Arab Bank headquarters in Amman, Jordan
Arab Bank headquarters in Amman, Jordan (Wiki)

More than 5,000 miles from the war-torn Middle East, a Brooklyn federal courtroom this week will be the scene of an unprecedented trial testing a multibillion dollar bank’s liability for allegedly offering material support to Hamas through its financial services.

Though a number of similar cases are pending or have been disposed, the high stakes Eastern District case, Linde v. Arab Bank, 04-CV-2799, is thought to be the first time jurors will weigh whether a financial institution should be held accountable for supporting terrorists under civil provisions of the Anti-Terrorism Act.

After 10 years of hard-fought litigation and one trip to the U.S. Supreme Court, jury selection is scheduled to begin Monday before Judge Brian Cogan (See Profile) for a trial that is expected to last at least three weeks.

The plaintiffs are about 300 victims or their estates who were harmed in 24 attacks allegedly carried out by Hamas from 2001 to 2004.

On the other side is Arab Bank, headquartered in Jordan with more than 600 branches in over 30 countries as well as the largest bank market share in the West Bank and Gaza. Saying it has the “largest global Arab banking network,” the 84-year-old bank had nearly $50 billion in assets as of last year.

The plaintiffs claim the bank knew some of its customers were Hamas leaders, operatives or families of suicide bombers receiving reward payments.

The bank flatly rejects that assertion, saying it provided routine services following all counterterrorism laws and regulations, and that it never intended to offer support to Hamas or other terrorist groups.

Gary Osen of Osen LLC, one of the lead attorneys for the plaintiffs, said he was grateful to finally be presenting the case to a jury.

Though any liability ruling would not solve ongoing Middle East tensions, Osen said, “maybe in our way, using the civil provision as Congress intended, we can adjust and somewhat alter the risk tolerance of foreign financial institutions that operate in other parts of world where they may take a more liberal view of dealing with customers that the civilized world does not deem appropriate to do business with.”

In a statement, Arab Bank said it “has great sympathy for all victims of terrorism but is not liable for the tragic acts described by plaintiffs.”

The bank noted in its statement that it would not be able to present the “full evidentiary record” that would vindicate its actions because of an adverse inference sanction by Judge Nina Gershon (See Profile) and other pretrial rulings. Still, the bank said it was “confident it will ultimately prevail.”

The case has implications for the international finance system, Arab Bank said. “Plaintiffs argue banks should be liable for the millions of routine, automated transactions that they process even when proper compliance requirements are followed and the parties were in good standing at the time. Plaintiffs’ theory, if adopted by the court, would undermine the automated compliance systems that regulators around the world require banks to employ, and create vast uncertainty and risk in the international finance system,” the bank said in its statement.

Shand Stephens, Brett Ingerman and Anthony Coles, partners at DLA Piper, will be representing the bank at trial.

Hurdles at Upcoming Trial

The Anti-Terrorism Act allows private rights of action to a U.S. national “injured in his or her person, property, or business by reason of an act of international terrorism,” 18 U.S.C. §2333(a).

In suits like Linde, plaintiffs argue defendants breached criminal laws that, pursuant to 18 U.S.C §2339B, forbid the knowing offer of material support to foreign terrorist organizations. Financial services are part of the definition of what constitutes material support.

According to Osen, the plaintiffs’ burden is to show by a preponderance of the evidence that Hamas committed the attacks and the bank provided financial services, knowing it was doing so or being willfully blind.

Plaintiffs also must show that the timing and volume of support from the bank was “both a substantial factor in assisting Hamas and it was reasonably foreseeable that giving assistance would cause the injuries” at question.

The plaintiffs will build their case through expert testimony, transaction records, evidence of Hamas’ funding structure and prior sworn testimony from Arab Bank employees.

The bank meanwhile, has pushed for a tougher standard on causation. Gershon rejected a “but for” standard in a summary judgment decision, and Cogan said he would not alter her rulings.

Also pretrial, the bank tried to introduce evidence of compliance with foreign laws as relevant to the bank’s state of mind but Gershon refused to allow it.

She also sanctioned the bank for non-production of records. Arab Bank said while it disclosed some 200,000 documents, it could not turn over others because of foreign banking secrecy laws.

Gershon said jurors would be instructed they could, but not be required, to infer the bank offered its services to terrorist organizations, and did so “knowingly and purposefully.”

The bank unsuccessfully appealed the sanction to the U.S. Court of Appeals for the Second Circuit and then asked the U.S. Supreme Court to undo the sanction, arguing in its writ of certiorari that “the jury will never be able fairly to consider the merits of Arab Bank’s defenses.”

The Supreme Court asked for the government’s take on the writ. U.S. Solicitor General Donald Verrilli Jr. counseled against taking up the interlocutory appeal, but not before faulting the sanction, noting the diplomatic implications and calling Arab Bank a “constructive partner” in the fight against terrorist financing.

The Union of Arab Banks and the Hashemite Kingdom of Jordan filed amicus briefs supporting Arab Bank’s position.

The Supreme Court declined to hear the matter, setting the stage for trial (NYLJ, July 1).

History of the Act

The Anti-Terrorism Act was enacted in 1990 in response to notorious terror attacks, including the murder of Leon Klinghoffer, an elderly, wheelchair-bound Jewish man thrown from a cruise ship hijacked by Palestinian Liberation Organization members; and the bombing of the Pan Am plane over Lockerbie, Scotland, that killed all 259 people onboard.

Family members seeking redress in both cases faced jurisdictional challenges. The Anti-Terrorism Act remedied those jurisdictional problems by permitting U.S. nationals harmed beyond borders to bring suit against terrorists.

A 2013 article in the Arizona State Law Journal on the history of the act, “So Banks Are Terrorists Now?: The Misuse of the Civil Suit Provision of the Anti-Terrorism Act,” argued that when enacted, lawmakers viewed the law as symbolic because few terrorists had assets in America that could be collected.

There were no reported decisions during the law’s first decade, according to the article’s author, Geoffrey Sant, special counsel to Dorsey & Whitney.

After the law was amended to include the criminalization of material support for terrorists, more than 100 reported decisions cited the law in its second decade, Sant said.

The first civil Anti-Terrorism Act case to get before a jury concerned the work of charities including the Quranic Literacy Institute and the Holy Land Foundation for Relief and Development in 2004. Holy Land leaders were later sentenced criminally. The jury’s $156 million civil judgment was ultimately upheld.

Apart from Linde, there are four cases in New York pending in district courts or at the U.S. Court of Appeals for the Second Circuit.

Another three have been disposed, with outcomes favorable to defendant banks.

In fact, Arab Bank was the defendant in one of the resolved cases, Gill v. Arab Bank, 11-CV-3706, where Eastern District Judge Jack Weinstein (See Profile) granted the bank’s summary judgment order in 2012 (NYLJ, Nov. 7, 2012).

The bank, in its statement about Linde, said Gill was based largely on the same evidentiary record, but without the sanction.

Though plaintiffs in the consolidated Linde litigation also pursued claims under the Alien Tort Statute, those claims were dismissed and are under appeal.

Stephen Landes, a partner at Edwards Wildman Palmer and trial counsel for the plaintiffs in the Holy Land case, said many cases did not get as far as his and Linde because of the difficulty in connecting financial services and terrorist attacks. Moreover, different judges might take different views on a financial institution’s potential liability.

“It’s a whole new area of the law,” Landes said, noting that while his case targeted Hamas charities, Linde made the significant extension to third-party banks.

At trial, the plaintiffs are also represented by Shawn Naunton, a partner at Zuckerman Spaeder; Mark S. Werbner of Sayles Werbner in Dallas, Michael Elsner, a member at Motley Rice in South Carolina and C. Tab Turner of North Little Rock, Arkansas.