Camille Pissarro's painting Rue Saint-Honoré in the Afternoon. Effect of Rain, 1897. (1976.74), at the Museo Nacional Thyssen-Bornemisza in Madrid.

In a long-running legal fight over a Nazi-looted painting by French impressionist master Camille Pissarro, a federal judge in Los Angeles on Tuesday sided with the Spanish Foundation who currently holds the painting over the heirs who were seeking to reclaim it.

The parties in the case agreed that Lilly Cassirer Neubauer, the great-grandmother of the Cassirer plaintiffs, sold Pissarro's “Rue Saint-Honoré, après-midi, effet de pluie” in 1939 after a Nazi-appointed art dealer seized it to conduct an appraisal and valued it at the modern equivalent of $360. The masterpiece since has been appraised at more than $30 million.

U.S. District Judge John Walter on Tuesday held in a 34-page order that Madrid-based Thyssen-Bornemisza Collection Foundation (TBC), which manages the collection of art acquired by the Spanish state that includes the Pissarro, didn't have “actual knowledge” that the painting was stolen despite “red flags” that might have raised suspicions about the painting's record of ownership.

“In other words,” the judge wrote, “although failing to investigate the provenance of the painting may have been irresponsible under these circumstances, the Court concludes that it certainly was not criminal.”

Walter, however, wrote that he found the Foundation's refusal to return the painting “inconsistent” with the Kingdom of Spain's commitment to nonbinding principals that more than 40 countries signed onto in 1998 and 2009 vowing to return art found to have been taken by the Nazis before and during the Holocaust. Walter wrote that he had “no alternative but to apply Spanish law and cannot force the Kingdom of Spain or TBC to comply with its moral commitments.”

Nixon Peabody attorney Thaddeus Stauber, who represented the defense in the case, called the judge's opinion “meticulous” and “very thoughtful.”

“Ultimately the question put before him was 'Does the foundation have actual knowledge that the painting was stolen?'” Stauber said. “He finds very convincingly that they did not.”

“I think what's important here is that these are factual findings based on evidence,” he said. “Now that we've had a full trial on the merits we think this should bring a conclusion to the case.”

Boies Schiller Flexner's Stephen Zack, who represented Neubauer's heirs, didn't immediately respond to an email seeking comment Tuesday.