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The growing practice of litigation financing

Some California employees who are pursuing a lawsuit against their employer may have another option besides finding an attorney to work on a contingency basis. Litigation financing is the practice of funding a lawsuit. In exchange, the investor gets a portion of the recovery. If the litigation is unsuccessful, it is not necessary to repay the investor. Both plaintiffs and defendants may benefit from litigation financing, and investors work with both companies and individuals.

Largely at use in big commercial cases, litigation funding may expand to include lawsuits that focus on labor disputes particularly those dealing with noncompete agreements and trade secrets. These kinds of lawsuits can be very expensive for a company, but they can also be necessary for the company to establish itself as not tolerating the theft of trade secrets or dismissal of such an agreement. Establishing the precedent matters more to the company than the settlement.

From the employee side of things, litigation funding could be useful when a group of employees decides to sue a company regarding an issue like pursuing unpaid overtime. Workers should keep in mind that in some cases, the cost of litigation funding could consume a significant amount of their recovery. How long the settlement is likely to take is another consideration. If it is several years, then interest could mount and make the recovery small.

Some workers who have complaints about their employers, such as unpaid overtime, may feel hesitant about pursuing such a case. They might not understand their rights, or they may think they cannot afford to press the issue either financially or because they fear retaliation. They might want to consult an attorney about their situation to get a better understanding of their rights and how they might proceed.

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Avila & Shaddow Attorneys at Law

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