A New York federal court ruled Monday that 11 American families who won a huge judgment earlier this year against Palestinian leadership in connection with terror attacks are entitled for now to only a fraction of that award -- in a decision the families' attorneys called a setback.

U.S. District Judge George B. Daniels ruled in the case of families who won a potentially billion-dollar judgment earlier this year against the Palestinian Authority (PA) and Palestine Liberation Organization (PLO), which a federal jury blamed for a string of deadly terror attacks from 2001 to 2004.

Daniels ordered the PA and PLO to pay a $10 million bond now, and $1 million a month, until the appeals process is over.

But families had wanted $30 million a month while the case is pending. The families in February had won $218.5 million; and due to a 1992 law that requires damages in such cases to be tripled, as well as interest on the award, the amount would be pushed to $1.1 billion. The judgement would equal nearly a third of the Palestinian Authority's annual operating budget, and the Palestinians are appealing.

According to the families' attorneys, the court's latest ruling works against the victims.

"This is a very serious blow to the terror victims who spent 11 years litigating against these terrorist defendants," attorney Nitsana Darshan Leitner told Fox News, arguing that the defendants "certainly can afford to pay many of millions of dollars for a bond to ensure they don't just run off and refuse to pay the court judgement after they lose at trial."

Leitner also blasted the State Department for "heavy handed interference" in the case -- referring to a "statement of interest" filed in the case weeks earlier in which the State and Justice departments urged Daniels not to force the PA and PLO to post bond of up to $30 million per month while they appeal the jury's decision.

A State Department spokesperson said Monday that the statement was regarding interests of the United States in the Sokolow v. PLO case, and not on behalf of any party.

"We are aware that the court made a decision in the Sokolow case regarding the bond," the official told Fox News. "We have no further comment."

Kent Yalowitz, another attorney for the families, said "it's disappointing that the security for the judgment is so low."

"The PA pays jailed and former terrorists $65 million per year, but claims it is 'too poor' to pay its judgement debt to the victims of those very same terrorists," Yalowitz said.