Arab Bank judge sets low causation bar for Anti-Terrorism claims

April 8, 2015

(Reuters) – The Anti-Terrorism Act – which grafts civil remedies onto criminal statutes aimed at international attacks by militant groups – is confusing. As U.S. District Judge Brian Cogan of Brooklyn explained Wednesday in an opinion upholding a jury verdict of liability under the ATA against Jordan-based Arab Bank, the civil provisions “are derived from a complicated series of incorporations by reference” from the criminal laws – not, in other words, the easiest statutory texts for judges to interpret.

One of the most hotly contested disputes in ATA litigation is what plaintiffs must show to establish that their injuries occurred “by reason of” the defendant’s actions, which is the language the ATA uses. Must victims of terror attacks prove that the attacks would not have taken place but for the material support defendants provided to the groups that executed the operations? Or that the defendant’s material support led directly to the attacks? Or both?

Judge Cogan’s post-trial opinion said those questions actually have a simple answer: Defendants can be held liable under the ATA when plaintiffs show they acted with the knowledge that their conduct would result in injuries that would otherwise not have occurred. In this case, he said, the appropriate issue for the jury was not whether Hamas could have carried out attacks that injured or killed American citizens without Arab Bank’s services but whether Arab Bank knew it was providing material support to Hamas and could reasonably have foreseen that the attacks would be a consequence of its support. That’s what the jury was asked to decide, he said, rejecting the bank’s assertion that the jury charge was erroneous.

Arab Bank and its lawyers at DLA Piper have been arguing for years that plaintiffs couldn’t show the bank’s routine banking services caused their injuries. Before last summer’s trial and during negotiations over the charge to the jury, the bank contended that under controlling 2013 precedent from the 2nd U.S. Circuit Court of Appeals in Rothstein v. UBS and the U.S. Supreme Court’s 2014 decision in Burrage v. U.S.(which discussed the “by reason of” language that appears in the ATA), ATA plaintiffs must show both that Arab Bank’s conduct was a proximate cause of the attacks and that Hamas couldn’t have executed the bombings and shootings without Arab Bank’s services.

Judge Cogan agreed that the 2nd Circuit’s Rothstein decision requires ATA plaintiffs to show a proximate link between a defendant’s actions and subsequent terrorist attacks. But he said Rothstein does not demand “but for” causation. He also said the Supreme Court’s subsequent discussion of the “by reason of” phraseology, in a case involving RICO liability, doesn’t change the 2nd Circuit’s analysis.

According to Cogan, the ATA would be meaningless if plaintiffs were required to show attacks wouldn’t have occurred but for material support provided by defendants. “Money is fungible,” he wrote. “Even if an ATA plaintiff could show that a particular dollar was used in furtherance of a particular attack – a requirement rejected by this court – that plaintiff still could never prove that absent the defendant’s providing that dollar, a group like Hamas would not have made up the shortfall from elsewhere.”

No court, Cogan wrote, “has expressly held that the ATA’s civil remedy requires a showing of but-for causation.” And in its 2008 opinion in Boim v. Holy Land Foundation, the 7th Circuit explicitly concluded that but-for causation isn’t required in ATA cases.

I told you Monday that the ATA causation standard and the 2nd Circuit’s Rothstein decision are the focus of a joint motion to dismiss by five European banks facing accusations from former U.S. soldiers that they facilitated Iran-sponsored attacks on troops in Iraq. I asked Gary Osen, lead plaintiffs’ lawyer in the soldiers’ case and one of the leads in the Arab Bank litigation, whether Cogan’s causation analysis in the Arab Bank decision would help the soldiers argue against dismissal. “It won’t hurt,” Osen said in an email, calling Cogan’s opinion “arguably the most definitive decision ever written on the ATA.”

But I predict Arab Bank and future ATA defendants will argue that Cogan’s interpretation contains a fundamental flaw. In Cogan’s reading of the Rothstein decision, the 2nd Circuit required only proximate causation and not also “but for” causation, which the appeals court mentioned only once, citing a 1992 Supreme Court case called Holmes v. SIPC in its discussion of the ATA’s “by reason of” language. But the Holmes decision, like the Supreme Court’s later Burrage decision, held that the RICO statute’s “by reason of” phraseology requires a showing of both proximate and but for causation.

Arab Bank tried and failed to persuade Cogan that the but for requirement was implicit in the 2nd Circuit’s Rothstein decision. The bank didn’t immediately respond to a Reuters request for comment on the judge’s decision, but I’d say there’s a very good chance the 2nd Circuit is going to have another opportunity to clarify its ATA causation standard before this case is over.

(This post has been corrected. An earlier version incorrectly reported that White & Case represents Arab Bank.)

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