An appellate court has upheld a $156 million judgment against two organizations found to have provided financial support to Hamas and sent the claim against a third back to district court for a new trial. The Seventh Circuit Court of Appeals issued a ruling Wednesday that eliminated the distinction between supporting the violent and social wings of a terrorist group.

"If you give money to an organization that you know to be engaged in terrorism, the fact that you earmark it for the organization's nonterrorist activities does not get you off the liability hook," Judge Richard Posner wrote for the majority.

The ruling favors Joyce and Stanley Boim, whose son David was shot and killed by Hamas terrorists in 1996. It upholds the damages against the Quranic Literacy Institute, a Chicago-area non profit that was accused of laundering money for Hamas and the American Muslim Society, which the judges found "did know and in giving money to the (Holy Land) Foundation was deliberately funneling money to Hamas."

The court described the American Muslim Society as "an alter ego" of the Islamic Association for Palestine (IAP). The IAP served as a Hamas propaganda arm in the U.S. Three IAP officials – Nihad Awad, Omar Ahmad and Rafeeq Jaber – founded the Council on American-Islamic Relations (CAIR) in 1994.

The court overturned damages against Hamas operative Muhammed Salah, who was in an Israeli prison when Boim was killed and, therefore, "did not render material support to Hamas" when Boim was killed. It also sent the claim against the Holy Land Foundation for Relief and Development (HLF) back to the district court for a new trial. HLF and five former officials were convicted in Dallas last week for providing material support for Hamas.

Attorney Stephen Landes hailed the decision as an important precedent for families of people killed by terrorists because it helps "victims of terror make the people paying the terrorists pay the victims."

Last December, the Seventh Circuit reversed the damage award, finding the Boims needed to show an "adequate causal link" between the defendants' actions and Boim's death. The Boims sought a rehearing before the entire Seventh Circuit, which took place in September. Wednesday's ruling is the result of that en banc proceeding.

CAIR-Chicago Executive Director Ahmed Rehab issued a statement hailing that decision as a victory in "our nation's great tradition of respect for the rule of law." Rehab also criticized efforts to punish people whom he said merely sought to provide aid to Palestinians:

"The defendants in this case have endured a seven-year legal battle in which their reputations have been smeared and their assets confiscated. While the destruction of American Muslim groups who have committed no wrong-doing is irreparable, today's decision, in which the rules of law were finally applied, helps restore the American people's trust in the system."

The majority of the Seventh Circuit disagreed.

"Anyone who knowingly contributes to the nonviolent wing of an organization that he knows to engage in terrorism is knowingly contributing to the organization's terrorist activities. And that is the only knowledge that can reasonably be required as a premise for liability. To require proof that the donor intended that his contribution be used for terrorism—to make a benign intent a defense—would as a practical matter eliminate donor liability except in cases in which the donor was foolish enough to admit his true intent. It would also create a First Amendment Catch-22, as the only basis for inferring intent would in the usual case be a defendant's public declarations of support for the use of violence to achieve political ends."

In a dissenting opinion, Judge Ilana Diamond Rovner criticized the majority's view that plaintiffs do not have to prove money given by a defendant to a terrorist group or its affiliate makes them liable for any subsequent action by the group. She called the majority opinion "remarkable" for eliminating the need for proof the money "was given with the intent to further Hamas's terrorist agenda."

The Quranic Institute and the American Muslim Society can try to appeal to the U.S. Supreme Court. The District Court in Chicago is expected to inform attorneys for the Boims and HLF when a new proceeding would commence, Landes said.