Late Wednesday, U.S. District Judge George Daniels of Manhattan ruled that the Palestinian Authority and the Palestine Liberation Organization are not entitled to summary judgment on Anti-Terrorism Act claims by more than 40 U.S. citizens (or their survivors) who were the victims of attacks in and around Jerusalem between 2000 and 2004. Judge Daniels’ decision clears the way for a trial, scheduled to begin on Jan. 12, against the Palestinian Authority and the PLO.

The potential liability is enormous. In two previous Anti-Terrorism Act cases – Ungar v. Palestinian Authority, a 2000 suit involving two victims; and Knox v. Palestine Liberation Organization, a 2003 case by a single plaintiff – the Palestinian Authority and the PLO were hit with default judgments of more than $100 million. That’s no guarantee of similar results, of course, for plaintiffs in the suit before Daniels, known as Sokolow v. PLO. The Palestinian Authority and its lawyers at Miller & Chevalier are actively contesting liability in the Sokolow suit. As the judge pointed out in his summary judgment opinion Wednesday, the victims and their lawyers at Arnold & Porter still have to prove what they’ve alleged to a Manhattan jury.

If, however, jurors eventually hand the Sokolow plaintiffs a big judgment under the ATA, which carries treble damages, it could devastate the West Bank, where the Palestinian Authority is the governing body. U.S. courts, according to terror litigation expert Jimmy Gurule, a law professor at Notre Dame, have already ruled conclusively that the Palestinian Authority is not protected by sovereign immunity because the United States does not recognize Palestine as a state. Judge Daniels cited that precedent in a 2008 opinion in which he rejected Palestinian Authority arguments against his jurisdiction over the Sokolow case. So Palestinian Authority assets in the United States and other countries that recognize U.S. judgments – unlike the assets of sovereigns like Iran and Libya – can be attached by plaintiffs who’ve won judgments.

In fact, lawyers for victims who have previously obtained default judgments against the Palestinian Authority were successful enough at disrupting the government’s finances that the Palestinian Authority quietly settled both cases, Knox in 2010 and Ungar in 2011.

There are dozens more plaintiffs in the Sokolow case than there were in the Knox and Ungar suits, which vastly magnifies the potential damages. “The Palestinian Authority is in a really difficult situation,” said Gurule. “The price of settlement could really add up.”

A private Anti-Terrorism judgment that cripples the West Bank’s economy is almost surely not in the diplomatic interests of the U.S. State Department, which continues to aver its commitment to reviving peace talks between Israel and the Palestinian Territories. So, will the State Department do anything to prevent this case from going to trial?

I should say here that I don’t know if the Palestinian Authority has asked for help from the U.S. State Department. I emailed Laura Ferguson at Miller & Chevalier but didn’t hear back. A representative of the State Department told me that it doesn’t comment on pending cases. So far, State has not turned up in the Sokolow case and Judge Daniels has not asked for its views. “There is no reason for the State Department to get involved,” said Nitsana Darshan-Leitner of the Israeli advocacy group Shurat HaDin, who has worked with U.S. lawyers on most of the Anti-Terrorism Act suits against the PLO and PA. “They should let the parties litigate the case.” Plaintiffs counsel Kent Yalowitz of Arnold & Porter said that the Palestinian Authority “could easily pay any judgment in this case.”

But in previous cases, Palestinian Authority President Mahmoud Abbas did ask the State Department to intervene after it lost default judgments. When the Abbas government took power, it changed the Palestinian Authority’s litigation strategy and began actively litigating against Anti-Terrorism Act claims in the United States. Abbas sought the State Department’s support for motions to vacate adverse judgments. In early 2007, then Secretary of State Condoleezza Rice sent Abbas a letter that rebuffed the request very gently. One of the federal judges overseeing an ATA case in which the Palestinian Authority wanted to vacate a default judgment, Judge Victor Marrero of Manhattan, subsequently ordered the U.S. government to inform him whether it had an interest in any of the pending ATA cases.

The government eventually informed several different judges overseeing victims’ suits against the PLO and the Palestinian Authority that it would take no position in the litigation. “The United States supports just compensation for victims of terrorism from those responsible for their losses and has encouraged all parties to resolve these cases to their mutual benefit,” the statement said. “At the same time, the United States remains concerned about the potentially significant impact that these default cases may have on the defendants’ financial and political viability.”

U.S. District Judge Gladys Kessler of Washington, D.C., called the statement “mealy-mouthed,” complaining in a 2009 opinion that the U.S. government had “certainly provided no substantive guidance whatsoever to the court regarding the government’s position or concerns about any impact a decision might have on the delicate situation in the Middle East.”

Terror litigation expert Gurule said that if the State Department were to register an interest in the Sokolow case, it probably wouldn’t be until after a jury has decided the case. “If there is a judgment, I can see a scenario unfolding of the Palestinian Authority going to the State Department and saying, ‘You’ve got to help us. We’re going to have people starving,'” he said. If he were a plaintiff in the case, Gurule added, he would already be writing to Congress to ward off any interference by the State Department.

“The State Department has not been supportive of these cases,” he said. “I would want to make sure there’s not mischief going on behind the scenes.”

(The story has been updated to add comment from a lawyer for the plaintiffs.)

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