Citibank's latest battle over accidental Revlon loan repayment

Citibank says that Revlon owes it $500 million. Revlon — currently operating under bankruptcy protection — would love to not owe Citi anything. So Citi has sued Revlon, in an attempt to get a judge to say that the debt is real.

Why it matters: Citi lost $500 million thanks to its own antiquated technology and a key legal precedent involving a French institution with the glorious name of Banque Worms. Now it wants to use another legal concept — subrogation — to ensure it can claw back at least some of that money from Revlon.

State of play: Citi didn't lend Revlon the money. Instead, it accidentally and unilaterally paid off a group of Revlon lenders. Citi is still trying to get its money back from those lenders, but it hasn't had much luck so far, and if it fails on that front, it wants to be able to chase Revlon for the money instead.

What they're saying: "It has become crystal clear that the Revlon Group and other constituencies have refused to acknowledge Citibank’s subrogation rights," says Citi in its lawsuit, adding: "As of the date of this filing, Citibank is subrogated to the rights of the Non-Returning Lenders. Period."

Translated into English: Revlon owed the lenders money; the lenders got paid in full; Revlon didn't pay anybody; so Citibank should be able to "subrogate" for the lenders — which is to say, it can take over their status as Revlon creditors.

• Citi's assertion is that Revlon's debt, much like Revlon's perfume, is lasting. (Revlon had been paying Citi interest, up until it filed for bankruptcy.)

The other side: "There isn't a lot of law on this," Columbia University law professor Eric Talley told Bloomberg last month, saying that subrogation rights are much more common in insurance than in finance. Once the debt is paid off, maybe it's just paid off.

• If Citibank loses the suit, then Revlon would be relieved of $500 million in liabilities.

The bottom line: If you're in the business of moving trillions of dollars around the world, it's probably a good idea to make sure your software is well-designed. Otherwise, you'll have to rely on judges, and they aren't always predictable.