Citigroup urges appeals court to hit ‘rewind’ after Revlon blunder

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The emblem for Citibank is seen on the buying and selling flooring on the New York Inventory Trade (NYSE) in Manhattan, New York Metropolis, U.S., August 3, 2021. REUTERS/Andrew Kelly

NEW YORK, Sept 29 (Reuters) – Citigroup Inc on Wednesday pressed a federal appeals courtroom to let it recoup about $504 million of its personal cash that it unintentionally wired Revlon Inc lenders, saying its mistake didn’t entitle them to an enormous windfall.

The financial institution’s lawyer Neal Katyal mentioned the lenders had six “pink flags” of the error, and had not anticipated the cosmetics firm managed by billionaire Ronald Perelman to repay them for one more three years.

“In the event you hit rewind right here, it isn’t unfair,” Katyal advised the 2nd U.S. Circuit Courtroom of Appeals in Manhattan. “The events get returned to the place that they bargained for.”

However one member of the three-judge panel mentioned a key precedent from New York state’s highest courtroom appeared to depart authorized questions on Citigroup’s cost and the lenders’ response unanswered, and which maybe that courtroom ought to reply first.

“Every of these points can be a query of coverage,” Circuit Choose Pierre Leval mentioned. “We’d largely be guessing.”

The case stemmed from New York-based Citigroup’s August 2020 prepayment of an $894-million mortgage for Revlon, which lacked sufficient money to repay it, that was not due till 2023.

Slightly than return their share of the cash, 10 asset managers whose shoppers included the Revlon lenders saved it.

They mentioned Citigroup, performing as Revlon’s mortgage agent, paid precisely what was owed, and so they had no purpose to consider a complicated financial institution would err so badly.

The asset managers included Brigade Capital Administration, HPS Funding Companions and Symphony Asset Administration, amongst others.

On Feb. 16, U.S. District Choose Jesse Furman dominated towards Citigroup, saying the prepayment was a “discharge for worth,” and the asset managers weren’t on discover of Citigroup’s blunder.

These managers deserve “finality,” their lawyer Kathleen Sullivan advised the appeals courtroom.

She additionally mentioned the prepayment appeared believable as a result of Perelman had beforehand bailed out Revlon.

“They’d seen it earlier than,” she mentioned.

However Katyal mentioned the banking trade wires $5.4 trillion every day, and errors will occur.

Business teams have mentioned a ruling towards Citigroup might expose banks to extreme legal responsibility dangers, and destabilize the roughly $1.2 trillion U.S. syndicated mortgage market.

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

Reporting by Jonathan Stempel in New York
Enhancing by Nick Zieminski


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