Citigroup wins appeal over Revlon transfer error


A view of the exterior of Citibank’s corporate headquarters in New York, New York, U.S., May 20, 2015. REUTERS/Mike Segar//File Photo

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NEW YORK, Sept 8 (Reuters) – Citigroup Inc (CN) is entitled to recover about $500 million of its own money that it accidentally wired three years earlier to Revlon Inc (REV.N) lenders, a a US appeals court said Thursday.

Overturning a lower court ruling, the 2nd U.S. Circuit Court of Appeals in Manhattan said it was improper to give lenders a “huge windfall” by letting them keep Citigroup’s money, and that they had been warned that the wiring was wrong.

The case highlights the risks in a banking industry that transfers around $5.4 trillion a day.

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Citigroup, acting as loan agent for Revlon, in August 2020 intended to make a $7.8 million interest payment on a loan for billionaire Ronald Perelman’s now bankrupt cosmetics company. , but instead repaid the $894 million loan despite not being due until 2023.

Some creditors returned what they received, but 10 asset managers, including Brigade Capital Management, HPS Investment Partners and Symphony Asset Management, whose clients included Revlon lenders, did not.

They said Citigroup paid exactly what was owed and they had no reason to believe a sophisticated bank would be so wrong. They also noted that Perelman had already bailed out Revlon.

In February 2021, U.S. District Judge Jesse Furman in Manhattan ruled against Citigroup after a non-jury trial, saying the advance payment was a “release for value.” Read more

But in Thursday’s 3-0 decision, Circuit Judge Pierre Leval rejected that conclusion.

“Here, the debt that Citibank made a payment on in error was not due for three years,” Leval wrote in a 93-page notice. “Defendants cannot rely on the value relief rule as a shield against Citibank’s restitution claims.”

Lawyers for Revlon’s lenders did not immediately respond to requests for comment.

Citigroup welcomed the decision.

“Today’s decision reaffirms our long-standing belief that these erroneously transferred funds should be returned under the law, as well as ethics,” Citigroup said in a statement. He also said he took steps to prevent a recurrence.


Industry groups have warned that a ruling against Citigroup could expose banks to excessive liability risks and destabilize the roughly $1.2 trillion US syndicated loan market.

Revlon filed for Chapter 11 protection from creditors on June 15, and Thursday’s decision could see asset managers become involved in restructuring talks.

Shares of the New York-based company fell about 10% within minutes of the decision, but recouped those losses.

Citigroup pleaded its appeal on September 29.

Leval said the court took a long time to rule, in part because he originally planned to ask New York state’s highest court for guidance on the complex case, before deciding that it would take even longer and that Citigroup’s arguments were compelling.

“Finding the best accommodation between the goals of speed and legal soundness is not always easy,” Leval wrote.

The case is In re Citibank August 11, 2020 Wire Transfers, 2nd US Circuit Court of Appeals, No. 21-487.

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Reporting by Jonathan Stempel in New York; Additional reporting by Luc Cohen; Editing by Chris Reese, Leslie Adler and Josie Kao

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