N.J. Super. Ct. Law Div. 1995) (seller of stock received proceeds for 100 times his… v. Mfrs. & Traders Tr. Co. (In re Bennett Funding Grp., Inc.), 146 F.3d 136, 138-39 (2d…

21-487
In re: Citibank August 11, 2020
PARK , Circuit Judge, concurring in the judgment (amended):
When people receive money by mistake, the law usually
requires them to give it back. This commonsense rule allows
transferors to reclaim property that rightfully belongs to them—
whether misdirected funds,1 an accidental overpayment,2 or a credit
to the wrong bank account.3 An exception to the general rule can
sometimes protect a recipient who was owed the mistakenly paid
money. Under this narrow equitable defense, called “discharge for
value,” a creditor who receives a payment in discharge of a debt he is
owed can defeat restitution by invoking his own competing claim to
the disputed funds. But here, Defendants had no such claim—not
when they received Citibank’s money, and not when they were asked
to give it back—because they were not entitled to payment for another
three years after Citibank erroneously sent them half a billion dollars.
Allowing them to keep that money would turn equity on its head and
topple the settled expectations of participants in the multitrillion-
dollar corporate-debt market. It would also be brutally unfair.
1 E.g., Home Sav. Bank v. Rolando, 14 A.2d 822, 824 (R.I. 1940) (sum of
money paid by a bank to the executor of the late Francisco Marsicano was
erroneously drawn from an account that “in fact . . . belonged to another
man by the name of Francisco Marsicano”).
2 E.g., PaineWebber, Inc. v. Levy, 680 A.2d 798, 798–800 (N.J. Super. Ct.
Law Div. 1995) (seller of stock received proceeds for 100 times his number
of shares due to an unprocessed reverse stock split).
3 E.g., Citibank, N.A. v. Warner, 449 N.Y.S.2d 822, 823 (Sup. Ct. 1981)
(“[T]he bank inadvertently microencoded the defendant’s account number
010 22666 thereon, instead of the account number of the [intended recipient]
109 22666.”).

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2
In my view, this is a straightforward case that many smart
people have grossly overcomplicated. The Court ultimately arrives
at the correct conclusion but only after taking an unnecessary detour
through the factual record. I agree with the majority that the district
court clearly erred in concluding that there were insufficient red flags
to put Defendants on notice of Citibank’s mistake. I also agree that
the district court erred as a matter of law in its overreading of Banque
Worms. But Defendants’ case fails on a more basic level: A recipient
of mistakenly transferred funds cannot invoke the discharge-for-
value defense—a general legal rule incorporated by the Restatement
(First) of Restitution and the New York Court of Appeals—unless and
until it has a present entitlement against the debtor. Put simply, you
don’t get to keep money sent to you by mistake unless you’re entitled
to it anyway. I respectfully concur only in the judgment.
I. BACKGROUND
On August 11, 2020, Citibank set out to process a $7.8 million
interest payment to the lenders of its client Revlon, Inc., a global
cosmetics company. But instead, Citibank inadvertently wired the
entire principal balance of the loan—nearly $1 billion—from the
bank’s own account. Some recipients gave the funds back.
Defendants (“the Creditors”), managers who controlled over $500
million of the mistakenly transferred funds, did not. Citibank sued,
lost at a bench trial, and appealed to this Court.
A. Revlon’s Debt Dispute
In 2016, Revlon took out a $1.8 billion loan (the “2016 Term
Loan”) to finance its purchase of Elizabeth Arden, Inc., another
cosmetics brand. A syndicate of lenders agreed (under the “2016
Term Loan Agreement”) to provide the funds in exchange for

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3
periodic interest payments and a return of principal on September 7,
2023, the maturity date. Revlon offered certain intellectual property
(“IP”) as collateral.
In addition to Revlon and the lenders, Citibank was party to the
contract as the “Administrative Agent and Collateral Agent.” In
that role, Citibank was charged with receiving interest and principal
payments from Revlon and passing them along to the lenders.
Those lenders—investors and investment vehicles that took a variety
of corporate forms—were represented by portfolio managers,
including Defendants, who controlled the lenders’ funds.
By spring 2020, liquidity had become tight for Revlon in the
face of slumping sales numbers and the beginning of the COVID-19
pandemic. Revlon tried to raise additional capital to meet its
immediate financial obligations, and it again sought to put up its IP
as collateral. But to do so, it had to win majority approval of the 2016
Term Loan lenders, whose loans were secured by the same property.
So Revlon proposed a “roll-up” transaction: A lender who agreed to
the refinancing would convert its 2016 Term Loan position into a new
one in the 2020 loan. The consenting creditors would thus continue
to have their loans secured by Revlon’s IP, while those maintaining
their 2016 positions would effectively lose their priority.
Not all agreed. The objecting lenders—Defendants here
among them—campaigned to block the deal, fearing that the
restructuring would leave them holding the bag in the event of a
default if others acceded to Revlon’s plan and they did not. But
ultimately, Revlon prevailed, and the IP transfer took place in May
2020. Afterwards, some objectors, including Defendants, accused
Revlon of manipulating the vote. In an effort to accelerate the debt’s

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4
maturity and to demand repayment immediately, they planned a
lawsuit in which they would allege that Revlon was “deeply
insolvent.” Joint App’x at 177. By then, the value of the 2016 Term
Loan had fallen to roughly 25 to 30 cents on the dollar. The
Creditors’ lawsuit, naming Revlon and Citibank as defendants, was
eventually filed on August 12, 2020, at 2:06pm.
B. The Mistake
Just one day before then, however, the Creditors were suddenly
repaid in full. Notwithstanding Revlon’s dire financial straits, its
reputation for playing leveraged-finance hardball, 4 and the
impending lawsuit alleging its chronic insolvency, each creditor on
the 2016 Term Loan received, without notice or explanation, every
penny of its principal and interest balance three years early, for a total
of $893,944,008.52 in prepaid principal.
Of course, Revlon had not suddenly acquired the cash, or the
irrational impulse, to prepay all of its outstanding debt to the 2016
creditors at four times its market value. Instead, Citibank had paid
off the balances by mistake.
That day, August 11, 2020, Citibank was tasked with executing
a roll-up for a few of the 2016 lenders. This required Citibank (1) to
pay accrued interest to those lenders, and (2) to move their principal
balance to a new loan facility. Under the constraints of Citibank’s
“Flexcube” payments software, the best way to do that was
4 Revlon was at the time 85% owned by Ronald Perelman’s
MacAndrews & Forbes Inc., whose own battle to take over Revlon is one of
the most famous corporate-control fights in modern history. See Revlon,
Inc. v. MacAndrews & Forbes Holdings, Inc., 506 A.2d 173 (Del. 1986).

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5
apparently to pay all of the 2016 lenders their accrued interest. Then,
Citibank would synthetically pay all those lenders their principal by
routing it into a “wash account,” from which the principal could be
reallocated into the old and new tranches of loans.
Revlon agreed to pay accrued interest to all of the 2016 lenders
in this way, and Citibank delegated execution to an employee at its
contractor in India. In order to pay out interest but redirect the
principal into a wash account, that employee had to check three
cryptically named boxes in Flexcube: “FRONT,” “FUND,” and
“PRINCIPAL.” But the employee checked only “PRINCIPAL,” and
neither of the two supervisors charged with verifying the transaction
spotted the error. So, instead of booking a wash transfer, Flexcube
actually wired nearly $1 billion of Citibank’s own money out the door
to the 2016 Term Lenders.
The lenders each received a “Calculation Statement” showing
only a payoff of accrued interest. The dollar amounts they were
wired, however, were over 100 times larger. Per the 2016 Term Loan
Agreement, Revlon was permitted to prepay the loan, but it had to
give notice to Citibank three days in advance, and Citibank then had
to notify the lenders of the decision “promptly.” No lender received
notice that Revlon was prepaying any debt.
C. The Aftermath
The day after the transfer, on August 12, at around 2:25pm,
Citibank began sending “Recall Notices” to the lenders notifying
them of the mistake. Managers controlling about half of the total
sum quickly agreed to return the mistakenly wired funds.
Defendants decided not to do so.

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6
First came mockery. From one pair of employees:
[Employee A]: I feel really bad for the person that fat
fingered a $900mm erroneous
payment. Not a great career move
. . . .
[Employee B]: certainly looks like they’ll be looking
for new people for their Ops group
[Employee A]: How was work today honey? It was
ok, except I accidentally sent $900mm
out to people who weren’t supposed
to have it
[Employee A]: Downside of work from home.
maybe the dog hit the keyboard
[Employee B]: the song “Had a Bad Day” playing in
the background
Spec. App’x at 73.
Then came strategy. After receiving the Recall Notices, the
Creditors paused. There were calls and emails with counsel. There
were sudden reversals, instructions to stop payment. See, e.g., Joint
App’x at 1302–03 (“Sounds like we have a good bargaining chip with
Citi/revlon”; “Do not refund [the payment], I am on a call with
attorneys right now.”). And then, a few months later, there was
voluntary dismissal of the Creditors’ earlier lawsuit against Revlon.
After all, the Creditors already had more than what they wanted:
They could, as one employee put it, “take the money and run.” Id.
at 1295.

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7
Less than a week after the error, on August 17, 2020, Citibank
sued under theories of unjust enrichment, conversion, money had
and received, and payment by mistake. Citibank sought equitable
relief in the form of specific restitution of its identifiable funds.5 The
United States District Court for the Southern District of New York
granted a temporary restraining order freezing the funds,6 but after
a bench trial, the district court entered judgment for Defendants and
held that recovery was barred by the discharge-for-value defense. In
re Citibank Aug. 11, 2020 Wire Transfers, 520 F. Supp. 3d 390 (S.D.N.Y.
2021). Citibank appealed, arguing the defense does not apply for
three reasons: (1) Defendants were not yet entitled to payment, (2)
Defendants did not apply the funds to credit Revlon’s account before
receiving the Recall Notices, and (3) Defendants were on constructive
notice of the mistake even before those Recall Notices were issued.
II. MERITS
Mistaken payments generally must be returned to the payor.
See Ball v. Shepard, 95 N.E. 719, 721 (N.Y. 1911); Moses v. Macferlan
(1760) 97 Eng. Rep. 676, 680-81; 2 Burr. 1005, 1012 (“This kind of
equitable action, to recover back money, which ought not in justice to
5 Remedies for unjust enrichment are available both at law (typically
money damages) and at equity (typically specific enforcement of a
constructive trust). See Restatement (First) of Restitution § 160 cmt. e.
Citibank justifies its request for equitable relief in part based on the
organizational structure of the lenders and managers, which Citibank says
would make it difficult to trace and collect an unsecured money judgment.
Cf. John Morley, The Separation of Funds and Managers: A Theory of Investment
Fund Structure and Regulation, 123 Yale L.J. 1228, 1240–41 (2014).
6 The funds remained frozen pending our review and continue to be
frozen under the injunction this Court enters today.

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8
be kept . . . lies for money paid by mistake.”). The logic of this rule,
a fundamental part of the law of unjust enrichment, is obvious: People
do not lose all rights to their property merely because they mistakenly
gave possession of it to someone else.7
Citibank erroneously sent a billion dollars from its own account
to the creditors of Revlon three years before they were entitled to
payment. Citibank thus has an unquestionable claim to entitlement
under the law of unjust enrichment. See 3 George E. Palmer, Law of
Restitution § 14.1(a), at 173 (3d ed. 2020) (“[U]njust enrichment in one
of its clearest forms” exists when “because of plaintiff’s mistake, the
defendant received a money payment to which he was not entitled,
and his claim for its retention rests primarily on the fact that he has it,
or at least that he received it from the plaintiff.”). Defendants argue
that they are nevertheless entitled to keep the funds erroneously
transferred by Citibank based on the discharge-for-value defense, as
recognized by section 14 of the Restatement (First) of Restitution. See
Banque Worms v. BankAmerica Int’l, 570 N.E.2d 189, 198 (N.Y. 1991).
They clearly are not.
The majority correctly vacates the judgment of the district court
but only after conducting a detailed survey of the record and New
York caselaw on discharge for value. I do not disagree with that
7 For the preservation of property rights, see Restatement (First) of
Restitution § 163 (“Where the owner of property transfers it as a result of a
mistake of such a character that he is entitled to restitution, the transferee
holds the property upon a constructive trust for him.”). Accord
Restatement (Third) of Restitution § 1 cmt. b (explaining that transactions
that result in “[u]njustified enrichment . . . [are] ineffective to work a
conclusive alteration in ownership rights.”).

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9
analysis but would have reached the same result more directly by
applying basic principles of unjust enrichment as explained below.
A. Background Principles
The majority opinion might leave the impression that the
discharge-for-value defense was first conceived of by the American
Law Institute in the 1930s and then brought into existence by the New
York Court of Appeals in 1991. The majority treats the discharge-
for-value rule as an espousal of “New York’s general rule that
mistaken payments should be returned.” Maj. Op. at 94. But in
fact, the discharge-for-value defense, as defined by the Restatement
and then recognized in Banque Worms, is merely a “specific
application” of a traditional equitable defense: “the principle of bona
fide purchase.” Restatement (First) of Restitution § 14 cmt. a.
1. Bona Fide Purchase
The bona fide purchase defense protects a party who
“innocently has acquired the title to something for which he has paid
value.” Id. § 13 cmt. a. “Without notice of the circumstances” that
would have given rise to a restitution claim against the seller, such a
purchaser is insulated from restitution claims arising out of property
purchased for value in good faith. Id. § 13(a) (cleaned up). That is,
if B would owe A restitution over X, but C, without notice, gives value
to B in exchange for legal title to X, then A cannot claim restitution
from C. The buyer C is “protected, as well at law, as in equity, in
[his] purchase[] . . . since it would be impossible for him to guard
himself against such latent frauds.” 1 Joseph Story, Commentaries on
Equity Jurisprudence § 381, at 373 (1836); see also Simpson v. Del Hoyo,
94 N.Y. 189, 193–94 (1883); 3 John Norton Pomeroy, Equity
Jurisprudence § 738, at 8 (5th ed. 1941) (“[E]quity refuses to interfere

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10
and to aid the plaintiff in what he is seeking to obtain, because it
would be unconscientious and inequitable to do so.”).
Importantly, the bona fide purchase rule is distinct from the
alternative defense of mistake of fact or detrimental reliance. That
defense may “terminate[] or diminish[]” the “right of a person to
restitution from another because of a benefit received because of
mistake” through a “[c]hange of circumstances.” Restatement
(First) of Restitution § 69(1)–(2). That is, if a recipient reasonably
relies on a mistaken transfer to his detriment, he may be able to block
recovery to the extent of his justified reliance. But the good-faith
purchaser need not show any special change in circumstances. He
has done more than merely detrimentally rely on a mistake; he has
given value for a property interest, which protects the buyer not only
in his reliance, but in his justified expectations, and so fully insulates
him from any restitution claims that were viable against the seller.
See Henry E. Smith, Equity as Meta-Law, 130 Yale L.J. 1050, 1095 (2021)
(explaining that giving value is said to make the bona fide purchaser
“equity’s darling” but that “lack of value given means no reliance (or
change of position)”).
2. Discharge for Value
Discharge for value is a “specific application” of the bona fide
purchase rule. Restatement (First) of Restitution § 14 cmt. a. But a
discharge-for-value creditor is both the purchaser and the party who
would otherwise owe restitution, rather than a third party buying
from one who owed restitution to another.
The defense works like this: A creditor has a claim against a
debtor for unpaid debt, and a third party mistakenly sends money to
the creditor on behalf of the debtor. For example, the third party

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11
might mistakenly believe it is under a duty to do so,8 or it might
simply have made a clerical error.9 As a result, the sender may have
an unjust-enrichment claim against the creditor. See supra at 7-10.10
And if that were the end of the matter, the creditor would not be able
to defeat this claim through the defense of bona fide purchase because
he is the original recipient, not a subsequent purchaser. See 3 Palmer
§ 16.6(b), at 590 (“When relief depends merely upon a setting aside of
the payment itself, or upon rescinding an agreement pursuant to
which the payment was made, the usual rules governing restitution
will apply.”).
The way to square bona fide purchase with discharge for value
is the right of setoff. “The right of setoff . . . allows entities that owe
8 E.g., Restatement (First) of Restitution § 14 illus. 5 (“A, under the
erroneous belief that he has effectively promised B to pay C’s debt to him,
makes payment thereof to B. He is not entitled to restitution from B.”).
Judge Leval offers a discussion about the nature of mistake under the
discharge-for-value defense. See “Addendum” (Leval, J.) at 95-99. I am
doubtful that the inquiry he proposes, which would seem to turn on the
mental states of people making accidental payments, would be as
straightforward as he believes. But in any event, as Judge Leval
acknowledges, “[r]esolution of this question is of course unnecessary to
deciding this case.” Id. at 99.
9 E.g., Banque Worms v. BankAmerica Int’l, 570 N.E.2d 189 (N.Y. 1991).
10 Much of this analysis would apply if the debtor (rather than a
third party) were to erroneously pay the creditor directly. But in such a
case, there would likely be no unjust enrichment as between the two parties:
If the debtor pays a creditor a debt that is due, then the debtor is out what
he owes, and the creditor receives only what she is due. See 3 Palmer
§ 14.1(a), at 173 & n.20. The Restatement’s discharge-for-value rule, which
concerns claims between a mistaken third-party payor and a creditor,
presumes the prima facie availability of an unjust-enrichment claim.

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12
each other money to apply their mutual debts against each other,
thereby avoiding ‘the absurdity of making A pay B when B owes A.’”
Citizens Bank of Md. v. Strumpf, 516 U.S. 16, 18 (1995) (quoting Studley
v. Boylston Nat’l Bank, 229 U.S. 523, 528 (1913)); see Off. Comm. of
Unsecured Creditors v. Mfrs. & Traders Tr. Co. (In re Bennett Funding
Grp., Inc.), 146 F.3d 136, 138–39 (2d Cir. 1998) (New York law). Thus,
a creditor—usually a bank—in possession of funds in the account of
the debtor may apply (or “set off”) the debtor’s funds against a claim
for unpaid debt. See, e.g., Marine Midland Bank-N.Y. v. Graybar Elec.
Co., 363 N.E.2d 1139, 1142–43 (N.Y. 1977). In the case of discharge
for value, a creditor sets off funds that were sent by a third party for
the account of the debtor and on the debtor’s behalf. See Brief for
Amicus Curiae Loan Syndications and Trading Association in
Support of Plaintiff-Appellant and Reversal at 11–12 (highlighting the
parallel between setoff and discharge for value); cf. In re Awal Bank,
BSC, 455 B.R. 73, 93 (Bankr. S.D.N.Y. 2011) (sustaining a claim over
the discharge-for-value defense because plaintiff plausibly alleged
notice before setoff).
Through setoff, the creditor gives value by applying mistakenly
transferred funds to discharge an unpaid debt, thus taking title to the
funds in exchange for surrendering a valuable claim against the
debtor. Once that happens, “it would be inequitable to require
restitution from the transferee since, in the surrender of the
debt . . . he has given value and acquired title to the money or other
thing given in payment.” Restatement (First) of Restitution § 14 cmt.
b; see also id. § 13 cmt. a (“The principle that a person who innocently
has acquired the title to something for which he has paid value is
under no duty to restore it to one who would be entitled to reclaim it
if the one receiving it had not been innocent or had not obtained the

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13
title or had not paid value therefor . . . [is] [t]he same underlying
principle [operating] under the circumstances stated in § 14.”);
Restatement (Third) of Restitution and Unjust Enrichment § 67 cmt. a
(“The thought behind the expression ‘discharge for value’ is that the
protected recipient of a payment is treated as a bona fide purchaser of
the money, to the extent the payee gives value by accepting the
payment in discharge of an antecedent debt.”).11 In other words,
whereas the mistaken payment standing alone was subject to
restitution, setoff allows a creditor to assume the role of bona fide
purchaser—by giving “value” (in the form of relinquishing its claim
for debt) in exchange for funds received and applied in “discharge”
(or satisfaction) of a debt.
In short, equity protects the secured expectations of creditors
who have, without notice of a mistake, given value for the funds in
their possession.12 As Section 14 of the Restatement states:
11 The Third Restatement articulates a different defense called “bona
fide payee,” which is broader than the discharge-for-value defense.
Restatement (Third) of Restitution § 67; see id. § 67 cmt. a. It is thus not
dispositive of the scope of the discharge-for-value defense, see infra note 21,
but its characterization of the traditional rule remains persuasive.
12 One can question whether even this is enough to bring a creditor
under the bona fide purchase rule. In a typical bona fide purchase, a third-
party purchaser gives value to a recipient of the property and is usually a
stranger to the original owner. Here, the creditor is the direct recipient
and gives value to the original owner. See Restatement (First) of
Restitution § 13; see also 3 Palmer § 16.5, at 575 (further noting that, in other
contexts, forgiveness of an antecedent debt may not be value); 3 Pomeroy
§ 748, at 26 (same). Indeed, not all jurisdictions appear to accept the rule,
instead allowing for restitution in cases where Section 14 would bar
recovery. See Wilson v. Newman, 617 N.W.2d 318, 321 (Mich. 2000). But

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14
A creditor of another or one having a lien on another’s
property who has received from a third person any
benefit in discharge of the debt or lien, is under no duty to
make restitution therefor, although the discharge was
given by mistake of the transferor as to his interests or
duties, if the transferee made no misrepresentation and
did not have notice of the transferor’s mistake.
Restatement (First) of Restitution § 14(1) (emphasis added).
B. The Present-Entitlement Requirement
As a form of bona fide purchase, the discharge-for-value
defense (1) requires a creditor to give “value” by setting off
mistakenly transferred funds against a debt, and (2) rests on the
premise that it would be inequitable to deprive a creditor of a
payment he fairly bargained for. Both these features of discharge for
value lead to the same conclusion: Discharge for value requires a
preexisting entitlement to mistakenly transferred funds.13 In Banque
Worms, the New York Court of Appeals correctly described the
Restatement rule it adopted when it said—without equivocation—that
in Banque Worms, the New York Court of Appeals held that New York
follows the discharge-for-value rule, and no party has suggested that it no
longer controls.
13 The majority opinion eventually reaches this conclusion in Section
I.B. See Maj. Op. at 82. In my view, the Creditors’ lack of entitlement to
the principal balance of the loan on August 11, 2020 is a sufficient basis to
reverse the district court. Even so, I diverge from the majority’s approach
to the present-entitlement requirement. The majority engages in a close
reading of caselaw on present entitlement and balances various policy
considerations. But, as described here, the present-entitlement
requirement is rooted in equity, not caselaw.

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15
the defense protects only a creditor who is “entitled to the funds” he
receives. 570 N.E. at 198.
1. Discharge, Value, and Setoff
Discharge for value requires giving value for mistakenly
transferred funds in the form of relinquishing a debt. But here, the
Creditors could not exercise setoff rights against Revlon’s debt
because that debt was not yet due.
“There is . . . no question that New York has long recognized a
common law right of setoff.” In re Bennett Funding Grp., 146 F.3d at
139 (citing Straus v. Tradesmen’s Nat’l Bank, 25 N.E. 372, 372 (N.Y.
1890)). And the first rule of common-law setoff is that, absent special
circumstances,14 a debt cannot be set off against unless the debt is
“due and payable” because only then can it be “presently enforced.”
De Camp v. Thomson, 54 N.E. 11, 12 (N.Y. 1899). Thus, a creditor
cannot unilaterally cleanse a payment of its mistaken character
through setoff—and so take a transferor’s money free of the payor’s
restitution claims—unless he has the power to apply the funds to
satisfy a debt because that debt is already due.15
14 See N.Y. Debt. & Cred. Law § 151; Jordan v. Nat’l Shoe & Leather
Bank of N.Y., 74 N.Y. 467, 473 (1878).
15 Defendants argue that a creditor gives value immediately upon
payment by the debtor, without any further action by the creditor. See
M’Crea v. Purmort, 16 Wend. 460, 474 (N.Y. 1836) (“The payment of the
money discharges or extinguishes the debt; a receipt for the payment does
not pay the debt, it is only evidence that it has been paid.”); see also 3 Palmer
§ 16.6, at 580 (“[R]eceipt of the plaintiff’s funds in payment of . . . the debt
of a third person is value.”); cf. Pittsburgh Nat’l Bank v. United States, 657 F.2d
36, 38 (3d Cir. 1981) (Under Pennsylvania law, “as soon as a debt owed to a

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16
For a matured debt, discharge for value tracks ordinary setoff
principles. If the mistakenly transferred funds were already in the
creditor’s possession in the account of the debtor, the creditor would
be entitled simply to collect. But the “self-help remedy in the form
of a setoff[] cannot be exercised until . . . the obligation is due an[d]
payable.” Marine Midland Bank-N.Y., 363 N.E.2d at 1143. That
maturity condition is essential because without it, a pledge to offer
credit for a defined term would be meaningless—a bank could, for
example, seize a customer’s deposits to offset them against her new
30-year home mortgage loan. So when a creditor holds an unmatured
debt, it cannot apply the debtor’s funds to satisfy an unripe claim,
even if those funds are already legitimately and unmistakenly in the
creditor’s possession. It would make no sense for a creditor
bank by a depositor matures, the bank’s right of setoff extinguishes the
depositor’s rights in the account.”). Citibank contends that giving value
within the scope of the defense instead requires the creditor affirmatively
to set off the debt by crediting the debtor’s account. See NBase Commc’ns,
Inc. v. Am. Nat’l Bank & Tr. Co. of Chi., 8 F. Supp. 2d 1071, 1077 (N.D. Ill.
1998); First Nat’l Bank & Tr. Co. v. Brant (In re Calumet Farm, Inc.), 398 F.3d
555, 559–60 (6th Cir. 2005); Qatar Nat’l Bank v. Winmar, Inc., 650 F. Supp. 2d
1, 10 (D.D.C. 2009) (mem.); see also Equilease Corp. v. Hentz, 634 F.2d 850, 853
(5th Cir. Jan. 1981) (“It is patently unfair to require an innocent payee who
has received and used the money to satisfy a debt to repay the money.”
(emphasis added)); cf. Strumpf, 516 U.S. at 19 (noting the majority setoff rule
requiring “(i) a decision to effectuate a setoff, (ii) some action accomplishing
the setoff, and (iii) a recording of the setoff” (citing Baker v. Nat’l City Bank
of Cleveland, 511 F.2d 1016, 1018 (6th Cir. 1975))). We need not decide
which rule applies. It does not matter whether the value in discharge for
value is given by force of law upon receipt and maturity or via an
affirmative action of the creditor because a creditor must at least be capable
of setting off a debt (and thus giving value) using the funds that have
mistakenly come into its possession. Before maturity, a creditor cannot do
so and, in any event, has received a pure windfall.

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17
suddenly to gain that right if, rather than holding the debtor’s assets
already, the creditor were instead to receive a payment made by
mistake. In other words, a creditor may not take a third party’s
money, even if sent in the name of the debtor, to cover a debt that isn’t
yet due, just because the creditor will become entitled to receive that
money from the debtor in the future.
Although the right of setoff can be expanded by contract, the
2016 Term Loan Agreement here unsurprisingly preserved this basic
constraint. See Revlon, Inc., Annual Report (Form 10-K) exhibit 4.6
(Mar. 3, 2022) (2016 Term Loan Agreement § 10.7(b)) (allowing
Revlon’s lenders to “set off” funds “held or owing by such
[l]ender . . . to or for the credit or the account of [Revlon],” but only
“upon any amount becoming due and payable” by Revlon (emphasis
added)). Neither the general common-law right of setoff nor the
specific contractual right here could be exercised because Revlon’s
debt was not due.
Without setoff, a creditor on an unmatured debt is not a “bona
fide purchaser of the money.” Restatement (Third) of Restitution
§ 67 cmt. a (citing Restatement (First) of Restitution § 14)). So the
ordinary rule of restitution applies.
2. The Creditors’ Windfall
Defendants’ argument also fails for a related, more basic
reason: The Creditors received a massive windfall by being paid in
full three years early. As the majority recognizes, “[a]pplication of
the discharge-for-value rule to our facts [would] bring[] the Lenders
a huge windfall over and above what they bargained for.” Maj. Op.
at 90. The bona fide purchaser is protected because it would be
unjust and inequitable to claw back property from one who

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18
innocently gave value for it. The defense does not apply to a
recipient who received a pure windfall—for example, a donee who
received the subject property for free. See Simonds v. Simonds, 380
N.E.2d 189, 194 (N.Y. 1978); Oliver v. Piatt, 44 U.S. 333, 401 (1845)
(Story, J.) (emphasizing the “full right to follow such property into the
hands of such third person, unless he stands in the predicament of a
bona fide purchaser, for a valuable consideration, without notice”); J.B.
Ames, Purchase for Value Without Notice, 1 Harv. L. Rev. 1, 3 (1887) (“If
he gave no value, though his acquisition was honest, his retention of
the title, after knowledge of the equity, is plainly dishonest.”); see also
Restatement (First) of Restitution § 13 cmt. a (noting that Section 14
“merely creates convenient rules for determining which of two
innocent persons should bear a loss” (emphasis added)). Without
entitlement, there would be no injustice in allowing recovery, and the
discharge-for-value defense does not apply.
At a minimum, a creditor invoking the defense must have
received only what he was owed. But the Creditors here received an
unearned gain—and will have suffered no loss after restitution—
because they were not yet entitled to be paid. To be sure, the Term
Loan Agreement provided for the possibility of prepayment, but only
if Revlon chose to do so. See Joint App’x at 1263 (2016 Term Loan
Agreement § 2.11(a)) (“[Revlon] may at any time and from time to
time prepay,” under certain conditions, any tranche of its loans.
(emphasis added)). By definition, prepayment is an option of the
debtor, not a right of the creditor. See Prepayment Clause, Black’s Law
Dictionary (11th ed. 2019) (“A loan-document provision that permits
a borrower to satisfy a debt before its due date.” (emphasis added)).

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19
The Creditors could not demand payment until 2023, and they were
not entitled to their principal until then.16
It does not matter, as the Creditors suggest, that they were
entitled to be paid eventually. A dollar today is not equal to a dollar
tomorrow. See generally Irving Fisher, The Theory of Interest (1930).
That is why debt contracts include detailed terms about the timing of
payments, and why repayment timing invariably affects other
elements of the bargain including the amount of interest, covenants
made by the debtor, and the like. The Creditors’ argument—that
there is no “time” in “entitlement”—defies the basic premise of debt
contracts, whose function is to exchange the time value of money: A
debtor becomes entitled to cash now; a creditor, to money plus
interest on a future date.
The windfall the Creditors received here is hard to overstate.
On August 11, 2020, the Creditors were entitled to nothing.
Moreover, they had just lost a bitter dispute with Revlon, held loans
that were trading for a fraction of their face value, and were on the
verge of filing a suit alleging a default.17 Then, out of the blue, they
16 If Revlon had decided to prepay its debt in full, and if Citibank
had provided the contractually required prepayment notice, then the debt
would have become “due and payable on the date specified therein.” See
Joint App’x at 1263 (2016 Term Loan Agreement § 2.11(a)); cf. Chase
Manhattan Bank v. Burden, 489 A.2d 494, 497 (D.C. 1985) (granting discharge
for value based on the equitable right to receive discretionary transfer once
that discretion is exercised). But absent such notice of prepayment, the
status quo remained unchanged and the debt was not due for three years.
17 The Creditors briefly suggest that they were in fact entitled to the
transferred funds by reason of Revlon’s default. Specifically, they say that
a notice of default issued on August 12, 2020 (the day after the mistaken

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20
received half a billion dollars in cash—a pure bank error in their
favor.18 Discharge for value protects only parties who received what
they bargained for. That does not include the Creditors here.
3. Banque Worms
In Banque Worms v. BankAmerica International, 928 F.2d 538 (2d
Cir. 1991), we asked the New York Court of Appeals whether it
follows the Restatement’s discharge-for-value rule. Id. at 539. The
court answered that it does, and both its conclusion and its
articulation of the rule were consistent with the Restatement—
including its implied present-entitlement requirement. Id. The
majority agrees that the present-entitlement requirement is “clear” in
Banque Worms and every precedent relied on therein (a reflection of
long-established principles of equity).
In Banque Worms, Spedley Securities (the debtor) had
maintained a revolving credit agreement with Banque Worms (the
transfer, but—apparently purely by coincidence—just before the Recall
Notices were sent) accelerated the debt and made it then due and payable.
That argument, which was asserted summarily, mentioned only in a
footnote, and raised for the first time on appeal, is forfeited. See Norton v.
Sam’s Club, 145 F.3d 114, 117 (2d Cir. 1998); Universal City Studios, Inc. v.
Corley, 273 F.3d 429, 445 (2d Cir. 2001) (“[W]e have repeatedly ruled that
arguments presented to us only in a footnote are not entitled to appellate
consideration.”); Greene v. United States, 13 F.3d 577, 585–86 (2d Cir. 1994).
18 Although I would not reach the issue, I agree with the majority
that the Creditors were on inquiry notice. See supra at 4–6. But I am
puzzled by the majority’s extensive discussion about the correct notice
standard, given that the Creditors (a) do not argue that anything other than
constructive notice applies, and (b) do not cite any authority defining
“constructive notice” under New York law as anything other than “inquiry
notice.”

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21
creditor). Banque Worms decided not to renew the agreement and
demanded payment of the outstanding debt on the due date, which
was in ten days. Id. At 12:36 am on the due date, Spedley initially
instructed Security Pacific (the agent) to send nearly $2 million to
Banque Worms. But three hours later, Spedley revoked that
instruction and told Security Pacific to pay a different creditor
instead. Id. at 539–40. Security Pacific mistakenly executed both
transfers that same day, leaving Spedley’s account in overdraft and
Security Pacific on the hook for the mistaken transfer to Banque
Worms. Banque Worms refused to return the money, which
reflected the sum that had become due just hours before the funds
were transferred. Litigation ensued, with Banque Worms and
Security Pacific both asserting claims to the funds. Id. at 540.
Citing Banque Worms’s argument based in the bona fide
purchase rule, the Court of Appeals answered that New York does
indeed recognize the defense. The Court of Appeals explained that
the defense “furthers the policy goal of finality in business
transactions.” Banque Worms, 570 N.E.2d at 196. After citing
several early cases concerning title to money, the Court of Appeals
noted that the rule was also consistent with the policy goals of the
newly enacted Article 4-A of the New York Uniform Commercial
Code. Id. at 195–97. Elaborating on the defense that it adopted, the
court explained that “[w]hen a beneficiary receives money to which it
is entitled and has no knowledge that the money was erroneously
wired . . . such a beneficiary should be able to consider the transfer of
funds as a final and complete transaction, not subject to revocation.”
Id. at 196 (emphasis added).

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22
In line with the principles underlying the bona fide purchase
rule, the Court of Appeals expressly held that Banque Worms was
protected by the discharge-for-value rule because it was “entitled to
the funds” it received. Id. at 198 (emphasis added); see also 82 N.Y.
Jur. 2d Payment and Tender § 107 & n.4 (citing Banque Worms for the
proposition that the discharge-for-value rule applies only for “a debt
which is due”); Credit Lyonnais N.Y. Branch v. Koval, 745 So. 2d 837,
841 (Miss. 1999) (explaining, by reference to the “preeminent case on
erroneous wire transfers” Banque Worms, that “the beneficiary
receiving the funds transfer must be entitled to receive money in
payment of a debt”); A.I. Trade Fin., Inc. v. Petra Bank, No. 89-cv-7987,
1997 WL 291841, at *4 (S.D.N.Y. June 2, 1997) (citing Banque Worms for
the point that “[t]he discharge for value rule contemplates that at the
time of the erroneous transfer the transferee/beneficiary have some
present entitlement to the funds”); 3 Palmer § 16.6, at 580–82 (“In
situations of endless variety, courts have denied restitution because
money paid by one party was received in good faith by the other, in
satisfaction of . . . a valid claim against a third person.” (emphasis
added)). The Creditors and the district court find ambiguity in
Banque Worms where there is none.19
Of course, the facts of Banque Worms are very similar to those of
this case. But there is one crucial difference: Unlike the Creditors
here, Banque Worms was entitled to the money it mistakenly
19 The majority implies that Banque Worms adds a present-
entitlement requirement not otherwise included in Section 14. Maj. Op. at
91 (“[T]he district court is correct that Section 14 of the First Restatement
does not mention a present entitlement requirement.”). As Citibank
correctly argues, Banque Worms explicitly states a requirement that the
Restatement necessarily implies. See Appellant’s Brief at 26.

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23
received. Indeed, it had just discontinued a revolving credit
agreement and demanded payment, which was received on the very
day it was due. The payment thus arrived exactly as expected and
exactly as owed. Banque Worms, 928 F.2d at 539. The Creditors here
received the principal amounts of their loans, which were not due
until 2023. They clearly lacked entitlement under any definition of
the term or reading of New York caselaw, as the majority observes.
This lack of entitlement is dispositive—Banque Worms had a
preexisting right to keep the money it received; the Creditors did not.
That should be the end of the matter.
C. The Creditors’ View
The Creditors contend that a lender not yet owed back its
money becomes entitled to be repaid early simply because a payment
was made by mistake. Under their theory, discharge for value
would operate as a kind of legal alchemy, transforming far-away debt
payments into cold hard cash. The Creditors’ view has no basis in
law, equity, or common sense.
1. Textual Arguments
Instead of addressing the legal content of the defense
incorporated by the Restatement and then adopted in Banque Worms,
the Creditors draw the wrong lessons from the text. They say that
Section 14 doesn’t mention a present-entitlement requirement, only a
“discharge” of the debt of a “creditor”; and that our Court, in
interpreting the decision of the Court of Appeals in Banque Worms,
found it important that Banque Worms was a “bona fide creditor.”
Banque Worms, 928 F.2d at 541.

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24
These arguments are misguided. The “discharge” in
discharge for value requires a discharge in exchange for value. See
supra Section II.B.1. And in Banque Worms, our Court referred to
Banque Worms as a “bona fide creditor” in passing only after
explaining in detail the timeline of events and Banque Worms’s
entitlement to the funds. 928 F.2d at 539–40. More broadly, the
Creditors’ style of argument—relying on cherry-picked, isolated
phrases taken out of context—is misplaced. “The language of an
opinion is not always to be parsed as though we were dealing with
the language of a statute.” Brown v. Davenport, 142 S. Ct. 1510, 1528
(2022) (cleaned up) (quoting Reiter v. Sonotone Corp., 442 U.S. 330, 341
(1979)). Neither the American Law Institute (in drafting the
Restatement) nor the New York Court of Appeals (in deciding Banque
Worms) acted as a legislature drawing up a new rule, requiring us to
evaluate the meaning of statutory language. Rather, both relied on
well-settled rules of law and equity, which we are bound to apply
even if doing so may require more effort than reading legal text.
Here, Defendants’ view—which effectively reads out “value”
from “discharge for value”—is unfounded. Ordinarily, a recipient
of mistakenly transferred funds must prove reasonable, detrimental
reliance on the other party’s mistake—and may keep transferred
property only to the extent that recovery would be unjust. See
Banque Worms, 570 N.E.2d at 192; Restatement (First) of Restitution
§ 69(1)–(2). Discharge for value, like the general defense of bona fide
purchase, deems giving value as a substitute for a special showing of
reliance. See supra Section II.A. There is thus an intuitive parallel
between these two defenses: Mistake of fact requires detrimental
reliance before a recipient is put on notice, and discharge for value
similarly requires giving value before a recipient is put on notice.

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25
The Creditors, like the district court, try to invert this principle by
contending that because a discharge-for-value creditor need not show
reliance, it also need not show value given. But bona fide purchase
excuses a separate showing of reliance because the purchaser has given
value. Simply being a creditor entitled to payment sometime in the
future, without reliance or value, is irrelevant.20
2. Policy Arguments
The Creditors also raise two unpersuasive arguments based on
policy concerns. First, they assert that forbidding restitution here,
even if it might result in injustice, would advance “finality.” But, as
the majority correctly points out, the Court of Appeals in Banque
Worms did not express any interest in ensuring that transactions are
“final,” in the sense that they cannot be undone, in all cases. To the
20 The Creditors claim to find support in the Third Restatement, which
allows for retention of funds even where a creditor has “something short of
an enforceable right.” Restatement (Third) of Restitution § 67 cmt. c. The
Creditors overread this language. See id. § 67 cmt. h (“The object of the
rule of § 67 is not the ‘finality’ of payment transactions without
more . . . but the security of expectations of ostensible ownership—
expectations that are reasonably formed on receipt of money to which the
payee is apparently entitled.” (emphasis added)). In any event, the Court of
Appeals explicitly adopted the rule of the First Restatement, the Third was
published twenty years after Banque Worms, and the latest edition
forthrightly admits that it seeks to “state[] the rule more broadly” than the
First Restatement to cover “a wide range of transactions.” Id. § 67 cmt. a;
see also Kansas v. Nebraska, 574 U.S. 445, 475 (2015) (Scalia, J., dissenting)
(noting that “modern Restatements—such as the Restatement (Third) of
Restitution . . .—are of questionable value, and must be used with caution”
given the authors’ increasing “abandon[ment] [of] the mission of describing
the law” and their “cho[ice] instead to set forth their aspirations for what
the law ought to be”).

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26
contrary, it held that “[w]hen a beneficiary receives money to which it
is entitled and has no knowledge that the money was erroneously
wired . . . such a beneficiary should be able to consider the transfer of
funds as a final and complete transaction, not subject to revocation.”
Banque Worms, 570 N.E. at 196 (emphasis added). This holding
echoes traditional equitable and commercial concerns, not a rule of
“finders, keepers.” If the court wanted to insist on the finality of all
errant transactions, it would have had to do away altogether with the
law of unjust enrichment, which provides for the unwinding of
otherwise-final transfers. See Andrew Kull, Rationalizing Restitution,
83 Calif. L. Rev. 1191, 1234 (1995). An erroneous transfer by itself
creates no new “final” entitlement: Discharge for value lets a creditor
keep mistakenly transferred funds if it was already entitled to those
funds, but it does not convert a mistake into a sudden acceleration of
maturity.
Second, drawing on the reasoning of the district court, the
Creditors suggest that, by penalizing transferors for their mistakes,
courts might encourage them to take greater care. But to what end,
and at what cost? If a transferor discovers its mistake and asks for
its money back before the transferee has either relied on or given
value for it, then there is no harm done—not to the transferee, and not
to anyone else. All that remains is the transferor’s own, internalized
cost of pursuing recovery, a cost that supplies the efficient deterrent.21
21 See J. Beatson & W. Bishop, Mistaken Payments in the Law of
Restitution, 36 U. Toronto L.J. 149, 150 (1986) (Where a “mistaken payment
is very quickly discovered . . . [a]ny such avoidance expenditure would be
wasted—a costly attempt to avoid a costless event.”); Dhammika
Dharmapala & Nuno Garoupa, The Law of Restitution for Mistaken Payments:

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27
The law thus allows mistaken transferors to recover even if they were
negligent. Ball, 95 N.E. at 721.
And even if we were permitted to modify the discharge-for-
value rule to achieve the policy ambitions articulated by the district
court, it would be bizarre to do so here. In particular, the district
court’s warning that “the banking industry could—and would be
wise to—eliminate the risk [of mistakes] altogether” is especially
inapt in the context of what it called a “Black Swan” event. 22
Citibank, 520 F. Supp. 3d at 451. Denying recovery would senselessly
induce loan agents to expend resources in a futile effort to prevent all
possible mistakes, no matter how unpredictable, and no matter how
An Economic Analysis (manuscript at 30) (Feb. 2022),
https://ssrn.com/abstract=3902607 (“[I]t is clear . . . that [full restitution] is
socially optimal whenever harm is unilateral—i.e., when a mistaken
payment imposes [harm] only on the payer (absent restitution).”); Maytal
Gilboa & Yotam Kaplan, The Cost of Mistakes, 122 Colum. L. Rev. F. 61, 67
(2022) (“[A]s long as the mistake is harmless, restitution should be available
to protect the payer.”); Peter K. Huber, Mistaken Transfers and Profitable
Infringement on Property Rights: An Economic Analysis, 49 La. L. Rev. 71, 83
(1988) (“[A]s long as the recipient has not disposed of the money, he
generally suffers no loss if he has to turn it over to the transferor-
claimant.”).
22 Indeed, the entire point of the “Black Swan” framework that the
district court invoked is that predicting extreme events is an impossible,
counterproductive task. See Nassim Nicholas Taleb, The Black Swan: The
Impact of the Highly Improbable 208 (2d ed. 2010) (“[D]o not try to predict
precise Black Swans . . . . Remember that infinite vigilance is just not
possible.”). Instead, the theory goes, systems should be “robust” in that
they can flexibly respond to errors when they inevitably occur. Id. at 322.
For example, perhaps rather than imposing on banks a duty to prevent all
possible errors, the law might allow them to recover mistakenly transferred
funds when a transferee has neither relied on nor given value for them.

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28
harmless. It should come as no surprise that the opinion below has
roiled the market for commercial debt, to the point where the type of
contract clause overriding the district court’s rule already has its own
name: “Revlon blocker.” See Brief of Professors of Law and
Economics as Amici Curiae at 27; Eric Talley, Discharging the
Discharge-for-Value Defense, 18 N.Y.U. J.L. & Bus. 147, 154 (2021)
(reporting a “veritable flood” of 150–200 such Revlon blockers per
month following the decision, compared to exactly one contract
affirmatively adopting the district court’s rule).
III. CONCLUSION
Although the Court has ultimately arrived at the correct
conclusion, our timing is unfortunate. Citibank filed suit within six
days of its mistake, the district court conducted a full bench trial and
published a detailed opinion six months later, and we set out to
expedite consideration of this case. But it has now been nearly a year
since oral argument and over two years since the mistaken transfer.23
In that time, Citibank has lost out on tens of millions of dollars in
returns on its frozen funds. Businesses and their lenders have
scrambled to negotiate various new terms into their agreements. See
Talley, supra, at 199–200. And the parties, as well as the market at
23 At oral argument, it was suggested that we might be amenable to
certifying questions to the New York Court of Appeals. Thankfully, no
one defends that path—and the months or years of additional litigation it
could entail—today. In fact, even the party that floated the possibility of
certification has since written to the Court that, in light of intervening
events, see infra at 29–30, the parties would instead “benefit from a prompt
resolution of this appeal.” Appellant’s Rule 28(j) Letter at 1 (June 22, 2022).

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29
large, have had to manage the uncertainty our indecision has caused
them.
This delay has had dire repercussions for Revlon, the company
at the center of this case. Both sides contend that through
subrogation, the district court’s judgment has put Citibank in the
shoes of the Creditors, obliging Revlon to pay Citibank instead and
transferring to Citibank the credit risk of Revlon’s distressed debt. A
company like Revlon—no stranger to restructuring its debts—would
normally try to negotiate with its creditors when struggling to meet
its obligations. But Revlon never recognized Citibank’s subrogation
claim, 24 and even if it had, Citibank would have been at best a
substitute creditor, whose claim (if any) would revert to Defendants
once Citibank finally reclaimed its funds. Revlon cannot secure
additional senior financing without the consent of a majority of the
2016 Term Creditors, but for the past two years, no one has been able
to agree on who would constitute such a majority. So Revlon
“effectively has had, since August 11, 2020, no 2016 Term Loan[]
counterparty with which it can negotiate,” and on June 15, 2022,
Revlon filed for Chapter 11 bankruptcy. Declaration of Robert M.
Caruso, Chief Restructuring Officer at 7, In re Revlon, Inc., No. 22-
10760 (Bankr. S.D.N.Y. June 16, 2022), ECF No. 30. Revlon, a
century-old American company, cited not just its business troubles,
but also “significant and unprecedented difficulty in managing its
capital structure out of court.” Id. at 37. That difficulty, Revlon
24 See Revlon, Inc., Quarterly Report (Form 10-Q), at 33 (May 4, 2022)
(“Citi has also asserted subrogation rights, but, as yet, there has been no
determination of those rights (if any) under the 2016 [Term Loan] and
Revlon has not taken a position on this issue.”).

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said, stemmed from the fact that “the Second Circuit ha[d] not yet
issued a decision” in this case. Id.
Respectfully, the correct conclusion in this case was clear from
the start. At bottom, Defendants received a payment to which they
were not entitled, for which they did not bargain, and on which they
did not rely. Their only real asserted justification for keeping
Citibank’s money is “finality”—the fact that they have it. But that is
not enough to claim ownership over someone else’s property.
Possession is not ten-tenths of the law.
I join only in the majority’s judgment.

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