Case Summary

In a case that could have serious implications for nonprofit organizations (NPOs) that work to relieve suffering and reduce violence in conflict zones where terrorist groups operate, a group of about 200 U.S. nationals that are victims of attacks by Hamas has asked the Supreme Court to review dismissal of their civil suit against a UK bank that provided financial services to a UK charity that the U.S. listed as a terrorist supporter in 2003 but that has been investigated and cleared by the Charity Commission of England and Wales. The legal issue is what level of knowledge a defendant must have regarding terrorist attacks and associations in order to be held liable for civil damages under the Anti-Terrorism Act (ATA), as amended in 2016 by the Justice Against Sponsors of Terrorism Act (JASTA).

The suit was filed in 2005 under ATA against National Westminster Bank (NatWest), claiming that the UK-based bank is liable for injuries plaintiffs suffered in terrorist attacks by Hamas, a U.S.-listed Foreign Terrorist Organization (FTO). The basis for the claim is that Nat West provided financial services to a UK charity, the Palestinian Relief and Development Fund (Interpal). The case was brought in the U.S. District Court for the Eastern District of New York, which, after several rounds of litigation, granted summary judgment dismissing the case on March 31, 2019, a decision affirmed by the U.S. Court of Appeals for the Second Circuit on April 7, 2021. The plaintiffs filed a petition for certiorari to the Supreme Court, which the Supreme Court rejected on June 27, 2022.

Plaintiffs’ Legal Argument

The plaintiffs claim that by providing banking services Interpal, NatWest knowingly provided funds to Hamas because the 13 Palestinian charities Interpal sent funding to were allegedly controlled by Hamas through shared personnel and overlapping leadership. The plaintiffs also argued that because NatWest used intermediary banks in the U.S. to process these cross-border transfers, it could be subjected to the jurisdiction of U.S. federal courts.

The central legal question is whether NatWest had the requisite knowledge that the 13 Palestinian charities were actually controlled by Hamas. The Second Circuit said that threshold is met when a defendant has general awareness that his role is part of an overall illegal or tortious activity at the time the assistance is provided. But the plaintiffs argued that this is incorrect, and that the standard used in decisions in the Seventh Circuit should be applied. That standard imposes civil liability when the entity providing either knowing an organization engages in terrorist acts or is deliberately indifferent to whether it does or not. Plaintiffs claim the Second Circuit test creates a “charitable purpose” exception that would permit funding to FTOs for non-violent activities.

NatWest Counter Arguments and the Second Circuit Decision

NatWest countered the plaintiffs’ arguments and factual allegations by pointing out that:

  1. Interpal transferred funds to charities that were legitimate in Palestine, were not on terrorist lists in the U.S. or UK, did not publicize connections to Hamas;
  2. There was no evidence any of the funds Interpal transferred to the 13 charities in Palestine were used for terrorist acts;
  3. NatWest was not deliberately indifferent to the use of the funds and had taken extra steps by reporting suspicious transfers to British law enforcement. Those inquiries found no evidence of funding going to Hamas.
Anti-Terrorism Act Basics

The Anti-Terrorism Act (ATA) (18 U.S.C. §2333), part of the “material support” statutes, allows U.S. persons to sue for any injury caused by an act of international terrorism committed, planned or authorized by an organization that was designated as a Foreign Terrorist Organization (FTO) under Section 219 of the Immigration and National Act. Any person who knowingly provides substantial assistance to the terrorists, or who conspires with the person who committed the terrorist act, can be liable under the ATA.

To establish liability under the ATA, a plaintiff must prove:
—An act of international terrorist committed by an FTO
—An injury to a U.S. person, or their estate, survivors or heirs
—Conduct that “proximately” caused the injury, or secondary liability if the defendant aided and abetted the acts of terrorism by providing substantial assistance
—Defendant must have general awareness of its role as part of the overall illegal activity at the time it provides assistance.

ATA cases can have implications for nonprofit organizations (NPOs) working in proximity to terrorist groups. ATA raise the threat civil liability for multiple degrees of separation from a FTO or for use of aid that is stolen. If broad theories of liability currently being argued in federal courts are accepted, the ability of NPOs’ to operate life-saving programs would be severely limited.

The Second Circuit agreed with NatWest, finding that the extensive record of due diligence efforts by the bank, documented by ten years of pre-trial discovery, showed that plaintiffs did not meet the knowledge element of liability as set out in JASTA.

The court also found that Interpal did not say the transfers were for terrorism and that plaintiffs had no evidence that the 13 charities supported terrorist acts or recruitment.

Issues Before the Supreme Court

The plaintiffs’ petition for review framed the question before the court as “Whether a person who knowingly transfers substantial funds to a designated FTO aids and abets that organization’s terrorist acts for purposes of civil liability under JASTA, §2333(d)(2).” It cited both JASTA and the Supreme Court’s ruling on the criminal prohibition on material support of terrorism (Holder v Humanitarian Law Project) as support for its argument that civil liability should be triggered by the same threshold as the criminal statutes.

NatWest’s brief, filed in Nov. 8, 2021, makes two basic arguments: 1) that JASTA establishes a different threshold for liability than the criminal statute, requiring support to be both knowing and substantial, 2) there is no split between federal Circuit Courts of Appeals rulings on JASTA, since the Seventh Circuit case was decided before JASTA was enacted, and 3) that:

“Notwithstanding petitioner’s efforts to engineer a purely legal question from the decision below, their real quarrel is with the lower courts’ fact-bound application of the multi-factor test for aiding and abetting liability set out in Halberstam v Welch, 705 F.2d472(D.C. Cir. 1983, which Congress explicitly instructed provides the governing legal standard for JASTA claims in the Findings and Purposes section of the statute.” (p.2)

The plaintiffs’ reply, filed Nov. 22, 2021, argued that the dispute in the case is over legal, not factual issues, and that the Second and Seventh Circuits are split on the issue, which is ripe for Supreme Court review.

Briefs from amici supporting the plaintiffs can be accessed on the Supreme Court’s docket page for the case.

On Dec. 13, 2021, the court invited the Solicitor General to “to file a brief in this case expressing the views of the United States.” As of May 3, 2022, the brief has not yet been posted.

On June 27, 2022, the Supreme Court denied the plaintiffs’ petition for certiorari without explanation. As a result, the Second Circuit’s ruling that the banks in question cannot be held liable for funds transfers to organizations with alleged ties to Hamas remains in place.