NEW YORK (Reuters) - Citigroup Inc made a final push on Wednesday to persuade a federal judge to force lenders of Revlon Inc to return half a billion dollars of its own money that it mistakenly sent them.
At the conclusion of a six-day non-jury trial, U.S. District Judge Jesse Furman in Manhattan said he would rule as quickly as he could, while admitting “it’s not the easiest case.”
The case stemmed from an Aug. 11 blunder where Citigroup, acting as Revlon’s loan agent, wired $893 million to Revlon lenders, which the struggling cosmetics company controlled by billionaire Ronald Perelman did not owe until 2023, rather than a $7.8 million interest payment.
Ten asset managers including Brigade Capital Management, HPS Investment Partners and Symphony Asset Management have refused to return $501 million.
Furman said he plans to consider their thinking immediately after being paid, as he decides whether there was a “discharge for value.”
Such a discharge allows creditors who are owed money to keep sums they are mistakenly wired if they are unaware of a mistake.
“You might expect some sort of chat or email like, ‘Whoa, can you believe it, they must have totally messed up,’” Furman said.
Citigroup, the administrative agent for the 2016 loan, blamed human error for the overpayment.
It said the lenders should return its money because they knew it was sent in error and Revlon couldn’t afford it.
“The question is, what would have a reasonable person done under the circumstances,” Citigroup’s lawyer Christopher Houpt said. Revlon’s lenders acted “as if there was no repayment,” he said.
In contrast, the defendants said they had no reason to believe Citigroup blundered.
“The situation here is the exact payout of outstanding principal with accrued interest through that date,” their lawyer Adam Abensohn said. “That is quite different from hitting ‘send’ twice on the same interest payment.”
Furman urged the financial services industry and regulators to adopt procedures to address similar situations.
“The industry should figure out a better way of dealing with these things, even if this is a black swan event,” he said.
The case is In re: Citibank August 11, 2020 Wire Transfers, U.S. District Court, Southern District of New York, No. 20-06539.
Reporting by Imani Moise and Jonathan Stempel in New York; Editing by Alexandra Hudson
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