By James McNair
The Cincinnati Enquirer

The state appeals court in Cincinnati has ruled that KeyBank must return to trial in the case of a former loan officer who rejected a businessman's application for a loan to buy a pump distributorship, then bought the company herself a week later.

The Hamilton County Common Pleas case, which went to trial in December 2001, involved the bank, former loan officer Carol Sapinsley and Fort Mitchell business consultant Jeffrey Groob. The jury ordered Sapinsley to pay $556,000 and legal expenses to Groob, but the claims against KeyBank were either tossed out by visiting Judge John Crouse or dismissed by the jury.

Last Friday, the Ohio First District Court of Appeals ruled in a 3-0 vote that Crouse erred on two issues pertaining to KeyBank. And because it could find no legal precedent in Ohio, the court sought guidance from similar cases in Oklahoma and Missouri.

"We have been unable to find any (Ohio) cases in which loan officers or banks took confidential information from a prospective loan applicant and used it for their own benefit," Judge Mark Painter said, writing for the court. "Thankfully, this situation is rare - most loan officers do not hijack customers' business opportunities."

Groob had accused KeyBank of breach of fiduciary duty, but Crouse threw that charge out before the case went to the jury. The judge also did not tell the jury that Key could be held liable for Sapinsley's actions as a loan officer.

Based on what it called an "error of law," the appeals court ordered a new trial on the issue of KeyBank's alleged breach of fiduciary duty. It also ruled that the next jury - assuming the case goes to a second trial - be told of KeyBank's possible liability for its employees.

"We conclude that a special duty of confidentiality exists between a loan applicant and the prospective lender," Painter wrote. "Banks or loan officers cannot use information obtained from loan applicants for their own benefit. Key therefore had a special duty of confidentiality to Groob."

The appeals court upheld Crouse's dismissal of a negligence claim against KeyBank.

KeyBank spokesman Gary Cavano said the company does not comment on litigation. Groob, who reached an out-of-court settlement with Sapinsley for a lower, undisclosed amount, said he, his wife and business partner were grateful for the appeals court ruling.

"It has been a very difficult road for us as individuals to take on a giant, well-resourced corporation like KeyBank, and we are all very pleased that we are now one step closer to justice and an ultimate resolution of this case," Groob said.

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E-mail jmcnair@enquirer.com.