The Disastrous Consequences of a Lawsuit by a Terror Victim's Parents

The law, lawyers, and the court.
Feb. 13 2014 12:49 PM

Uncivil Damages 

American victims of Palestinian terrorism are suing a Chinese bank. Israel is trying to stop them.

Bank of China
In 2005, Israeli intelligence allegedly informed Bank of China officials that terrorist operatives were funneling money through the bank’s accounts to Gaza and the West Bank.

Photo by Mark Ralston/AFP/Getty Images

A bizarre new episode in the legal fight against terror is playing out right now in a federal courthouse in New York City. An American family, Yekutiel and Sheryl Wultz of Miami, lost their 16-year-old son Daniel to a Palestinian Islamic Jihad terrorist attack in Tel Aviv in 2006. In 2008, they filed a $300 million civil lawsuit against Iran, Syria, and the terror group’s state sponsors.* But in an unprecedented move, the Wultzes also named the Bank of China in their suit. They accuse the state-backed bank of serving as a knowing conduit for the funds used to finance the attack. But the case has hit a snag and the Wultz family suddenly finds itself fighting this legal battle on two fronts: Against the Chinese government and its unlikely ally, the state of Israel.

Even the U.S. government has now positioned itself against them. Why did a victim’s quest for simple justice turn into an ugly legal gunfight? Because when it comes to battling global terror, civil suits by American citizens often do more harm than good.

Wultz v. Bank of China hinges on simple facts. In 2005, a year before the attack, Israeli intelligence allegedly informed Bank of China officials that terrorist operatives were funneling money through the bank’s accounts to Gaza and the West Bank. The bank took no action. Under federal and state tort law here in the United States, if the Wultzes can prove the Chinese had foreknowledge, courtesy of Israel, they stand a decent chance of convincing a New York jury to hold the bank liable for civil damages.

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Following the attack, the Israeli government reportedly encouraged the Wultz family to seek justice in the American legal system.* According to court proceedings and press statements by the family, Israel pledged to provide a former intelligence official from the 2005 meeting with the bank, to testify on their behalf. The family would gain a crucial piece of evidence, while the Israeli government would get a low-cost, nonpolitical mechanism to pressure China to change its policies. The mutual interests of the Wultzes, who are U.S. citizens (though Yekutiel also holds an Israeli passport), and the state of Israel seemed self-evident. But shared interests between states and foreign citizens can break down. Especially when you are dealing with a small state like Israel that must balance competing legal and diplomatic priorities.

The case began to run off the rails last spring when an irate Beijing threatened to cancel a much-desired state visit from Prime Minister Benjamin Netanyahu because of the lawsuit. In response, the Israeli government officially declined to allow the plaintiff’s star witness to testify in U.S. court. Underscoring the sensitivity of the matter, former Israeli National Security Adviser Yaacov Amidror submitted a notarized affidavit to the federal court in Washington, D.C., in late October to testify to the national security concerns at play should this witness testify.* The Israeli government promptly filed suit to quash the subpoena.

The Wultz family is, needless to say, furious. So are pro-Israel American lawmakers, such as Rep. Ileana Ros-Lehtinen, R-Fla., who has publicly criticized Israel’s actions.* The case puts Rep. Eric Cantor, R-Va., who is a first cousin of the Wultz family, and initially acted as a broker between the family and the Israeli prime minister's office, in a delicate position.

And just as the Wultzes were being abandoned by Israeli officials, they hit a wall with the U.S. government. Like their Israeli counterparts, the U.S. Treasury Department had also reportedly negotiated with the Bank of China to stop its facilitating illicit money transfers. Hence, in theory, American foreign policy interests naturally aligned with the logic of the Wultz lawsuit. Staunch the flow of funds through the global banking system and you hit terrorists in the pocketbook. Name and shame the financial enablers in an open legal action, and you claim a just recompense. But here, again, individual civil lawsuits can come into conflict with larger-scale government foreign policy.

So the Treasury Department has thus far resisted providing the Wultz family with all the information they need about the finances of Palestinian Islamic Jihad. American authorities tell the court that disclosing too much confidential intelligence will compromise clandestine methods and scare away the many countries and banks that voluntarily comply with U.S.-led efforts to keep terrorists out of the banking arena.

It is too soon to tell what will happen with Wultz v. Bank of China. The pre-trial proceedings have dragged on for more than five years. Neither side seems ready to throw in the towel. The family may yet succeed in forcing Israel back into the courtroom. Other pending federal lawsuits could alter the law involved. But the victims might only, at best, achieve a pyrrhic victory: Should they win, they would still have to collect a judgment. In one of the final paradoxes of this litigation, the U.S. government has for years blocked financial judgments awarded to American plaintiffs against Iran and other foreign governments. Why? Such judgments are seen as conflicting with American foreign policy interests. So even if they succeed, the Wultzes will remain enmeshed in an ugly fight with the very governments who are supposed to be fighting alongside them to defeat terror.

American victims of terror deserve justice. But they will not achieve it through ad hoc partnerships with foreign governments. Nor can countries like Israel outsource their larger political battles to private U.S. citizens. The U.S. Congress, in turn, should consider drafting legislation to limit the jurisdiction of U.S. courts in civil suits concerning terrorist acts committed abroad. This will avoid placing judges directly into the most fraught global political issues of the moment. When it comes to transnational terrorism, U.S. domestic courts are the wrong tool for political action.

No one is denying the high human costs of terrorism. The legal challenges of meting out justice to terrorist groups with shadowy ties to states and banks worldwide are immense. So we instinctively cheer every new attempt to expand the legal arsenal to address terrorism in friendly courts. But a lawsuit of this kind brings huge risks for both vulnerable victims and the U.S. judiciary. It thrusts private U.S. citizens and U.S. judges into the awkward roles of international legal diplomats for which they are ill equipped. And when things go wrong, as they did in the Wultz case, it is usually because even our friendliest allies may prove fickle partners in civil lawsuits with international implications. All the more reason to hold the executive, and not the courts, responsible for combating terrorism.

Correction, Feb. 19, 2014: This article originally misstated the damages sought and plaintiffs named in a civil lawsuit brought by the Wultz family. They sought $300 million, not $10 million, from Iran, Syria, the Palestinian Islamic Jihad's state sponsors, and the Bank of China. This article also initially attributed Israeli government actions to the Netanyahu administration; Netanyahu's predecessor was in charge at the time. In addition, the article stated that Israeli National Security Adviser Yaacov Amidror appeared in federal court in Washington, D.C. He submitted a notarized affidavit to the court. Finally, Rep. Ileana Ros-Lehtinen's last name was originally misspelled.

James Loeffler is an associate professor of history at the University of Virginia and a 2013–14 visiting scholar at Georgetown University Law School.

Moria Paz is a Law and International Security Fellow at the Stanford Center for International Security and Cooperation.

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