Editor’s note: This article has been modified since its original publication.

The 1st U.S. Circuit Court of Appeals has criticized a district court’s denial of a motion to vacate a $116 million default judgment against the Palestinian Authority and the Palestine Liberation Organization and remanded the case back to the court for reconsideration. Charges in the case relate to the murder of a U.S. citizen by Palestinian terrorists 14 years ago.

The 1st Circuit’s March 25 decision in Ungar v. The Palestine Liberation Organization ruled that Judge Ronald Lagueux of the District of Rhode Island abused his discretion when he denied the defendants’ motion to void the default judgment. The lower court ruling was based on the defendants’ willful default on the case.

Palestine’s government, the Palestinian Authority, and the PLO argued to the 1st Circuit that both organizations’ current leadership regimes are trying to improve relations with the United States. They also said current regimes are willing to actively defend themselves in U.S. Anti-Terrorism Act lawsuits. The ATA allows private suits against parties responsible for killing or injuring U.S. nationals in terrorist incidents.

In the decision, Judge Bruce Selya wrote for a unanimous panel that the 1st Circuit has “never laid down an explicit, broad-scale categorical rule concerning willful defaults” when defendants file a Rule 60(b)(6) motion. That rule “authorizes a district court to grant relief from judgment for ‘any other reason that justifies relief.’ “

“Whether or not the defendants’ arguments ultimately carry the day, they are substantial,” Selya wrote. “Indeed, several district courts, presented with similar circumstances and similar arguments in other ATA cases against these same defendants, have engaged in holistic analyses and granted relief from defaults or default judgments.”

Selya concluded that the district court “did not analyze the totality of the circumstances but, rather, focused on what it improvidently believed to be a categorical bar to relief.” He said four factors can help courts weighing whether to grant a party relief from judgment. These include: “the timing of the request for relief, the extent of any prejudice to the opposing party, the existence or non-existence of meritorious claims of defense, and the presence or absence of exceptional circumstances.”

The 10-year-old Ungar case involves the 1996 murder of U.S. citizen Yaron Ungar and his pregnant Israeli wife. The couple was killed in Israel by a Hamas attack. Ungar’s estate and the couple’s parents, children and siblings filed suit under the ATA.

In the appeal, the Palestinian Authority and the PLO claimed the district court ignored the good-faith efforts of the current leadership of the Palestinian Authority and the PLO to participate in litigation; the defendants’ defenses on the merits; and the foreign policy impact of a $116 million default judgment against the defendants.

The defendants also emphasized in their brief that Hamas extremists killed the Ungars, not individuals “acting with the support or under the direction of the [Palestinian Authority] or PLO.”

The PLO’s attorney, Laura Ferguson, a partner at Washington-based Miller & Chevalier, declined to comment while the case is still pending.

The Ungers’ attorney, David Strachman of Providence, R.I.-based McIntyre, Tate & Lynch, did not return a call for comment.

The 1st Circuit judges recognized that they’re seeing a “terrorist organization taking baby steps toward recognizing the rule of law and the real jurisdiction of a tribunal court,” said Harvey Silverglate, of counsel to Boston’s Zalkind Rodriguez Lunt & Duncan. Silverglate wasn’t involved in the Ungar case.

“They thought that Judge Lagueux’s rigid rejection of even listening to the PLO on the merits of the case was inappropriate, given that technically the case law would allow him to reopen the case,” Silverglate said. “It’s not a good idea to not allow this kind of organization to take this baby step toward recognizing a rule of law. It’s perfectly appropriate for the 1st Circuit to look at the case like that.”