(Bloomberg) -- Investment firms shouldn’t be allowed to keep half a billion dollars Citigroup Inc. accidentally sent them because the payment wasn’t due for three more years, legal experts and advocacy groups said in asking a court to overturn the ruling.A group of law professors said in a brief filed Thursday with the federal appeals court in Manhattan that the lower-court ruling, allowing Revlon Inc. lenders to hold on to $504 million the bank wired them last August, misapplied legal precedent and could harm the industry’s standards.“The sheer magnitude of the transfer, constituting nearly 100 times the size of defendants’ scheduled coupon payments, was a giant ‘red flag,’” the professors told the court. They said the prepayment of the 2016 loan, at par and without notice, “constituted another glaring red flag that would have caused a reasonable person to inquire.”The law shouldn’t encourage similar “self-imposed ignorance in situations where it is nearly costless for a party” to “uncover and remedy the error,” the professors said in their friend-of-the-court brief offering the judge their views. They aren’t a party to the case.$900 Million BlunderThe conflict started after Citigroup inadvertently wired more than $900 million to asset managers for the Revlon lenders and then asked for it back. The bank sued firms, including Brigade Capital Management, HPS Investment Partners and Symphony Asset Management, that wouldn’t return the funds. It unexpectedly lost that battle in February.The embarrassing blunder forced Citigroup to answer to regulators and tighten its internal controls. The ruling was a boon to creditors, which had been locked in a battle with billionaire investor Ronald Perelman’s struggling cosmetics company over previous restructuring maneuvers.Read More: Citi Asks Court to Reverse $500 Million Transfer DecisionCitigroup has asked the appeals court to overturn U.S. District Judge Jesse Furman’s decision, saying it “sent shockwaves through the markets and generated outcry across the financial industry.” Oral argument in the appeal will be held in August or September.The professors said the funds “were not due until the term loan matured in 2023,” and full repayment required prior written notice from both Revlon and Citibank that never occurred and was never questioned. The payment occurred outside of the contract between the investors, the company and the bank, which was acting as administrative agent on the loan. That should have “put a reasonable lender on notice of Citibank’s mistake,” they said.‘Manual Touches’The Loan Syndications and Trading Association offered similar arguments in its own friend-of-the-court brief, saying the mistaken payment has already “significantly disrupted” the drafting and negotiation of credit facilities and the expectations of participants in the market. Mistakes will happen because the often automated transactions require “manual touches,” the trade group said.Another brief was filed by the American Bankers Association, the Bank Policy Institute, the Clearing House Payments Company LLC and the Clearing House Association LLC in support of Citi. They said allowing the decision to stand would “upset well-settled industry customs and practices” followed for 30 years.“The daily volume and size of wire transfers executed by banks have increased exponentially,” those groups said. “Banks should not solely bear the risk of human error visà-vis lenders who, in this case, would suffer no injury if the mistakenly transferred funds were returned.”Furman’s decision letting the investment firms keep the money was based on a 1991 New York state court case, Banque Worms v. BankAmerica International. In that case, New York’s highest court ruled that under a principle called discharge for value, when a third party mistakenly sends money from a debtor to a creditor, the creditor can keep the payment if it didn’t realize it was sent in error and didn’t make any misrepresentations.But the mistaken payment in the Banque Worms case was money due to the creditors at the time it was sent, critics of the Citi ruling noted.Read More: Citi Faces ‘Finders Keepers’ in Fighting $500 Million RulingThe Citi decision could have “substantial, detrimental effects” on the industry, including adding costs and risks in the leveraged loan market, “discouraging parties from engaging in collaborative contracting and punishing those who do,” and introducing “uncertainty into both new and already existing leveraged loan agreements,” the Loan Syndications and Trading Association said.The academic group includes Columbia Law School professors Eric Talley, Talia Gillis, Ronald Gilson, Joshua Mitts and Robert Scott; University of California at Berkeley professor Robert Bartlett; University of Michigan professor Albert Choi; and University of Pennsylvania professor David Hoffman, as well as Edward Morrison, co-director of the Richard Paul Richman Center for Business, Law, and Public Policy at Columbia.The appeal is Citibank NA v. Brigade Capital Management LP, 21-487, U.S. Court of Appeals, Second Circuit (Manhattan). The lower-court case is Citibank NA v. Brigade Capital Management, 20-cv-6539, U.S. District Court, Southern District of New York (Manhattan).(Updates with filing by other groups)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.