In this case of interest, the Second Circuit Court of Appeals reversed a prior ruling and ruled that lenders must return $500 million to Citibank, who mistakenly wired transferred funds to the lenders in excess of the presently required loan payments as a result of an error. See Citibank v. Brigade Capital Management, 49 F.4th 42 (2nd Cir. 2022). This case started when Citibank, who served as administrative agent for a number of lenders, made an erroneous loan payment of $893 million to Revlon, Inc.’s lenders.  The loan was payable on September 7, 2023, and Citibank was supposed to make a $7.8 million interest payment to lenders on August 11, 2020.  Instead, Citibank transferred $893 million, which represented to the penny the current payoff for the loans.  Upon discovery of the error, recall notices were sent to all lenders the next day.  Citibank sued lenders who did not return the funds for unjust enrichment, conversion, money had and received, and payment by mistake.  The district court concluded defendants had established the elements of the discharge-for-value defense and the district court ruled that the transfers were “final and complete transactions, not subject to revocation” and that Citibank was not entitled to return of the funds mistakenly paid to lenders.

The Court of Appeals reversed the district court’s judgment and remanded the matter to the district court for further proceedings. The Court of Appeals concluded that the lenders’ inquiry notice of mistake prevented the lenders from retaining the overpayments under the discharge-for-value rule. According to the Court of Appeals, “inquiry notice is the applicable notice standard in adjudicating discharge-for-value defense.”  The Court determined “the facts were sufficiently troublesome that a prudent investor would have made a reasonable inquiry, and reasonable inquiry would have revealed that the payment was made in error.”  The Court further held that it was unreasonable for lenders to conclude that there was nothing unusual about receiving full payment for a loan payable in three years, without notice of prepayment, by a financially troubled company.  There was “a substantial reason in justice” for returning the funds to Citibank.  Thus, Citibank was able to seek to obtain back the mistakenly transferred funds.

No information in this communication is intended to constitute specific legal advice.  For specific legal advice, please contact an attorney, and if you have any such questions or would like more information about this issue, please contact William “Pat” Huttenbach at 713.752.8616, or email at



William “Pat” Huttenbach | Shareholder | Banking Litigation
Crain Caton & James | Attorneys & Counselors
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Houston, TX 77010
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Citibank NA v Brigade Capital Man