A federal appeals court said a judge must hear arguments on whether the Palestine Liberation Organization and the Palestinian Authority can be forced to pay more than $116 million for a Hamas terrorist attack that killed a US citizen and his wife.

The 1st US Circuit Court of Appeals said US 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 Beit Shemesh. The case was filed in the federal court in Providence, where the lawyer for the Ungar estate is based, and accused the defendants of giving Hamas aid and support.

The late Palestinian leader Yasser Arafat had refused to recognize the US court's jurisdiction.

Lagueux entered the $116 million judgment in 2004. But by 2007, new Palestinian leadership had changed legal strategy and began urging Lagueux to set aside the judgment, citing the political ramifications of the penalty and potential hindrance on the Israeli-Palestinian peace process.

But 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 Boston-based appeals court in ruling last week 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.

"Whether or not the defendants' arguments ultimately carry the day, they are substantial," Senior Circuit Judge Bruce Selya wrote in the court's decision.

Richard Hibey, a lawyer for the defendants, declined to comment Monday.

The lawsuit seeks compensation for the fatal attack that took place in 1996. Ungar and his wife were driving home when another vehicle driven by three Hamas gunmen pulled alongside them and opened fire.

The couple were killed, but their 9-month-old son survived; another son wasn't in the car.

"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, a lawyer for the Ungar family.