PROVIDENCE, R.I. – A federal appeals court has ordered a judge to hear arguments from the Palestine Liberation Organization and its governmental entity on why it should not have to pay more than $116 million for a Hamas terror attack that killed a U.S. citizen and his wife.

The 1st U.S. Circuit Court of Appeals said U.S. District Judge Ronald Lagueux in Rhode Island should have taken more factors into account before deciding last May to uphold the default judgment against the PLO and the Palestinian Authority. The court sent the case back to Lagueux for more arguments.

The ruling stems from the 1996 drive-by shooting deaths of Yaron Ungar and his Israeli wife, Efrat, near the West Bank. The case was filed in the federal court in Providence, where the attorney for the Ungar estate is based, and accused the defendants of giving Hamas aid and support.

Palestinian leader Yasser Arafat had refused to recognize the U.S. court’s jurisdiction. But by 2007, new Palestinian leadership had changed legal strategy and began urging Lagueux to set aside the $116 million judgment, citing the political ramifications of the penalty and potential hindrance on the Israeli-Palestinian peace process.

Lagueux refused last May to overturn the judgment, blaming the loss on the Palestinian leadership’s “intentional, deliberate and binding decisions” not to participate in the legal process.

The appeals court, in ruling March 25 that the case should be returned to the judge for more arguments, said Lagueux should have weighed the “totality of the circumstances” in deciding whether the judgment should be vacated.

The lawsuit seeks compensation for a fatal attack on June 9, 1996, near the Israeli village of Beit Shemesh.

Ungar and his wife were driving home when another vehicle with three Hamas gunmen pulled alongside them and opened fire. The couple were killed, leaving behind two sons.

“The Ungar orphans and their family are disappointed but continue on with their decade-long struggle for justice against their parents’ murder,” said David Strachman, an attorney for the Ungar family.