Lawsuit accused him of soliciting clients, using confidential information
In a ruling that underscores the growing use of restrictive covenants in the financial services industry, a federal judge has partially blocked a former executive of Union Home Mortgage Corp. from competing against the company, finding he likely violated contractual obligations after moving to a rival firm.
The decision, issued by Judge Charles E. Fleming of the US District Court for the Northern District of Ohio, stems from a lawsuit filed by Union Home Mortgage against Christopher Fratelli, a former branch manager who resigned in 2023 and joined EMM Loans, LLC, a competitor.
Union Home accused Mr. Fratelli of breaching multiple provisions of his employment contract, including clauses that prohibited him from soliciting clients, using confidential company information, and competing with Union Home in key markets. The company also alleged that Mr. Fratelli improperly facilitated the transition of a former assistant to EMM.
At the center of the case is the employment agreement Mr. Fratelli signed in 2022. The contract included:
- A non-compete clause, barring him from originating or brokering mortgage loans in states where he had done business for Union Home within 36 months of his departure.
- A non-solicitation clause, prohibiting him from soliciting former customers or prospective clients for two years.
- A confidentiality clause, restricting his use of Union Home’s proprietary information.
- A provision automatically extending restrictions by one year if breached.
Union Home claimed Mr. Fratelli downloaded confidential client data from the company’s internal systems, transferred it to a personal Dropbox account, and used it to solicit business after joining EMM.
Mr. Fratelli countered that the information he retained—including client lists and referral sources—was publicly available and that his new role differed from his prior position. He also argued that his former assistant’s departure from Union Home was part of a company-wide layoff and not at his behest.
Judge Fleming largely sided with Union Home, ruling that the customer lists compiled by Mr. Fratelli qualified as trade secrets under federal and Ohio law. While much of the underlying information was public, the judge said the specific aggregation and structure of the lists gave them competitive value.
However, the court rejected Union Home’s claim over a separate referral source list, concluding that the information was publicly available and could easily be recreated.
The judge also found the non-compete and non-solicitation provisions enforceable but trimmed their geographic and temporal scope. He limited the non-compete to 16 counties in Pennsylvania -specifically those within 75 miles of Harrisburg, where Mr. Fratelli had originated loans - rejecting Union Home’s attempt to apply the restriction to parts of Florida. Similarly, the non-solicitation clause was narrowed to apply only to actual Union Home customers, not prospective clients.
While Judge Fleming acknowledged that Mr. Fratelli had played a role in facilitating his assistant’s move to EMM, he declined to issue an injunction related to the non-solicitation of employees, citing a lack of evidence of ongoing or imminent harm.
The court extended the duration of the restrictions by one year, citing Mr. Fratelli’s violations, but required Union Home to post a $100,000 bond to offset potential financial harm to Mr. Fratelli.
The ruling highlights the increasing reliance of financial firms on restrictive covenants to protect client relationships and proprietary data amid intensifying competition. But it also reflects courts' growing tendency to scrutinize such agreements for fairness and proportionality.
Union Home’s partial victory comes as the mortgage lender, headquartered in Strongsville, Ohio, faces broader challenges in retaining talent in a competitive market. It is also suing nine East-coast ex-employees who joined American Pacific Mortgage.
For Fratelli, who had worked for Union Home for more than eight years, the decision narrows his ability to conduct business in the Pennsylvania mortgage market, though it leaves him free to continue working outside the restricted counties.
