WASHINGTON — A federal judge on Tuesday rejected the effort by relatives of victims of the Sept. 11 attacks to seize $3.5 billion in frozen Afghan central bank funds to pay off judgment debts owed by the Taliban, in part because he said doing so would mean effectively recognizing the militants as the legitimate government of Afghanistan.
In a 30-page opinion, Judge George B. Daniels of the Southern District of New York also ruled that federal courts lacked jurisdiction over the funds. On both grounds, he adopted the recommendation of a magistrate judge, Sarah Netburn, who analyzed the matter in a report last August.
The Sept. 11 families and insurance companies “are entitled to collect on their default judgments and be made whole for the worst terrorist attack in our nation’s history, but they cannot do so with the funds of the central bank of Afghanistan,” Judge Daniels wrote.
Under federal law and the Constitution, he added, “the Taliban — not the former Islamic Republic of Afghanistan or the Afghan people — must pay for the Taliban’s liability in the 9/11 attacks.”
In a statement, Lee Wolosky, a lawyer for the lead group of relatives of Sept. 11 victims who had sought those funds, said they would appeal the ruling.
“This decision deprives over 10,000 members of the 9/11 community of their right to collect compensation from the Taliban, a terrorist group which was found liable for the 9/11 attacks on America,” Mr. Wolosky said.
The ruling by Judge Daniels was the latest step in a complex legal and political saga raised by the extraordinary event of a country being seized by a terrorist organization that is not recognized as its legitimate government.
When the government of Afghanistan collapsed as the Taliban took over in August 2021, there was about $7 billion in Afghan central bank funds deposited at the Federal Reserve Bank of New York. A group of Sept. 11 families that years earlier had sued the Taliban for their losses, winning a default judgment when the militants failed to show up in court, then moved to seize the funds to pay off the judgment debt.
Last February, President Biden froze the funds, reserving about half to be spent on helping the Afghan people while leaving the remaining $3.5 billion for the Sept. 11 victims’ families to go after in court.
The effort by the initial group of Sept. 11 families — known as the Havlish plaintiffs and represented by Mr. Wolosky’s law firm — was disputed.
Other plaintiff groups of Sept. 11 families sought an equal share in any proceeds, but under New York law, the Havlish group, made up of about 150 people linked to 47 estates from the nearly 3,000 people killed, could get paid in full first. Ultimately, the Havlish group negotiated a deal with other groups in which they would receive a lesser share in exchange for their support.
Another faction of families of Sept. 11 victims, however, joined exiled Afghans, among others, in urging the court to reject giving any of the money to Sept. 11 families. It belonged to the Afghan people, they argued, and should go toward helping them during a humanitarian crisis caused by the collapse of the country’s economy.