The $900 Million Mistake: In re Citibank August 11, 2020 Wire Transfers (S.D.N.Y. Feb. 16, 2021)

Capital Markets Law Journal, forthcoming

Duke Law School Public Law & Legal Theory Series No. 2021-33

7 Pages Posted: 13 May 2021

Date Written: May 12, 2021

Abstract

The Citibank case dealt with a $900 million payment sent in error to the lenders of Revlon, Inc., in the midst of a fraught dispute over the loan restructuring. Surprising most market participants, the court ruled that the lenders who refused to return the funds to the administrative agent were entitled to keep the money. The case (currently on appeal) attracted commentary primarily due to the sheer size of the payment error, and the corresponding risks posed by “back-office” functions at financial institutions. But Citibank also highlights the widening gap in leveraged finance between the wishes and expectations of market participants and the actual outcomes they achieve under either (1) common-law default rules or (2) heavily negotiated contracts. In particular, the case raises questions such as (1) whether New York law remains an appropriate default choice for financing transactions; (2) whether the common-law of contracts does or should continue to have relevance for financing transactions among sophisticated parties; and (3) whether parties truly can contract for their desired outcomes when opportunistic behavior is prevalent in the market.

Keywords: distressed debt, contractual arbitrage

JEL Classification: K12, K22

Suggested Citation

de Fontenay, Elisabeth, The $900 Million Mistake: In re Citibank August 11, 2020 Wire Transfers (S.D.N.Y. Feb. 16, 2021) (May 12, 2021). Capital Markets Law Journal, forthcoming, Duke Law School Public Law & Legal Theory Series No. 2021-33, Available at SSRN: https://ssrn.com/abstract=3844646

Elisabeth De Fontenay (Contact Author)

Duke University School of Law ( email )

210 Science Drive
Box 90362
Durham, NC 27708
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
359
Abstract Views
979
rank
107,157
PlumX Metrics