A shopkeeper from Bethlehem who was branded a terrorist in Sacha Baron Cohen's film Bruno is seeking $110m (£67.5m) in damages.

Ayman Abu Aita is suing Baron Cohen, US talk show host David Letterman and others for libel and slander according to a lawsuit filed in the District of Columbia federal court last week.

The actor and comic Baron Cohen plays a gay Austrian fashion journalist in the film, which was released in the UK in July. Keen to become what he calls "the most famous Austrian since Hitler," Bruno travels to the middle east, and in a short interview with Abu Aita, asks to be kidnapped in an attempt to become famous.

A caption labels Abu Aita as a member of the militant al-Aqsa Martyrs' Brigade, the armed wing of the Fatah movement. He is a member of the board of the Holy Land trust, a non-profit organisation that works on Palestinian community-building.

Cohen was interviewed on David Letterman's talkshow in the US, and said finding a "terrorist" to interview for the movie took several months and some help from a CIA contact.

He said he had feared for his safety during the interview with Abu Aita, which he claimed took place at a secret location.

According to the lawsuit, however, the interview with Abu Aita took place at a hotel chosen by Cohen in a part of the West Bank that was under Israeli military control. The film's distributor, NBC Universal, and the director, Larry Charles, are also named in the proceedings.

Abu Aita case is that before the film he "enjoyed a good reputation for honesty and a peaceable nature" in his community. His lawyers write that any accusations or insinuations that Abu Aita is or ever was associated with the al-Aqsa Martyrs' Brigade, or any other terrorist activity, is "utterly false and untrue."

His US lawyer, Joseph Peter Drennan, said Abu Aita was never offered a release to sign to appear in the film. "This is an important lawsuit because it is about the dignity of a specific person. It is about his reputation, about his standing in the community." Drennan said he expects a hearing in late January.

Hatem Abu Ahmad, Abu Aita's Arab-Israeli lawyer, said Baron Cohen made millions "on the back of my client."

His 2006 film Borat also attracted lawsuits, including one for $30m from two residents of the Romanian hamlet where Borat's "home town" scenes were filmed. Most of the cases were thrown out.