Revlon Reversal: Common Sense Prevails (Finally)

It is generally the law that mistakenly-received funds must be returned to the sender. Last summer, we covered in detail the now-familiar Revlon case in which that understanding was tested and, surprisingly, not followed.* On Thursday of last week, the United States Court of Appeals for the Second Circuit (the "Second Circuit") delivered a much-anticipated reversal of a lower court ruling – issuing a decision that feels like a return to the law as well as common sense.

In August of 2020, Citibank (acting as the administrative agent for a large syndicate of banks and hedge funds) mistakenly sent out payments of over $900 million in full satisfaction of a loan, instead of the intended $7.8 million interest-only payments. It is worth noting that the vast majority of the funds sent to lenders was not money received from Revlon, but was in fact Citibank's own funds − $894 million to be more precise. Of the $894 million of Citibank's funds, approximately $400 million