Monday, February 26, 2024

$4.65M settlement agreement at hand in Live Oak Bank, nCino no-hire suit

Joseph McAlear, a 10-year resident of Wilmington, had his attorneys negotiate a settlement in a class-action lawsuit that alleged three local companies, nCino, Live Oak Bank and Apiture, conspired to avoid hiring each other’s employees. (Port City Daily/File)

WILMINGTON — Nearly a year after a former Live Oak Bank employee alleged in a class action lawsuit that major local companies had conspired to avoid hiring each other’s employees, a settlement agreement is now on the table. It could distribute millions of dollars to nearly 2,000 fintech workers. 

Joseph McAlear, a 10-year resident of Wilmington, joined the financial technology department of Live Oak Bank in April 2017, according to a lawsuit he filed last year. McAlear quickly became a vice president at Apiture, a digital banking solutions firm half-owned by Live Oak. 

The lawsuit was presaged by McAlear’s introduction at a conference to an nCino recruiter, from whom he allegedly learned that Live Oak Bank and nCino — founded in part by Live Oak executives in 2011 — did not hire talent from each other’s workforces. 

The no-poach agreement allegedly included Apiture, too, according to the lawsuit. The chief operating officer of Apiture reportedly told McAlear that “if any employee of either company wanted to pursue a position with the other company, he or she had to inform their current manager first, and the companies collectively would decide whether the application could proceed.”

Not long after McAlear expressed opposition to the alleged policy, his position at Apiture was eliminated, according to the lawsuit. He then applied to work at nCino, and his application was rejected. He sued Live Oak Bank and nCino in March 2021. 

In the past year, McAlear’s attorneys have negotiated a settlement with Live Oak Bank and Apiture. The payout is slated to be $4.65 million, divided among approximately 1,911 employees who have worked at the three companies since 2017 (with one-quarter of that going to attorneys, and a $120,000 “service award” for McAlear). 

“The entire pay structure gets depressed when employers engage in conduct that decreases competition in their labor markets,” said Anne Shaver, an attorney in San Francisco representing McAlear. “I do think that elimination of this conduct, which was part of the settlement agreement, will have an impact in that labor market there in Wilmington.”

nCino, in turn, did not sign on to the settlement agreement, and has repudiated McAlear’s allegations in court filings of its own. The nearly 2,000 fintech employees making up the class action suit includes hundreds of people who have been employed at nCino, according to court filings, and nCino-specific litigation will come after the settlement with the other two parties moves through the final approval process.

“They’ve answered the complaint,” Shaver said of nCino, “and the next step is for the court to issue an order starting the discovery process in that case.”

The existing settlement agreement, proposed last October, is also pending, as the deadline approaches for the class action group to challenge or opt out of the deal. If the court signs off on the agreement, not only would it unlock money for the fintech employees and their litigators, but it would also open avenues for Live Oak Bank and Apiture to begin collaborating with McAlear’s side. 

“Part of the settlement with Apiture and Live Oak is that they’ve agreed to litigation cooperation,” Shaver said. “They’ve agreed to provide us with access to witnesses, access to documents, and so forth. And that will happen only if the settlement is approved by the court.”

According to court filings, Live Oak Bank and Apiture have given the plaintiff’s legal team employee data to estimate damages in the case, and the attorneys are requesting that same kind of data from nCino. 

“The amount of recovery is significant, especially considering that the Settlements are only a partial resolution of the litigation, and that nCino continues to be jointly and severally liable for the totality of the class’s damages,” according to court filings. 

McAlear participated in an interview about his allegations with attorneys from the U.S. Department of Justice, court filings show. 

Broken down, $3.89 million of the settlement money will come from Live Oak Bank, and $777,000 will come from Apiture. “This is more than the recoveries in similar no-hire cases, and is especially notable given the early stage of the litigation,” according to legal filings from McAlear’s attorneys. 

In reporting its third-quarter earnings last year, Live Oak Bank disclosed a $3.9-million expense as part of settling a class action suit, but also noted receiving $3.7 million “related to an insurance recovery in regards to the same litigation.”

Both companies will make their employees available for interviews and depositions with McAlear’s lawyers, and moreover will assist “with the authentication of evidence.” 

“Such cooperation is valuable to the Settlement Class as Plaintiff continues to litigate this case,” according to court filings. 

Live Oak Bank and Apiture representatives declined to comment. nCino did not immediately respond to a request for comment. McAlear could not immediately be reached for comment.

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