Why did Arab Bank finally blink after over a decade?

Breaking down the Jordanian bank’s 11th-hour settlement with the plaintiffs of a historic terrorist-financing verdict.

August 20, 2015 22:30
Arab bank logo

Peace flags are reflected on the Arab Bank window during anti-wardemonstration in Rome.. (photo credit: REUTERS)

Jordan’s Arab Bank finally blinked.

It took 14 years and zillions of motions, depositions, a highly public five-week trial and one of the most scorched-earth legal battles observers have ever seen, but the saga is over, with the bank settling with hundreds of plaintiffs – and that without the expected damages trial and appeal to the US Supreme Court.

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The settlement comes nearly a year after a New York jury found the $46 billion global powerhouse bank liable for indirect financing of Hamas terrorist attacks, and four months after the bank lost a shot at a retrial and literally only days before a damages trial was expected to start.

The judgment had been estimated to be worth as much as billions of dollars, with the settlement expected to be a reduced but still large sum.

The highly public trial had revisited some of Hamas’s worst terrorist attacks, including the August 2001 Sbarro suicide bombing in Jerusalem that killed or wounded 130, and a range of 24 terrorist attacks during the second intifada.

Two-hundred-and-ninety-seven plaintiffs – who were injured or are family members of those murdered in the 24 terrorist attacks from 1998 to 2004, which were financed via Saudi Arabia and Hezbollah’s al-Shahid Foundation – sued the bank in 2004 for allowing itself to be used as a conduit for the terrorism funds.

The 10-year history of intense legal battles included trying to get the bank’s “secret” client documents located in Jordan, Lebanon and the Palestinian areas.

But Arab Bank said it would fight to the end in a damages trial that was set to start this week and then keep filing appeals if necessary.

To clarify, if plaintiffs win on liability, but their damages evidence is weak, they end up with a mere symbolic win and no money.

This was what the bank predicted would occur, and it had half-a-dozen appeals and retrial motions that it pledged to file, each of which could save it from paying out anything.

Given that context, to understand why the bank finally last weekend agreed to settle, one needs to look at what has happened since last year.

In fairness to Arab Bank, the settlement must include the plaintiffs blinking somewhat also in the level of damages they will seek, as the bank would not likely cut a deal with no financial benefit.

In February, another group of plaintiffs, represented by Shurat Hadin, in a parallel but different case, won an approximate $650 million judgment against the Palestinian Authority.

While there are huge distinctions between the cases, the massive size of that unprecedented judgment award could have given the bank pause, now that any jury deciding damages and massively fining the bank would be following a precedent rather than creating one.

In April, a US federal court in New York rejected the bank’s bid for a retrial of the case, ruling that the jury’s verdict last September 22 “was based on volumes of damning circumstantial evidence that defendant knew its customers were terrorists.”

In opposing the retrial motion, the plaintiffs had argued that contrary to the bank’s complaints about the trial, the jury’s verdict was “the inexorable result of overwhelming evidence” of the bank’s “complicity in dozens of terrorist attacks that maimed and murdered more than 1,000 people.”

They added that Arab Bank “stonewalled nearly all discovery [of evidence]” in the case for more than a decade while simultaneously and falsely casting itself as “the victim of a show trial.”

In most cases, the court accepted those and other arguments of the plaintiffs – but the bank was ready to fight on.

Some of the bank’s arguments could have brought in not only the US Supreme Court but also US executive branch intervention on a later appeal.

These arguments include that the trial court applied a plaintiff-friendly causation standard (which the bank says the trial court uncritically adopted from the pretrial court) for how carefully the plaintiffs needed to connect the bank to each of the attacks.

Further, the bank would have argued that the court disregarded certain issues of Jordanian sovereignty.

Arab Bank’s arguments here were viewed as serious arguments which could still potentially upend the judgment against it, especially if the US State Department got worried that the judgment could tank the bank and destabilize Jordan – a strong anti-terrorist ally in recent years.

But after these events the bank was still charging full speed ahead toward this week’s expected damages trial, setting conference calls with reporters for early this week to outline its themes for the expected damages trial.

Then came the nail in the coffin – the August 11 final pretrial hearing.

In advance of the hearing, Arab Bank filed around 50 extensive motions to block the plaintiffs from introducing all kinds of photographic evidence and heart-wringing witness testimony about the damage, harm and reconstruction of the attacks to prove their massive damages claim.

Without formally rejecting the motions, the court, except in regard to certain kinds of expert-related evidence, said it would not rule on the motions until it heard the testimony and saw the graphic evidence.

That was a home run for the plaintiffs, as it means the judge will likely let most of the evidence in and reject only select items.

Some of the evidence to be presented was to include items such as the grisly wreckage of a car from one of the attacks which would sit next to the courtroom for all to pass by.

But more important is this back-and-forth between the bank’s lawyer, Shand Stephens, and Judge Brian Cogan.

Stephens told Cogan, “The only issue in a damages-only trial is the plaintiffs’ injuries, not what happened before, not the misconduct of the defendant, not actually how it transpired... then recreating [by experts who were not present at the attacks] is not relevant.... And that’s what actually is going on here.... It’s a stage. They’re going to turn the courtroom into a stage to recreate terror attacks, and that is not what’s at issue in this case.”

Cogan responded, “I kind of think that it is.... The jury has to understand why the bank is here; that the bank was found liable of willfully providing financing to a terrorist organization.... The rest of it is what happened during the accident itself, and that is the only way for the plaintiffs to prove their damage claim. I’m not going to treat the bank like they are a merely negligent party.... We’re here because the bank was found to have knowingly supplied financing to a terrorist organization.”

Stephens kept pushing Cogan on the issue to try to frame the judgment as mere liability and not willingness, until Cogan finally virtually identified the bank with Hamas and told Stephens that he disagreed with him and to move on.

Since the judgment, the bank had complained that it was on trial, not Hamas.

The August 11 hearing made it clear to the bank that in the damages trial, it would be far more associated with Hamas than it even had been at the first trial on liability.

The September 2014 trial was bad press for the bank, but was somewhat sanitized and saved the bank a certain level of embarrassment, as the court did not want to prejudice the jury emotionally on the issue of liability.

But with liability decided, and only damages at issue, the embarrassment score was going to spike.

At this point, even as the plaintiffs have likely compromised somewhat, the bank decided that there are worse things than quietly paying out a massive damages claim and ending a 14-year headache.

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