related foreign policy into a freestanding federal common‑law or equitable cause of action. Congress chose to rely on state law and to extend limitation periods; federal courts must respect that choice. Second, the opinion applies contemporary specific-jurisdiction doctrine—informed by Ford, Walden, and Bristol‑Myers—to hold that a foreign insurer’s brief exhibition of a painting in Chicago, and its subsidiary’s unrelated insurance business there, do not create a sufficiently claim-specific relationship with Illinois to justify suit over global ownership of Sunflowers.

For practitioners and heirs pursuing Nazi-looted art claims, the message is clear: the path to relief in U.S. courts runs primarily through state-law causes of action and through forums where defendants’ contacts are closely tied to the alleged wrongful acquisition or retention of the artwork. The federal courts’ role, as outlined by the HEAR Act and now reaffirmed by the Seventh Circuit, is to keep those state-law doors open in time—but not to create new federal substantive rights where Congress has expressly declined to do so.

Case Details

Year: 2025
Court: Court of Appeals for the Seventh Circuit

Judge(s)

Ripple

Comments