## Facts

- Revlon, Inc. borrowed under a $1.8 billion syndicated term loan, with Citibank, N.A. serving as administrative agent responsible for transmitting payments to lenders (through their loan managers).
- By 2020, Revlon was distressed and the loan traded at a steep discount (about 20–30 cents on the dollar).
- On August 11, 2020, Citibank intended to transmit a routine interest payment, but due to internal processing/input error, it wired nearly all outstanding principal plus interest—about $500 million in total—from Citibank’s own funds.
- The transfer occurred years before the loan’s maturity, when no principal payment was due.
- Citibank discovered the error the next day and sent recall notices requesting return of the funds.
- Citibank recovered approximately $385 million, but several loan managers (for lenders receiving roughly $500 million) refused to return the amounts received.
- Citibank sued in the Southern District of New York seeking restitution of the mistaken payment.
- After a bench trial, the district court ruled for defendants, applying New York’s discharge-for-value rule and treating the transfer as discharging Revlon’s debt to the extent paid.

## Issues

1. Under New York law, does the discharge-for-value doctrine bar restitution when a creditor receives an accidental payment that is not presently due and the circumstances indicate potential mistake?
2. Were the recipients on notice (actual or inquiry) that the wire was erroneous, such that they could not treat the transfer as final?

## Decision

- The Second Circuit vacated the judgment and remanded.
- The court held discharge-for-value did not apply because the lenders were not entitled to immediate repayment when the payment was made.
- The court also held the recipients had notice, at least inquiry notice, that the payment was likely mistaken.
- Because the discharge-for-value exception did not apply, the default rule permitting restitution for mistaken payments governed, subject to further proceedings on remand.

## Legal Principles

- New York generally permits recovery of mistaken payments unless restitution would be unjust due to detrimental reliance or similar equitable considerations.
- Discharge-for-value is a narrow exception: a creditor may keep a mistaken payment only if (1) it satisfies an actual debt, (2) the creditor is presently entitled to the payment, and (3) the creditor lacks knowledge (including inquiry notice) of the mistake.
- A recipient who is on notice that a payment may be erroneous is not protected by discharge-for-value and may be required to return the funds.

## Conclusion

The Second Circuit limited discharge-for-value to cases where a creditor is presently entitled to payment and lacks notice of error, allowing Citibank to pursue restitution for its mistaken, early principal payment to lenders who should have recognized the transfer as likely erroneous.


Citibank, N.A. v. Brigade Cap. Mgmt., LP, 49 F.4th 42 (2d Cir. 2022)