The State Department declined Friday to enter a "statement of interest" to a federal court in New York that could have demonstrated U.S. favor toward the Palestinian Authority over U.S. victims of terror attacks.

The PA and the Palestinian Liberation Organization had sought the statement as part of a case before the U.S. District Court of New York, which had awarded a $174 million judgment to the family of Aharon Ellis, an American citizen killed in Israel in a 2002 attack carried out by Hamas. Hamas is a member of the PA.

That award, affirmed by the New York federal appeals court in 2005 and then upheld by the U.S. Supreme Court when it declined to rehear it last year, is the latest victory for families seeking restitution under the 1990 Antiterrorism Act. That law, enacted during the George H.W. Bush administration, enables families of terror victims to sue and collect judgments against organizations linked to terror. Money is awarded by the United States seizing bank accounts belonging to those organizations.

The Ellis case is the second multimillion-dollar award that the Palestinian Authority has refused to pay. In 2005, the Palestinian Authority lobbied Secretary of State Condoleezza Rice to ask that the State Department intervene in the court case brought by the children of Yaron Ungar, who was killed in a 1996 terror attack in Israel.

Then Finance Minister and now Prime Minister Salaam Fayyad wrote that peace talks with Israel would be hampered by a stoppage of U.S. funds destined for the PA, but frozen by the courts.

Rice had written a letter a year ago to Palestinian President Mahmoud Abbas noting that the U.S. government could not overturn the court's rulings, but offered the State Department's legal advisers to PA attorneys to discuss "pending proceedings" and facilitate meetings with the opposing side to "explore out of court settlements."

Asked about the State Department's decision to submit a statement of interest in the case brought by Leslye Knox, Ellis' widow, spokesman Tom Casey said that regardless of the U.S. government's submission to the court, "it is our hope that what we would see happen is a settlement reached between these parties that would ensure that the individuals involved get justice and receive compensation for the losses that they've suffered."

Casey added, "We are pleased that we have a Palestinian Authority government now under President Abbas and Prime Minister Fayyad, who are allied with us in fighting terror and who have acknowledged that these individuals deserve compensation. In fact, I know that Prime Minister Fayyad has said publicly that he would like to see some mechanism found to provide fair and just compensation to these individuals."

Upon hearing of the U.S. government decision not to file a statement of interest, David Strachman, attorney for a number of terror attack victims' families, said the families are grateful "the U.S. government has decided to support justice over terror and that it will not now enter the case to support the terrorists."

Knox added: "I am glad that the government will not interfere at this stage and am hopeful that it will refrain from supporting the legal position of the terrorists-defendants in the future."