McAlear v. NCino, Live Oak
McAlear v. NCino, Live Oak
McAlear v. NCino, Live Oak
Plaintiff
COMPLAINT - CLASS ACTION
v.
DEMAND FOR JURY TRIAL
nCINO, INC. and LIVE OAK
BANCSHARES, INC.,
Defendants.
individuals, hereby states and alleges the following against Defendants nCino, Inc.
(“nCino”) and Live Oak Bancshares, Inc. (“Live Oak Bank”) (collectively, “Defendants”).
1. This class action challenges an illegal agreement between nCino, Live Oak
Bank, and non-party Apiture LLC (“Apiture”) to suppress competition for each other’s
employees of nCino and Apiture, and employees in the software engineering department
of Live Oak Bank, employed in Wilmington, North Carolina. The express purpose of the
No-Hire Agreement was to prevent the companies from having to pay competitive wages
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2. The No-Hire Agreement began as early as nCino’s founding in 2011, and
has continued to the present. The No-Hire Agreement restrains competition in the labor
market and is per se unlawful under federal and North Carolina law. Plaintiff seeks
damages for violations of Section 1 of the Sherman Act, 15 U.S.C. § 1, and North
3. Plaintiff brings this action to recover treble damages, costs of suit, and
Sherman Act, 15 U.S.C. § 1, and North Carolina General Statutes §§ 75-1 and 75-2.
the Clayton Act (15 U.S.C. §§ 15 and 26) and 28 U.S.C. §§ 1331, 1337, and 1367.
Clayton Act (15 U.S.C. § 22) and 28 U.S.C. § 1391(b), (c), and (d) because a substantial
part of the events giving rise to Plaintiff’s claims occurred in this district, a substantial
portion of the affected interstate trade and commerce was carried out in this district, and
A. Plaintiff
Carolina. Mr. McAlear is a former employee of Live Oak Bank and Apiture. He was
injured in his business and property by reason of the violation alleged herein.
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B. Defendants
offering digital banking platforms to customers. It is headquartered and has its principal
C. Unnamed Co-Conspirators
technology. It is a joint venture between Live Oak Bank and First Data Corporation.
10. Plaintiff brings this action on behalf of himself and all others similarly
situated (the “Proposed Class”) pursuant to Federal Rule of Civil Procedure 23(a),
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11. Plaintiff does not, as yet, know the exact size of the Proposed Class because
such information is in the exclusive control of Defendants. Based upon information and
belief, there are at least seven hundred Class members. Joinder of all members of the
12. The questions of law or fact common to the Class include but are not
limited to:
between approximately 2011 and the present, which agreement expanded to include
N.C. Gen. Stat. §§ 75-1 and 75-2, , or alternatively whether the No-Hire
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g. whether the No-Hire Agreement restrained trade,
commerce, or
competition for employees between nCino and Live Oak Bank, and/or between nCino
and Apiture;
injury; and
i. the difference between the total compensation Plaintiff
and the Proposed Class received from nCino, Live Oak Bank, and Apiture,
and the total compensation Plaintiff and the Proposed Class would have
received from nCino, Live Oak Bank, and Apiture in the absence of the No-
Hire Agreement.
13. These and other questions of law and fact are common to the Proposed
Class, and predominate over any questions affecting only individual members of the
Proposed Class.
14. Plaintiff’s claims are typical of the claims of the Proposed Class.
15. Plaintiff will fairly and adequately represent the interests of the Proposed
Class and has no conflict with the interests of the Proposed Class.
16. Plaintiff has retained counsel experienced in antitrust and class action
17. This class action is superior to the alternatives, if any, for the fair and
efficient adjudication of this controversy. Prosecution as a class action will eliminate the
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possibility of repetitive litigation. There will be no material difficulty in the management
members of the Proposed Class would create the risk of inconsistent or varying
adjudications, and be inefficient and burdensome to the parties and the Court.
V. FACTUAL ALLEGATIONS
18. Defendants and Apiture employed members of the Proposed Class in North
commerce throughout North Carolina and the United States, and has caused antitrust
20. Live Oak Bank, nCino, and Apiture are the leading employers for financial
technology employees in Wilmington, North Carolina. All three are involved in the
development of digital banking technology. There are no other peer financial technology
companies in Wilmington.
Live Oak Bank, and Apiture would compete for employees by recruiting and hiring from
employees is profound. To work for any other potential employer in the same industry
Triangle, approximately 130 miles away. That involves significant costs to the
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employee, which may include moving a family, finding new schools for children, finding
new places of worship, and finding alternative employment for a spouse. None of these
costs would occur if an employee switched between Live Oak Bank, Apiture, or nCino.
As a result, but for the No-Hire Agreement, Live Oak Bank, Apiture, and nCino would
have been each other’s key competitor for employees, and their competition would have
22. Competition for employees via recruiting and lateral hiring has a significant
attractive outside opportunities for their employees, the threat of losing them to
morale and competitive positioning, and ultimately to retain their talent. If employers do
not react to competition, their employees are likely to seek positions that offer more
employer. Once an employee has received an offer from a rival, retaining the employee
employees well enough that they are unlikely to seek or pursue outside opportunities.
Preemptive retention measures thus lead to increased compensation for all employees.
forces employers to reactively increase compensation to retain employees who are likely
to join a competitor institution. This can occur both when a particular individual or group
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of individuals becomes interested in switching employers and the current employer
responds to overall attrition rates by increasing compensation levels. In the former case,
even a targeted increase designed to retain a certain group of employees will put upward
compensation design called “internal equity,” which refers to the concept that employees
want to be paid equitably with their peers. Targeted retention raises comes at a cost to
the employer: after making those targeted raises, the well-known forces of internal equity
will impact the broader pay structures, raising other employee pay as well. The
misconduct alleged here prevented this competitive process from occurring, suppressing
Class pay.
are not limited to the particular individuals who seek new employment, or to the
particular individuals who would have been offered new positions but for the No-Hire
Agreement. Instead, the effects of recruiting and hiring from competitors (and the effects
25. If operating under competitive and lawful conditions, Live Oak Bank and
nCino, and Apiture and nCino, would have recruited and hired employees from each
other, driving employee pay up. The companies knew this and avoided such competitive
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C. Live Oak Bank, nCino, And Apiture Agree Not To Compete For
Employees.
26. Live Oak Bank focuses on small business loans and deposits. It also
27. In 2011 Live Oak Bank executives co-founded nCino to specialize in the
development of online banking technology. Specifically, Live Oak Bank CEO James
“Chip” Mahan and Live Oak Bank President Neil Underwood were co-founders of nCino
and were members of its Board of Directors from 2011 until at least late 2017. They also
participated in the search for and hiring of nCino CEO Pierre Naudeé. Upon information
and belief, the executives of Live Oak Bank and nCino, including Mahan, Underwood,
and Naudeé, entered into the No-Hire Agreement from the outset of nCino’s founding.
28. After nCino’s founding, Live Oak Bank continued to develop and invest in
its own financial technology department. In 2017, Live Oak Bank and First Data
Corporation (based in Austin, Texas) created Apiture as a joint venture, owned fifty
percent by each company. Live Oak Bank’s financial technology department was largely
transferred to Apiture and the employees working therein became Apiture employees.
Chip Mahan and Neil Underwood serve on Apiture’s board of directors and have
substantial day-to-day control over the company, including through their frequent direct
communications with Apiture COO Christopher Cox. Mahan, Underwood, Cox, and
others ensured that the No-Hire Agreement that Live Oak Bank had with nCino extended
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29. As Apiture and nCino evolved to compete more and more with each other
in the digital banking market, tensions between the companies grew. In approximately
late 2017 or 2018, nCino leadership removed Mahan and Underwood from its board of
directors. However, despite fierce competition in the product market, the companies
maintained their agreement not to compete in the labor market. The No-Hire Agreement
wage pressure.
30. Plaintiff McAlear joined Live Oak Bank’s financial technology department
as a Project Manager in April 2017. He was hired by and reported to Pete Underwood,
brother of Neil Underwood. Mr. McAlear had been living in Wilmington for ten years,
but he had been employed that entire time as a consultant to the federal government in
31. When Mr. McAlear joined Live Oak Bank, several of his new colleagues
expressed surprise that he was a Wilmington local. These colleagues explained that the
company only hired from outside Wilmington, so it was remarkable for a new hire to be
from the area. Mr. McAlear did not think too much about these comments until he
needed to hire a new employee to report to him. Mr. McAlear conducted the interviews
of prospective hires himself, but he needed to get Pete Underwood’s approval before he
could even interview a candidate. Mr. McAlear noticed that Pete Underwood rejected
every qualified local candidate that Mr. McAlear proposed to interview. Pete Underwood
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claimed that he knew every single proposed local person and that they were not good
candidates, a claim which Mr. McAlear found implausible. His colleague, Geoff Gohs,
explained to Mr. McAlear that Pete Underwood rejected all the local candidates because
32. In October 2017, when the joint venture with First Data launched, Mr.
software development, an approach that he advocated for at Apiture with mixed success.
He was able to pursue an agile approach, but his managers were not themselves educated
or invested in it. In April 2019 he attended the TriAgile conference in Raleigh, North
Carolina. He met several representatives from nCino there, including recruiter Ren
Yonker, all of whom were also very enthusiastic about agile software development. Mr.
McAlear was thrilled to learn that there was another company in Wilmington that was
invested in his area of expertise. Mr. McAlear went to the nCino website and found a job
opening that matched his qualifications and submitted an application. A day or two later,
33. Mr. McAlear was disappointed, but continued working for Apiture. Shortly
thereafter, Mr. McAlear participated in a discussion with several Apiture managers where
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the No-Hire Agreement again came up. Apiture manager Matt Cook had an acquaintance
at nCino who wanted to apply for a quality assurance job on the Apiture quality
assurance team led by Dwayne Hill. Mr. Cook and Mr. Hill were discussing the nCino
candidate right next to Mr. McAlear’s desk, when Chris Cox (then Apiture President and
currently COO) came out from his office and joined the conversation. Mr. Cox informed
them that he had spoken with his counterpart at nCino about hiring, and 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. Mr. McAlear expressed his strong
opposition to this policy, finding it to be collusive and unethical. Mr. Cox responded that
this was the agreement between the companies, and made it clear it was not up for
discussion.
34. Not long thereafter, Mr. Cox informed Mr. McAlear that Apiture had
decided to eliminate his position. Mr. McAlear again applied to nCino but was rejected.
To find employment within his skill set, Mr. McAlear had to move to the Research
Triangle, which caused significant expense and disruption in his personal life.
among themselves for employees by entering into the No-Hire Agreement alleged herein.
Defendants and their co-conspirator entered into, implemented, and policed the No-Hire
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agreement with the intent and effect of suppressing the compensation of their employees
and members of the Proposed Class, because there was no threat of poaching by the
37. Second, because the agreement eliminated the primary competitors for
lateral hires, Defendants and their co-conspirator were relieved from having to react to
outside offers by offering higher pay, which would have increased the compensation of
not just the person receiving the offer but all or nearly all Proposed Class Members, as
38. Third, because Defendants and their co-conspirator constitute the only
increased the costs for Plaintiff and others to seek or accept employment elsewhere. To
change positions, Plaintiff and others similarly-situated would have to incur significant
relocation costs to work at a peer company. Defendants and their co-conspirator were
thus able to retain Plaintiff and members of the Proposed Class at artificially low
39. Plaintiff and members of the Proposed Class were harmed by the No-Hire
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compensation and mobility had a cumulative effect on all members of the Proposed
Class.
40. Without this class action, Plaintiff and the Proposed Class have been and
will be unable to obtain compensation for the harm they suffered, and Defendants and
41. Plaintiff, on behalf of himself and all others similarly situated, realleges and
42. Live Oak Bank and nCino entered into and engaged in unlawful agreements
in restraint of the trade and commerce described above in violation of Section 1 of the
Sherman Act, 15 U.S.C. § 1. Beginning no later than 2011 and continuing through the
present, Live Oak Bank and nCino engaged in continuing trusts in restraint of trade and
commerce in violation of Section 1 of the Sherman Act. Beginning no later than October
2017, Live Oak Bank and nCino extended this agreement to include Live Oak Bank’s
43. Live Oak Bank and nCino’s agreements have included concerted action and
undertakings among them with the purpose and effect of: (a) fixing the compensation of
Plaintiff and the Class at artificially low levels; and (b) eliminating, to a substantial
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44. As a direct and proximate result of Live Oak Bank and nCino’s No-Hire
Agreement, members of the Proposed Class have suffered injury to their property and
have been deprived of the benefits of free and fair competition on the merits.
45. The unlawful No-Hire Agreement had the following effects, among others:
compensation from Live Oak Bank, Apiture, and nCino than they otherwise would have
received in the absence of the No-Hire Agreement, and, as a result, have been injured in
their property and have suffered damages in an amount according to proof at trial.
46. The acts done by Live Oak Bank, Apiture, and nCino as part of, and in
their affairs.
Act.
48. Accordingly, Plaintiff and members of the Proposed Class seek three times
their damages caused by Live Oak Bank, Apiture, and nCino’s violations of Section 1 of
the Sherman Act, the costs of bringing suit, reasonable attorneys’ fees, and a declaration
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SECOND CLAIM FOR RELIEF
49. Plaintiff, on behalf of himself and all others similarly situated, realleges and
50. Live Oak Bank and nCino entered into and engaged in unlawful agreements
in restraint of the trade and commerce described above in violation of N.C. Gen. Stat.
undertakings among them with the purpose and effect of: (a) fixing the compensation of
Plaintiff and the Class at artificially low levels; and (b) eliminating, to a substantial
52. As a direct and proximate result of Live Oak Bank and nCino’s No-Hire
Agreement, members of the Proposed Class have suffered injury to their property and
have been deprived of the benefits of free and fair competition on the merits.
53. The unlawful No-Hire Agreement had the following effects, among others:
compensation from Live Oak Bank, Apiture, and nCino than they otherwise would have
received in the absence of the No-Hire Agreement, and, as a result, have been injured in
their property and have suffered damages in an amount according to proof at trial.
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54. The acts done by Live Oak Bank, Apiture, and nCino as part of, and in
their affairs.
55. The No-Hire Agreement is a per se violation of N.C. Gen. Stat. §§ 75-1 and
75-2.
56. Accordingly, Plaintiff and members of the Proposed Class seek three times
their damages caused by Live Oak Bank, Apiture, and nCino’s violations of N.C. Gen.
Stat. §§ 75-1 and 75-2, the costs of bringing suit, reasonable attorneys’ fees, and a
WHEREFORE, Plaintiff prays that this Court enter judgment on his behalf and
combination, or conspiracy in violation of Section 1 of the Sherman Act and N.C. Gen.
Stat. §§ 75-1 and 75-2, and that Plaintiff and the members of the Proposed Class have
been damaged and injured in their business and property as a result of this violation;
per se violations of the Sherman Act and N.C. Gen. Stat. §§ 75-1 and 75-2;
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D. Plaintiff and the members of the Proposed Class he represents recover
threefold the damages determined to have been sustained by them as a result of the
conduct of Live Oak Bank, Apiture, and nCino complained of herein, and that judgment
be entered against Live Oak Bank and nCino for the amount so determined;
E. Judgment be entered against Live Oak Bank and nCino in favor of Plaintiff
and each member of the Proposed Class he represents, for restitution and disgorgement of
ill-gotten gains as allowed by law and equity as determined to have been sustained by
them, together with the costs of suit, including reasonable attorneys’ fees;
K. For such other and further relief as the Court may deem just and proper.
JURY DEMAND
Pursuant to Federal Rule of Civil Procedure 38(b), Plaintiff demands a jury trial
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Dated: March 12, 2021 Respectfully submitted,
/s/Robert M. Elliot
Robert M. Elliot
N.C. State Bar No. 7709
ELLIOT MORGAN PARSONAGE, PLLC
426 Old Salem Rd.
Brickenstein-Leinbach House
Winston-Salem, NC 27101
Telephone: (336) 724-2828
Facsimile: (336) 724-3335
rmelliot@emplawfirm.com
Local Civil Rule 83.1(d) Counsel for Plaintiff
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