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February 15, 2010 – In a highly unusual step likely to come as a significant relief to U.S. officials, the Palestinian Authority has quietly paid an undisclosed amount to settle a lawsuit by the widow of an American killed in Israel in 2002.

The move resolving the longstanding court case appears to signal a more pragmatic approach by the Palestinians to such litigation. For years these court battles — between Americans and the Palestinian leadership — have roiled the U.S. government by pitting sympathetic U.S. terror victims against one of the negotiating partners in the Middle East peace process, complicating efforts by the Obama and Bush administrations to keep the Palestinians at the table.

A federal judge recently blasted the State Department for giving little guidance to the courts about how to tackle terror suits against the Palestinians. In a blunt December opinion, Judge Gladys Kessler called the executive branch’s vague official statements “mealy mouthed” and “particularly unhelpful.”

The settlement came in a case brought in New York by Leslye Knox, the widow of Aharon Ellis, a professional singer who was among six people killed in 2002 when a gunman opened fire on a Bat Mitzvah party where he was performing in the Israeli city of Hadera. The Al Aqsa Brigades, a militant group affiliated with the Palestine Liberation Organization, claimed responsibility for the attack, which was allegedly carried out by a Palestinian Authority security officer.

The parties took a series of steps to keep the amount of the settlement secret, though court papers refer to “installment payments” to be made by the Palestinian Authority and the PLO. A judge handling the case imposed a $173 million default judgment in the suit in 2006 but conditionally vacated it in 2008. The two sides signed a settlement in October 2009 and filed legal papers last month asking that the suit be dropped because the payments required by the deal had been carried out.

“I think it’s very positive,” said Jim Kriendler, a lawyer who worked out one of the only other publicly known settlements of its kind: Libya’s agreement in 2008 to pay $1.5 billion to resolve suits over the bombing of Pan Am Flight 103 two decades earlier.

Kriendler said the settlements underscored the value of U.S. laws allowing lawsuits against perpetrators of terrorism overseas. “It’s not meant to be just a symbol or a hollow gesture, but a way of obtaining relief,” he said.

“The goal for bringing these lawsuits is to put terror sponsors out of business by making them pay. Hard cash is very important because hard cash is hard cash,” said Stephen Flatow, whose 20-year-old daughter Alisa was killed in a terrorist attack in Gaza in 1995. She helped inspire the so-called Flatow Amendment, which passed in 1996 and helped clarify the right to sue over acts of foreign terrorism.

However, Stephen Flatow complained that the secrecy surrounding the recent settlement undermines the law’s impact.