Citigroup Inc urged a federal appeals court to overturn a ruling allowing a group of disgruntled Revlon Inc creditors to keep more than a half-billion dollars they were accidentally sent by the bank last summer.
The bank said in papers filed Thursday that the court should reverse US District Judge Jesse Furman’s surprise ruling, saying the February decision “sent shockwaves through the markets and generated outcry across the financial industry”.
The ruling expanded “far beyond historical bounds” an exception to an industry standard that the recipient of mistaken transfers should return the money, Citi argued. The bank said the judge mistakenly found that the so-called discharge-for-value defence — allowing an entity to keep funds that were accidentally sent if it had no notice they were sent in error — “applies regardless of whether a creditor is entitled to the funds when they arrive”.
“And — even though defendants had every reason to suspect a mistake had occurred — the district court held that a reasonably prudent inquiry would not have led defendants to discover that Citibank’s payment was a mistake,” the bank said in a 60-page brief to the federal appeals court in Manhattan.
“These errors led the district court to the inequitable result below: defendants’ clients received over [US]$500 million three years ahead of schedule from Citibank, which owed no money to any of the lenders on Revlon’s loan.”