The court on Tuesday refused to hear an appeal from the parents of David Boim, a 17-year-old killed in a 1996 drive-by shooting in Beit El on the West Bank.
The Palestinian Authority, which has jurisdiction on the West Bank, tried one man and sentenced him to 10 years in the case. Another escaped and later died in a suicide bombing, according to Boim attorneys.
Boim's family, who moved to Israel from New York City, had sued several U.S.-based Islamic fundraising groups and Mohammed Abdul Hamid Khalil Salah, saying they contributed money to Hamas and should be held responsible for civil damages in their son's death.
Salah, of suburban Chicago, is completing a 21-month federal prison sentence for lying in the civil suit.
Salah served 4 1/2 years in Israeli prisons in the 1990s after $90,000 that authorities say was destined for Hamas was discovered in his East Jerusalem hotel room. He was in prison when Boim was killed.
A law that could have made him liable was enacted while he was in prison. The 7th U.S. Circuit Court of Appeals in Chicago says it didn't apply to Salah because he was in prison.
The case is Boim v Salah, 08-1441.