U.S. Court of Appeals for the Second Circuit.
U.S. Court of Appeals for the Second Circuit (Credit: ALM)

Holding the Jordan-based Arab Bank liable for damages caused to the victims of terror attacks could deal a blow to legitimate banking operations in the Middle East and could negatively affect American interests in the region, an attorney for the bank argued Tuesday before a federal appeals court.

But the panel of the U.S. Court of Appeals for the Second Circuit that heard about 90 minutes of oral arguments in the long-running case Linde v. Arab Bank, 04-cv-2799, repeatedly questioned why they should rule on the arguments in the case considering that the parties have entered into a settlement agreement stipulating that the court’s ruling would end the litigation.

“We don’t sit here to provide opinions to fit into some settlement agreement that the parties have,” said Southern District Judge Lewis Kaplan, who sat on the panel by designation.

The bank is appealing a 2014 jury verdict from the Eastern District of New York in which the bank was found liable under the Anti-Terrorism Act for providing material support to the militant group Hamas. The plaintiffs in the case are about 300 Americans who were killed or injured in terrorist attacks, or their surviving relatives.

In 2015, Eastern District Judge Brian Cogan upheld liability for all but two of the 24 terrorist attacks.

Last year, Cogan entered a $100 million judgment for 16 plaintiffs in the case but put enforcement of the judgment on hold to allow the bank to appeal the liability verdict.

The parties in the case also reached a settlement in the case and, according to court papers submitted to the circuit, in which the parties agreed the appeals court’s ruling would be the final say in the case.

While Arab Bank has argued that finding it liable in the case would lead to its financial ruin, in its 2015 annual report to shareholders, the bank reported that it has “sufficient provisions to cover the expected financial obligations” under the agreement.

At oral arguments before the circuit, the panel consisting of Kaplan and Judges Reena Raggi and Susan Carney, turned most of its questions to Paul Clement, a partner at Kirkland & Ellis who appeared for Arab Bank.

The court questioned Clement—who was allotted 12 minutes to argue before the court but was kept for about 45 minutes—about Arab Bank’s argument that Cogan did not properly instruct the jury on the legal standard for finding the bank liable.

“This is a situation where what the defendant is accused of providing essentially routine banking services to individuals who eventually, it turned out, were affiliated with Hamas,” Clement said.

But after Peter Raven-Hansen, a George Washington University Law School professor who appeared on the plaintiffs side, noted that the parties agreed to the settlement in the case that the circuit’s decision in the case would effectively end it, Carney asked what effect the court’s decision would have.

Raven-Hansen said the court’s ruling could have a “substantial” difference in the amount collected by the plaintiffs and said that circuit courts have issued rulings on “high-low” settlements.

During rebuttal, Clement said the settlement could “collapse” if the circuit exercises jurisdiction in the case, but Raggi said “there isn’t going to be a new trial” in the case and asked for the parties to submit the settlement agreement and reports explaining how the court has jurisdiction.

“Obviously as this exchange shows, I think we were not aware of the settlement and the fact that it was going to obviate a new trial,” Raggi said.

While the circuit’s ruling in Linde may be the conclusion of that case, it’s not the end of all litigation concerning Arab Bank. In April, the U.S. Supreme Court granted certiorari to hear Jesner v. Arab Bank, 16-499, to consider whether or not corporations can be held liable for human rights violations under the alien tort statute.

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