Citi cleared to seek information in $900 million-error suit

Register now

Citigroup can seek information on the relationship between investment managers and Revlon creditors who have refused to return millions of dollars the company says it mistakenly sent them, a judge ruled.

Citigroup says an employee error caused it to send more than $900 million of its own money to a group of lenders expecting an interest payment on behalf of Revlon. The bank last month sued 11 investment managers for the Revlon creditors — including Brigade Capital Management LP, HPS Investment Partners and Symphony Asset Management — that are trying to hold on to the money as payment of Revlon’s debt to them.

U.S. District Judge Jesse Furman on Tuesday granted a request from Citigroup to seek information from some of the managers that would clarify their connection with the creditors, such as contracts that enforce the relationship.

“They’re going to defend the case on the grounds that they supposedly don’t control the money,” John Baughman, a lawyer for Citigroup, said during a conference. “We say there was a mistake. We say it’s a fact. We have to provide discovery as to whether it’s a mistake.”

As of Aug. 11, when the transfers were made, 315 lenders managed by 34 funds had received the money, Baughman said. So far, 186 lenders have returned it, and there are 129 holdouts, all of them managed by the defendant firms, he said.

Read More: Citigroup Gets Freeze on Brigade Money in $900 Million Error

Robert Loigman, a lawyer for the investment managers, argued against the request for information, saying it was equivalent to “suing a shareholder and saying they have control over a company.”

Furman said he may reconsider the scheduling of the trial, currently set to begin Nov. 9.

“All of this is leading me to think maybe we should revisit things and take a deep breath, and perhaps not rush this as much as we had originally contemplated,” he said.

Matthew Ingber, another lawyer for the bank, said the issues “are very straightforward, and it’s important Citibank gets the money back as soon as possible.” He cautioned against pushing off the trial date.

“If we take too deep of a breath, setting a trial date beyond Nov. 9 or 16, there is too much opportunity for mischief or additional delay,” he said.

The case is Citibank NA v. Brigade Capital Management, 20-cv-6539, U.S. District Court, Southern District of New York (Manhattan).

Bloomberg News
Lawsuits Citigroup Commercial banking Risk management
MORE FROM AMERICAN BANKER