Monday, June 17, 2024

nCino agrees to settle antitrust suit for $2.2M, denies claims of wrongdoing

nCino settles an antitrust civil suit for $2.2 million, more than a year after Live Oak Bank and Apiture resolve the matter. (Port City Daily/Shea Carver)

WILMINGTON — After standing its ground amid settlement offers from two other defendants in an antitrust violation civil suit, nCino agreed to a resolution last week.

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

The financial banking firm was the hold-out among a civil suit filed in March 2021 against nCino, Live Oak Bank and Apiture — three interconnected companies all headquartered in Wilmington.

Live Oak Bank was created in 2008, and three years later Chip Mahan and Neil Underwood co-founded nCino. In 2017, Live Oak partnered with First Data Corporation out of Austin, Texas, to launch Apiture.

nCino agreed Aug. 21 to settle for $2.2 million after ongoing discussions with plaintiffs in a class action suit that alleged the three financial tech businesses had a “gentlemen’s agreement” not to hire each other’s employees unless mutually agreed upon by top execs.

The payout will be distributed to nearly 2,000 employees who worked for Live Oak Bank, Apiture, and nCino from January 2017 through March 2021. Funds will be distributed based on an employee’s current salary and tenure with the company.

The settlement terms are “largely identical” to those laid out in a resolution with Live Oak and Apiture last year for employee pay-out (which excludes board members, C-suite and executive-level managers). nCino also agreed not to enter into, maintain or enforce any agreement with another employer that violates antitrust laws.

The class action suit filed by former employee Joseph McAlear calls out the “no-hire” arrangement as unlawful, violating section 1 of the Sherman Act and North Carolina General Statutes 75-1 and 75-2 — both essentially making it illegal to stifle competition among a specific market.

The deal reached last week was the third and final in a two-year case.

McAlear filed the complaint on behalf of all employees, stating the no-poaching consensus reduced competition within the local market and suppressed wages for all workers in the field.

Live Oak Bank and Apiture agreed to settle $4.65 million in October 2021 and were granted approval by Wilmington-based U.S. Chief District Judge Richard Myers in April 2022, with Live Oak paying the bulk of the money, $3.9 million.

As part of the resolution, Live Oak and Apiture agreed to not enter into any no-hire agreements with other companies and also to cooperate with the plaintiff’s case. The companies produced more than 60,000 pages of documents and agreed to provide witnesses if the case reached trial.

Meanwhile, nCino was willing to let the case carry on.

“While nCino strongly believes that it would prevail on the merits and that it has not violated the antitrust laws, in order to avoid the distraction and expense of protracted litigation and instead continue to focus on its employees and customers, nCino agreed to settle this matter for $2.19 million,” a motion submitted Aug. 29 notes.

The plaintiffs’ counsel, Daniel Lyon and Robert Elliot out of Winston-Salem and Dean Harvey and Ann Shaver from San Francisco, California, will receive 33% of the settlement money.

McAlear will be awarded $90,000 for his contributions, instigating the case and “ongoing reputational harms” suffered from bringing legal action. He also received an independent $120,000 from the Live Oak and Apiture settlement.

McAlear first brought the issue to light during his two-year stint with Live Oak and then Apiture. He joined Live Oak as a project manager in April 2017 and was promoted to vice president of Apiture when the company was spun off from Live Oak the same year.

In April 2019, McAlear attended a conference in Raleigh where he met nCino recruiter Ren Yonker. When he applied to work at nCino in a position fitting for his skill set, he was told the companies have agreed not to recruit each other’s employees.

The former employee also openly expressed his opposition to the policy when it was being discussed in the office the same year; his position was eliminated shortly thereafter. When McAlear tried to apply to nCino again after leaving Apiture, he was still rejected.

In nCino’s submitted motion last week, the company claims it has documentation proving McAlear was not hired for “legitimate reasons” and not because of any agreement in place.

Ultimately, the software developer had to move to the Research Triangle to find a suitable position.

An nCino spokesperson declined to answer any of Port City Daily’s questions regarding the lawsuit.

“Beyond what is included in the original filing, nCino does not have any additional comment,” nCino spokesperson Natalia Moose wrote in an email Wednesday.

In its submitted motion, nCino noted several facts it would offer if the case had proceeded to trial. The company claims to hire applicants from Live Oak and Apiture at a greater rate than the general population, noting between May 2018 and December 2020, nCino hired 15% of applicants from the two companies.

Responding to the notion it does not hire local employees — alleged in the original complaint from 2021 — nCino said it hires from a nationwide pool. It added 75% of offers are made to applicants outside Wilmington and 50% of new hires coming from other parts of the country.

The company currently has more than 1,650 employees, though it laid off 7% of its workforce — roughly 120 employees, including the chief financial officer — in January, citing a fluctuating market.

ALSO: nCino lays off 7% of workforce, CFO exits 

The 2021 complaint also alleges employees of the three companies earned less than market rate due to the no-compete agreement. 

“The entire pay structure gets depressed when employers engage in conduct that decreases competition in their labor markets,” the plaintiff’s attorney Anne Shaver told PCD in March 2022. “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 claims in its submitted settlement motion its average compensation in 2020 was double that in the Wilmington labor market.

In May 2023, nCino and the plaintiffs agreed to mediation with Jonathan Harkavy, the same mediator who helped reach a settlement with Live Oak and Apiture, but parties were unable to agree.

According to court documents, Harkavy continued conversations with counsel for both parties and ultimately recommended $2.2 million, equal to 1.3% of total compensation for employees that were working between 2017 and 2021, for eligible staff.

nCino’s and its cloud banking software is used by 1,850 financial institutions worldwide.

The settlement with nCino and plaintiffs still has to be formally approved by Judge Myers, but both parties submitted motions to the courts last week authorizing the resolution.

The U.S. Department of Justice was also investigating the company for criminal violations of antitrust laws, but it announced in February 2023 the case was closed with no fines, sanctions or penalties imposed on the company or its employees.

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