Takeaway From One of the "Biggest Blunders in Banking History": Get Payment Notices in Order

Summary

Often–at least in the legal field–a good-faith mistake can be reversed. A privileged document is inadvertently produced in discovery; it can be clawed back. An email to the team is accidentally sent to opposing counsel; professional courtesy generally means that the recipient will destroy the email without reading it. Evidently, not so under New York State law governing debts. After a bench trial, the Hon. Jesse M. Furman, U.S. District Judge for the Southern District of New York, found that Citibank could not recoup nearly $900 million it wired by mistake. Specifically, Citibank, acting as administrative agent for a loan taken out by Revlon, Inc., intended to wire $7.8 million in interest payments to the lenders. Instead, because of an intricate series of good-faith human errors, Citibank inadvertently repaid the entire principal of the loan plus interest in full to the lenders, to the tune of nearly $900 million. Applying principles of New York state law, Judge Furman found that the ...