Ohio Supreme Court Upholds Dismissal of Class Action Challenging Bank's Interest Calculation Method

Class Action Commercial Lending

On November 21, the Ohio Supreme Court reinstated a lower court’s grant of summary judgment to a bank defending a putative class action challenging its interest calculation method as described in its promissory note for a commercial loan. JNT Properties, LLC v. KeyBank N.A., No. 2012-Ohio-5369, 2012 WL 5911063 (Ohio Nov. 21, 2012). The borrower alleged that the bank was in breach of contract by calculating interest using the 365/360 method, resulting in a higher effective rate than the rate stated in the promissory note. The bank maintained that the note clearly fixed the interest rate according to the 365/360 method. The trial court found in favor of the bank on summary judgment, but the appellate court reversed, concluding that the note was ambiguous and created a genuine issue of material fact as to which interest rate the note meant to impose. The Ohio Supreme Court reversed the appellate court and reinstated the trial court’s grant of summary judgment in favor of the bank. It held that the note’s “inartful use of the term ‘annual interest rate,’ which is clearly at variance with the next phrase setting the 365/360 method as the applicable method for computing interest,” does not render the clause defining the interest calculation method ambiguous. The court reasoned that the note was not so confusing that a reasonable person would think that the rate would be calculated using something other than the 365/360 method, and held that the note made clear that the term being defined was not the annual interest rate, but rather the interest computation method.