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Trial Team Secures Win for Revlon Lenders Who Citibank Repaid “By Mistake”

April 2021

Quinn Emanuel secured a major trial victory against Citibank in federal court in New York.  The case was also remarkable for the speed with which Quinn Emanuel handled it.  On August 11, 2020, Citibank paid nearly $900 million to hundreds of Revlon lenders on a 2016 loan.  Each received exactly what it was then owed in principal and interest.  More than 20 hours later, Citibank said its payments were a mistake, that it had intended to pay only interest.  Citibank demanded return of nearly all of the money.

Over the next few days, lenders holding more than $300 million of the Revlon loans agreed to return the principal repayments.  But the lenders managed by ten investment managers represented by Quinn Emanuel—more than 100 lenders who held over $500 million of the loans—rejected Citibank’s demand.  As the Quinn Emanuel team read the law, the lenders were entitled to retain the funds because: (1) the payments were exactly what was owed; (2) the lenders had no reason to believe, at the time the payments were received, that they would have been made in error; and (3) the lenders did nothing to induce Citibank to make the payments.

One week later, Citibank sued Brigade, Symphony, HPS, and seven other investment managers.  The cases were consolidated before Judge Jesse Furman.  He issued temporary restraining orders preventing defendants from touching the funds before trial.  He set an expedited schedule, requiring that all fact discovery, expert discovery, and pre-trial motions be done in three months.  On December 9, he began a one-week, fully remote bench trial.  Throughout the case, Citibank expressed complete confidence that defendants had to return the money.  That ended in February, when Judge Furman issued a 101-page decision rejecting Citibank’s claims, holding that the lenders can retain the payments.

The Quinn Emanuel team based its case on New York’s “discharge for value” rule, which states that a lender is entitled to keep funds where it is paid what it is owed, without receiving any notice, at the time of the payment, of a mistake.  Judge Furman agreed that the doctrine applies here.  He found that Quinn Emanuel’s witnesses had credibly established that they did not know—and had no reason to know—that Citibank had erred when it payed the lenders exactly the amounts they were owed.  Indeed, “[g]iven a choice between assuming that Revlon had paid off the 2016 Term Loan early—as borrowers sometimes do—and assuming that Citibank or Revlon had mistakenly transferred over $900 million—something no bank may have ever done before (and may never do again)—it would have been borderline irrational to choose the latter.”