HB 2255
In CommitteeHouse
Litigation finance
Concerning litigation finance.
This status may be delayed. See Action History below for the latest updates.
How does a bill become law?
- Introduced: The bill is filed and assigned a number.
- Committee: A subject-matter committee holds hearings, takes public testimony, and decides whether to advance the bill.
- Floor Vote: The full chamber (House or Senate) debates and votes on the bill.
- Opposite Chamber: The bill repeats the committee and floor vote process in the other chamber.
- Governor: The Governor reviews the bill and decides whether to sign or veto it.
- Signed: The bill has been signed into law.
AI Analysis
This bill creates new rules for third-party litigation funders—companies or individuals who pay for lawsuit costs in exchange for a share of the settlement or judgment. It requires transparency, restricts funder influence over legal strategy, bans funding from certain foreign sources, and sets penalties for violations.
- Creates a new chapter in state law regulating third-party litigation funders—entities that finance lawsuits in exchange for a share of the settlement or judgment.
- Requires disclosure of funder identity, financial interest, and full financing agreement to all parties in the lawsuit before or shortly after filing the case.
- Bars third-party funders from influencing legal strategy, hiring lawyers, offering legal advice, or receiving more than 25% of the judgment or settlement.
- Prohibits funding from foreign countries or entities deemed national security threats, including those on U.S. sanctions lists.
- Makes violations of the law unfair or deceptive practices under the state Consumer Protection Act, allowing victims to sue for $10,000 per violation, recovery of funds, and other court-ordered remedies.
- Bars funders from charging interest rates above the legal limit (set in RCW 19.52.020) and prohibits referral fees, rebates, or other inducements for case referrals.
Who is affected
- Claimants (people filing lawsuits) — People pursuing lawsuits (plaintiffs or claimants) may be affected by new rules about how third-party funders can operate, including limits on what funders can charge and how much they can recover if the case wins.
- Attorneys and law firms — Lawyers and law firms who work with third-party litigation funders must now follow new disclosure and conduct rules, and may face limits on how they structure financing deals.
- Third-party litigation funders — Third-party companies or individuals who provide money to fund lawsuits in exchange for a share of the settlement or judgment must comply with new restrictions, including bans on influence over legal strategy and limits on profit shares.
- Defendants in lawsuits — Defendants in lawsuits will gain new rights to know who is financially backing the plaintiff’s case and may access the full financing agreement during discovery.
Pro/Con Analysis
Stronger case for benefits
Potential Benefits (5)
Mandatory disclosure of funder identity and financial interest, plus explicit bans on funder influence over legal strategy or provision of legal advice, significantly strengthen claimants’ autonomy and reduce the risk of covert third-party control over litigation. This protects vulnerable plaintiffs—especially low-income or marginalized individuals—from exploitation by well-resourced funders seeking to steer cases for profit.
Rights & LibertiesPeopleRef: Sec. 3(1)(a), Sec. 3(2), Sec. 4(1)(a), Sec. 4(1)(m)The 25% cap on funder recovery and interest rate limits (capped at RCW 19.52.020) prevent predatory pricing and excessive profit extraction—protecting claimants from exploitative financing terms. Combined with $10,000 statutory damages and mandatory disgorgement, this creates a strong deterrent against abusive practices, especially for claimants in economically precarious positions.
FinancialPeopleRef: Sec. 4(1)(h), Sec. 4(1)(g), Sec. 5(2)(a)-(b)Requiring disclosure of full financing agreements and prohibiting sharing of proprietary or national security–sensitive information with funders helps protect sensitive case data and prevents foreign actors (including state-sponsored entities) from gaining intelligence through litigation finance arrangements—especially important in high-stakes civil litigation involving critical infrastructure or government contracts.
Public SafetyPeopleRef: Sec. 3(1)(b), Sec. 3(6), Sec. 4(1)(c)Treating violations as unfair or deceptive practices under the Consumer Protection Act gives claimants and attorneys a powerful enforcement tool—allowing statutory damages, disgorgement, and equitable relief. This strengthens accountability for funders and may improve market discipline, especially for claimants without legal resources to pursue complex civil claims against sophisticated financiers.
Business & EmploymentPeopleRef: Sec. 5(1), Sec. 5(2)(a)-(c)The foreign funding restrictions aim to prevent adversarial foreign governments or entities from financing U.S. litigation to influence legal outcomes—potentially protecting Washington’s legal system from foreign interference, especially in cases involving state contracts, infrastructure, or public officials. However, the definition is broad and may overreach.
Public SafetyLean peopleRef: Sec. 4(1)(d), Sec. 1(3)-(4)
Potential Concerns (5)
The $10,000 per-violation civil penalty and mandatory disgorgement provisions may impose significant financial risk on claimants and their attorneys if funders violate disclosure or profit-share rules—especially where claimants are contractually liable for costs or share in penalties under financing agreements. This shifts litigation risk from funders to vulnerable plaintiffs, particularly in low- or moderate-value cases where the penalty could exceed the claimant’s net recovery.
FinancialPeopleRef: Sec. 3(1)(b), Sec. 4(1)(d), Sec. 4(1)(g), Sec. 4(1)(h)Mandatory disclosure of full financing agreements—including terms, profit shares, and funder rights—may chill access to justice for claimants who fear exposure of unfavorable terms or fear retaliation or strategic manipulation by defendants who gain full visibility into third-party influence. This could deter claimants from pursuing meritorious claims due to privacy concerns or perceived imbalance in settlement leverage.
Rights & LibertiesPeopleRef: Sec. 3(1)(b), Sec. 3(4), Sec. 4(1)(d), Sec. 4(1)(h)The 25% cap on funder recovery may reduce availability of litigation financing for high-risk, high-reward cases (e.g., complex commercial litigation, mass torts), potentially limiting access to capital for claimants in cases requiring substantial upfront investment. While intended to protect claimants, this could disproportionately affect claimants in niche or high-cost litigation who rely on flexible funding structures.
Business & EmploymentLean peopleRef: Sec. 4(1)(h)The ban on funding from “foreign countries of concern” and “foreign entities of concern” is broadly defined and includes entities on OFAC lists or designated as terrorist organizations—potentially overbroad and vague. This may inadvertently exclude legitimate diaspora or humanitarian funders, chilling cross-border solidarity litigation (e.g., human rights cases involving foreign victims or witnesses) and undermining international legal cooperation.
Public SafetyPeopleRef: Sec. 4(1)(d), Sec. 1(3)-(4)The prohibition on referral fees and inducements may disrupt integrated care and legal referral networks that connect injured patients to qualified attorneys—especially in personal injury or medical malpractice contexts—where third-party service providers (e.g., rehab clinics, vocational counselors) often facilitate introductions. This could fragment care coordination and reduce access to timely legal representation for injured workers and patients.
HealthcarePeopleRef: Sec. 4(1)(f), Sec. 4(1)(j)
Who Is Most Affected
Low- and moderate-income claimants—especially in personal injury, wage theft, or housing cases—are primary beneficiaries: the bill’s caps, disclosure rules, and penalties protect them from predatory financing and funder overreach. However, they may face higher barriers to accessing financing if funders reduce risk exposure by avoiding complex or lower-value cases.
Law firms and solo practitioners who rely on litigation finance to underwrite high-risk cases may benefit from increased case capacity and reduced capital constraints—but may lose flexibility in deal structuring and face new compliance burdens. The 25% cap and disclosure requirements may reduce profit margins and increase administrative costs.
Domestic, for-profit litigation funders face significant structural constraints: profit caps, disclosure mandates, and foreign restrictions will reduce revenue potential and limit portfolio diversification. However, the bill may improve industry legitimacy and reduce regulatory risk over time by standardizing practices and deterring bad actors.
Defendants gain transparency and discovery rights over funder agreements, which may improve fairness and reduce asymmetrical information advantage. However, they may also gain leverage to pressure settlements by exploiting funder disclosure requirements or threatening reputational harm.
Nonprofit legal aid organizations and pro bono programs are explicitly excluded from the definition of third-party funders, preserving their ability to fund litigation without restriction. This strengthens access to justice for underserved communities and reinforces the role of mission-driven legal services.