Arab Bank’s clever idea fails to avert damages trial in terror case

December 11, 2014

Arab Bank really, really wants the 2nd U.S. Circuit Court of Appeals to hear its arguments that last summer’s jury verdict holding the bank liable for Hamas attacks was hopelessly tainted. But after a ruling Wednesday by U.S. District Judge Brian Cogan of Brooklyn, it’s pretty clear that the bank won’t get to the 2nd Circuit before a Brooklyn jury hears a bellwether damages trial that could expose Arab Bank to a judgment of tens or even hundreds of millions of dollars, if past judgments in Anti-Terrorism Act cases are a reliable guide.

Cogan set a May 18 trial date for more than 15 victims of three Hamas attacks to present their damages claims to a jury. The three attacks he selected for this bellwether trial span the gamut of injuries, from death and grievous injury to the pain and suffering of survivors, and include clients of each of the plaintiffs’ lawyers in the case. (Arab Bank has disputed that the perpetrators of these attacks received any of its banking services.) Three plaintiffs’ lawyers – Gary Osen, Mark Werbner of Sayles Werbner and Michael Elsner of Motley Rice – told me Thursday that they’re eager to show jurors the devastating impact the Hamas attacks had on their clients.

That is exactly what Arab Bank was hoping to avoid with a shrewd last-ditch proposal that would have given the bank a shot at getting to the 2nd Circuit without enduring a punishing damages trial.

Last week, the bank’s lawyers at DLA Piper submitted a letter to Judge Cogan, proposing that instead of holding a damages trial, he adopt a judgment already entered in a different case for the survivors of one of the victims of a Hamas attack also at issue in the Arab Bank litigation. In 2007, U.S. District Judge Royce Lamberth of Washington, D.C., awarded the parents and sister of Marla Bennett – a student killed in the 2002 bombing of the Hebrew University in Jerusalem – $12.9 million in their suit against the Islamic Republic of Iran. In the bank’s letter last week, DLA Piper argued that even though Arab Bank wasn’t a defendant in the Bennetts’ case against Iran, the Bennett family is collaterally estopped from relitigating damages. According to Arab Bank, the Bennetts are entitled to $12.9 million for Marla Bennett’s death, regardless of the defendant.

The bank suggested that Judge Cogan enter a final judgment of $12.9 million for the Bennetts’ claims against Arab Bank. That procedure, the bank said, would permit it to appeal the underlying jury verdict of liability to the 2nd Circuit under the final judgment rule, instead of by a discretionary mid-case appeal. “This approach will expedite final resolution, benefit all parties and conserve court resources,” Arab Bank said.

What the bank didn’t say was that the $12.9 million awarded to the Bennett family in the Iran case is much less than judgments plaintiffs have obtained in Anti-Terrorism Act suits against private entities. The Bennetts’ damages against Iran were based on the Foreign Sovereign Immunities Act, not the ATA, which, unlike FSIA, permits treble damages. Three different ATA suits against the Palestinian Authority, the PLO or Palestinian fundraisers have each generated judgments of more than $100 million, twice for survivors of a single victim and once for survivors of a husband and wife killed in the same attack.

So, in rejecting the bank’s proposed model of adopting a judgment from the Bennett case against Iran, Judge Cogan not only cut off Arab Bank’s chance to take a final judgment to the 2nd Circuit without a damages trial but also refused to establish bellwether damages metrics that seem out of line with previous ATA judgments.

The bank still has motions for a new liability trial and for an interlocutory appeal pending before Judge Cogan. Those probably won’t stop the damages trial. As plaintiffs’ lawyer Osen pointed out, it wouldn’t have made much sense for Cogan to have set a schedule for discovery and jury selection in the damages trial if he intended to grant Arab Bank’s motion to set aside the liability verdict. Cogan has also already refused to stay the damages case while he considers the interlocutory appeal. So according to Osen, even if the trial judge grants leave for Arab Bank to bring a mid-case appeal, it’s unlikely that the 2nd Circuit would have time to hear and decide it before the damages trial in May.

Assuming that the liability verdict doesn’t reach the appeals court before the damages trial ends, there’s going to be a big fight after Cogan enters judgment for the bellwether plaintiffs. Arab Bank will surely contend that once judgment is final for that handful of plaintiffs, it can appeal the underlying liability verdict for every Hamas attack at issue in the litigation. The plaintiffs, according to Osen, will counter that Arab Bank’s arguments about mistakes in the liability trial don’t all apply equally to each attack, so the bank shouldn’t be permitted to appeal until all of the plaintiffs’ cases have reached a final judgment.

Plaintiffs’ lawyers have ideas for what should happen after the bellwether damages verdicts come in, such as sped-up damages proceedings before a special master rather than additional full-blown trials. They told me they don’t want this case to drag on for another 10 years. Cogan has also said he wants to see the litigation resolved.

No one has much expectation that will happen before Arab Bank gets its shot at the 2nd Circuit. By then, we should know a lot more about how big its exposure is.

I emailed Arab Bank representatives for comment but they did not immediately provide a statement.

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