The city could end up paying hundreds of thousands of dollars in a lawsuit involving a Kuwaiti-born Honolulu man whose arrest under mental health statutes was prompted, his attorney says, by being unjustly suspected of terrorist proclivities.

A city attorney disputes that suspicions of terrorism played a role in the arrest, but acknowledged that a decision by the 9th U.S. Circuit Court of Appeals last week cleared the way for the city to pay Mansour Arekat’s legal expenses.

In January 2006 a jury ruled in a federal civil lawsuit that three police officers were not liable for Arekat’s arrest three years earlier. But that verdict was set aside by a three-judge panel that found the arrest violated his civil rights, and the appeals court refused last week to take up the matter further.

The panel sent the case back to U.S. District Court to determine the amount of damages the city must pay Arekat.

Because Arekat prevailed in the case, his attorney, Eric Seitz, also will be entitled, under the federal civil rights law, to fees and costs that he estimates will be in the hundreds of thousands of dollars and possibly more than $500,000.

City Deputy Corporation Counsel D. Scott Dodd said the city has already paid $205,000 to the private lawyers who defended the three officers named in the case and would also pay for any judgment against them.

Dodd said the city is reviewing its options, which include an appeal to the U.S. Supreme Court, but he and Seitz said they are in discussions to settle the case.

Arekat, 45, owner of Arekat Pacific Security, a Honolulu security firm, was arrested Dec. 15, 2003, without a warrant under the state emergency mental health law. He was taken to the Queen’s Medical Center, where he was examined and released.

The law allows police to take into custody for examination a person who is "imminently dangerous to self or others, or is gravely disabled or is obviously ill."

Seitz said that in the wake of the Sept. 11, 2001, terrorist attacks, police Officer Letha DeCaires suspected that Arekat might be a terrorist because he came from the Middle East.

In addition, a former Arekat Pacific Security employee told DeCaires that Arekat was associated with terrorism and reported that Arekat had model airplanes at his apartment that resembled the airliners hijacked in the Sept. 11, 2001, attacks, Seitz said.

Even though the FBI warned her that they had no reason to believe Arekat was a terrorist, DeCaires used the emergency state law as a way to confiscate three registered firearms Arekat kept in a safe at his office for his security business, Seitz said.

Arekat, a naturalized U.S. citizen, served in the Army from 1987 to 1990 at Schofield Barracks and was honorably discharged.

Police searched Arekat’s home and later found him staying at a Waikiki hotel, but he was on his way to talk to the police because he had heard they were looking for him, Seitz said.

Arekat was taken to his office, where police took the three firearms, then transported to Queen’s, where he was examined by a doctor who concluded there was no reason to detain him, Seitz said. Seitz estimated his client was in custody for about seven or eight hours before he was released.

Arekat was not charged with any crime, and the firearms were returned to him, Seitz said.

Dodd said Seitz brought up his theory that Arekat was arrested because of terrorism suspicions during the trial, but did not produce any evidence to support it. On the witness stand, DeCaires denied that suspicions of terrorism were a motivating factor in the arrest, Dodd said.

In a 2-1 decision in November, the appeals court panel did not discuss suspicions about terrorism.

But Judges Stephen Reinhardt and Raymond Fisher ruled that the evidence was "insufficient" to allow any reasonable jury to conclude that police had "probable cause" or a legal basis for the arrest.

They said the evidence did not establish Arekat was "a danger to others, let alone that he was imminently dangerous or even that he suffered from a serious mental illness."

The majority noted that Arekat went to the FBI about a month before his arrest about his concerns that he was under surveillance by business competitors and that those competitors were involved in organized crime.

But the interview did not include any threat or act by Arekat that constituted he would harm anyone, the majority said.

The majority also discounted information by the former worker, David Engle, described by the judges as "a disgruntled" former employee.

Engle told police about Arekat’s behavior at his apartment a month before the arrest and alleged that Arekat assaulted him when he tried to collect a paycheck after being fired, the majority said.

But Engle did not have a history of providing police with reliable information, and police knew he had recent criminal convictions and was a longtime drug addict, the majority said.

The majority said Engle was "not a reliable source."

In dissent, appeals court Judge Consuelo Callahan said the jury’s verdict "should not be set aside because two appellate judges, on the cold record, would have weighed the evidence differently."

She said the police made "a courageous decision to detain Arekat."

"If the officers had done nothing and Arekat had proceeded to shoot someone, defendants undoubtedly would have been sued for failing to detain Arekat," Callahan said.

Seitz declined to say how much he will be seeking from the city, but said in addition to that amount, the city must pay his fees and costs for the hundreds of hours of work for the trial and the appeal, interest on that amount and a possible multiplier that would increase the fee award.

Unless the case is settled, a judge will review the request and determine the fees and cost amount.