Litigation finance

AN ACT Relating to litigation finance; adding a new chapter to 1
Title 19 RCW; and providing an effective date. 2
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:3
NEW SECTION. Sec. 1. The definitions in this section apply 4
throughout this chapter unless the context clearly requires 5
otherwise.6
(1) "Attorney" means an attorney, group of attorneys, or law firm 7
that represents a party in any legal action. 8
(2) "Claimant" means any individual who is or may become a 9
plaintiff, claimant, or complainant in a legal action in this state.10
(3) "Foreign country of concern" includes the following:11
(a) A foreign government listed in 15 C.F.R. Sec. 791.4; and12
(b) A country designated as a threat to critical infrastructure 13
by the federal government or the governor. 14
(4) "Foreign entity of concern" means a partnership, association, 15
corporation, organization, or other combination of persons that:16
(a) Is organized or incorporated in a foreign country of concern;17
(b) Is owned or controlled by the government, a political 18
subdivision, or a political party of a foreign country of concern;19
(c) Has a principal place of business in a foreign country of 20
concern; or 21
H-2622.2
HOUSE BILL 2255
State of Washington 69th Legislature 2026 Regular Session
By Representatives Walen, Walsh, and Nance
Prefiled 01/05/26. Read first time 01/12/26. Referred to Committee
on Civil Rights & Judiciary.
p. 1 HB 2255
(d) Is owned, organized or controlled by, or affiliated with a 1
foreign organization that has been: 2
(i) Placed on the federal office of foreign assets control 3
specially designated nationals and blocked persons list; or4
(ii) Designated by the United States secretary of state as a 5
foreign terrorist organization. 6
(5) "Legal action" means any legal claim, civil action, 7
administrative proceeding, or cause of action. 8
(6) "Litigation expenses" means any typical fees, costs, 9
expenditures, or other expenses incurred to pursue a legal action 10
including, but not limited to, court costs, filing fees, attorneys' 11
fees, expert witness fees, travel expenses, discovery costs, expenses 12
related to identifying or soliciting potential claimants to 13
participate in a legal action, or expenses related to collecting a 14
judgment. "Litigation expenses" does not include funds intended for 15
use by a party for personal or familial expenses such as food, rent, 16
mortgage payments, car payments, or medical bills.17
(7) "Litigation financing" means the financing, funding, 18
advancing, or lending of money to pay for litigation expenses for a 19
legal action or a group of legal actions, or an agreement to pay 20
litigation expenses related to pursuing a legal action or group of 21
legal actions, regardless of whether the financing is tied to a 22
specific case, if the financing, funding, advancing, or lending of 23
money is provided by a person who is not: 24
(a) A party to the legal action; 25
(b) An attorney engaged directly or indirectly through another 26
legal representative to represent a party in the legal action; or27
(c) An entity or insurer with a preexisting contractual 28
obligation to indemnify or defend a party to the legal action.29
(8) "Litigation financing agreement" means a transaction that 30
provides litigation financing to a claimant, a claimant's attorney, 31
or a person affiliated with a claimant or a claimant's attorney, in 32
return for assigning the third-party litigation funder a right to 33
receive any amount including the payment of all or part of a monetary 34
award or settlement, interest, fees, or any other consideration 35
contingent on the outcome of the legal action or a group of legal 36
actions. "Litigation financing agreement" does not include:37
(a) Legal services provided to a party by an attorney on a 38
contingency fee basis or legal costs advanced by an attorney when the 39
services or costs are provided to or on behalf of a party by an 40
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attorney in the dispute and in accordance with the rules of 1
professional conduct; 2
(b) Bills, receivables, or liens held by a health care provider 3
or their assignee; 4
(c) Loans made directly to a party or a party's attorney when 5
repayment of the loan is not contingent upon the judgment, award, 6
settlement, or verdict in a claim or action; or 7
(d) Funding provided by a nonprofit organization exempt from 8
federal income taxation under section 501 (c)(3) of the federal 9
internal revenue code of 1986. 10
(9) "National security interest" means interests relating to the 11
national defense, foreign intelligence and counterintelligence, 12
international and domestic security, and foreign relations.13
(10) "Party" means a person or entity in a legal action.14
(11) "Proprietary information" means information developed, 15
created, or discovered by a person, or that became known by or was 16
conveyed to the person, that has a commercial value in the person's 17
business and includes domain names, trade secrets, copyrights, ideas, 18
techniques, inventions, and other information relating to designs, 19
configurations, documentation, recorded data, schematics, circuits, 20
mask works, layouts, source code, object code, master works, master 21
databases, algorithms, flow charts, formulas, works of authorship, 22
mechanisms, research, manufacture, improvements, assembly, 23
installation, intellectual property including patents and patent 24
applications, and information concerning a person's actual or 25
anticipated business, research, or development. 26
(12) "Third-party litigation funder" means a person or entity 27
that provides litigation financing to a party or attorney in a legal 28
action and has the contractual right to receive or make a payment 29
that is contingent on the outcome of an identified legal action by 30
settlement, judgment, or otherwise on the outcome of a matter within 31
a portfolio that includes the legal action. This term does not apply 32
to: 33
(a) The named parties or attorneys who provide funding for 34
litigation expenses related to the legal action; 35
(b) A person or entity providing funding solely intended to pay 36
costs of living or other personal or familial expenses during the 37
pendency of the legal action; 38
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(c) The named parties or attorneys who provide funding, including 1
on a contingency fee basis or to advance the named parties' legal 2
expenses related to the legal action; 3
(d) A health insurer, medical provider, or assignee that has 4
paid, is obligated to pay, or is owed money for health care services 5
rendered to an injured person who is a party to the legal action 6
pursuant to the terms of a health insurance plan or other agreement;7
(e) A financial institution providing loans made directly to a 8
party or attorney when repayment of the loan is not contingent upon 9
the outcome of the legal action or on the outcome of a matter within 10
a portfolio that includes the legal action and involves the same 11
attorney; or 12
(f) A nonprofit legal organization exempt from federal income 13
taxation under section 501 (c)(3) of the federal internal revenue code 14
of 1986, or a person providing funding to a nonprofit legal 15
organization that represents clients on a pro bono basis.16
NEW SECTION. Sec. 2. (1) The requirements and limitations this 17
chapter places on third-party litigation funders apply to any third-18
party litigation funder that enters into a litigation financing 19
agreement:20
(a) In Washington; 21
(b) Subject to Washington law; 22
(c) That provides litigation financing for a legal action in 23
Washington; or 24
(d) That provides litigation financing to a party who resides in 25
or conducts business in Washington, or such parties' attorney.26
(2) A litigation financing agreement that does not comply with 27
the requirements and limitations of this chapter is void.28
(3) This chapter does not affect the award of costs or attorney 29
fees to a nonprofit legal organization or related attorney.30
NEW SECTION. Sec. 3. (1) A claimant or claimant's attorney who 31
is a party to a litigation financing agreement shall: (a) Disclose 32
and certify in writing to all named parties to the underlying legal 33
action and their attorneys the name, address, and citizenship or 34
country of incorporation or registration, of any person or entity 35
that, pursuant to the litigation financing agreement, has a financial 36
stake in the outcome of the legal action or portfolio that includes 37
the legal action; and (b) produce to all named parties to the 38
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underlying legal action an unredacted and complete copy of the 1
litigation financing agreement creating the contingent right to 2
receive payment. 3
(2) An attorney who enters into, arranges, or is a beneficiary of 4
a litigation financing agreement in connection with representing a 5
claimant in a legal action shall disclose in writing to the claimant 6
the existence of the litigation financing agreement, the identity of 7
the third-party litigation funder, any rights of the third-party 8
litigation funder under the agreement that may affect the claimant's 9
interests, including any rights relating to settlement, litigation 10
strategy, or recovery, and any compensation, fee, commission, or 11
other benefit the attorney or the attorney's firm may receive in 12
connection with the litigation financing agreement.13
(3) The disclosure, certification, and production required by 14
subsection (1) of this section must be made upon filing the legal 15
action or, if the legal action is filed prior to the execution of a 16
litigation financing agreement, within 35 days after the execution of 17
the litigation financing agreement. 18
(4) The disclosure, certification, and production required by 19
subsection (1) of this section shall be made under penalty of perjury 20
based on actual knowledge of the declarant formed after reasonable 21
inquiry. The claimant or claimant's attorney shall provide the 22
disclosure, certification, and production required by subsection (1) 23
of this section to all named parties to the underlying legal action, 24
and such recipients shall maintain the disclosure, certification, and 25
production to preserve the confidentiality of the parties and 26
attorneys, and terms of the litigation financing agreement.27
(5) If, after submitting the disclosure, certification, and 28
production required by subsection (1) of this section, the third-29
party litigation funder learns that the information or documents 30
disclosed are incomplete or inaccurate, the third-party litigation 31
funder must supplement or correct the incomplete or inaccurate 32
disclosure, certification, and production within 35 days after 33
learning of the incomplete or inaccurate information or documents.34
(6) The existence and terms of a litigation financing agreement 35
are subject to discovery in the legal action to which the litigation 36
financing agreement pertains. 37
NEW SECTION. Sec. 4. (1) A third-party litigation funder may 38
not:39
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(a) Decide, influence, or direct an attorney with respect to the 1
conduct of the underlying legal action or any settlement or 2
resolution of the underlying legal action including, but not limited 3
to, decisions concerning appointing or changing legal counsel, choice 4
or use of lay or expert witnesses, discovery, motions, arguments, and 5
litigation strategy. The right to decide, influence, or direct 6
matters related to a legal action belongs solely to the parties and 7
attorneys; 8
(b) Be assigned rights to profits other than the right to receive 9
a share of the proceeds obtained in the legal action, or an agreed 10
payment of fees or interest, contingent on the outcome of the legal 11
action, as outlined in the litigation financing agreement;12
(c) Share with anyone who is not a party to the underlying legal 13
action, or attorney to such party, any proprietary information or 14
information affecting national security interests obtained as a 15
result of the litigation financing agreement for the legal action;16
(d) Provide funding to or in connection with a litigation 17
financing agreement that is directly or indirectly financed by a 18
foreign country of concern or foreign entity of concern;19
(e) Pay or offer commissions, referral fees, rebates, or other 20
forms of consideration to any person in exchange for referring a 21
claimant to a third-party litigation funder; 22
(f) Accept any commissions, referral fees, rebates, or other 23
forms of consideration from any person providing any goods or 24
rendering any services to a claimant; 25
(g) Charge a rate of interest that exceeds the rate of interest 26
allowed under RCW 19.52.020; 27
(h) Receive or recover any payment that exceeds 25 percent of the 28
amount of any judgment, award, settlement, verdict, or other form of 29
monetary relief obtained in the legal action that is the subject of 30
the litigation financing agreement; 31
(i) Advertise false or misleading information regarding its 32
products or services; 33
(j) Refer or require a claimant to hire or engage any person 34
providing any goods or rendering any services to the claimant;35
(k) Fail to promptly deliver a fully completed and signed 36
litigation financing agreement to all parties to the agreement and 37
their legal representatives; 38
(l) Attempt to secure a remedy or obtain a waiver of any remedy 39
including, but not limited to, compensatory, statutory, or punitive 40
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damages, a party to the litigation financing agreement may or may not 1
be entitled to pursue or recover otherwise; 2
(m) Offer or provide legal advice to a claimant;3
(n) Assign, including securitizing, a litigation financing 4
agreement in whole or in part; 5
(o) Report a party to the litigation financing agreement to a 6
credit reporting agency. 7
(2) A person who provides any goods or renders any services to a 8
claimant is prohibited from having a financial interest in litigation 9
financing and may not receive any commissions, referral fees, 10
rebates, or other forms of consideration from any third-party 11
litigation funder or its employees, owners, or affiliates.12
NEW SECTION. Sec. 5. (1) The legislature finds that the 13
practices covered by this chapter are matters vitally affecting the 14
public interest for the purpose of applying the consumer protection 15
act, chapter 19.86 RCW. A violation of this chapter is not reasonable 16
in relation to the development and preservation of business and is an 17
unfair or deceptive act in trade or commerce and an unfair method of 18
competition for purposes of applying the consumer protection act, 19
chapter 19.86 RCW.20
(2) In any suit brought to enforce this chapter, in addition to 21
all relief available under chapter 19.86 RCW, the plaintiff may seek 22
any or all of the following remedies: (a) Statutory damages equal to 23
$10,000 per violation; (b) disgorgement of any funds paid or received 24
pursuant to the litigation financing agreement; and (c) any other 25
equitable relief deemed appropriate by the court. 26
NEW SECTION. Sec. 6. Sections 1 through 5, 7, and 8 of this act 27
constitute a new chapter in Title 19 RCW.28
NEW SECTION. Sec. 7. This act takes effect July 1, 2026.29
NEW SECTION. Sec. 8. This act applies prospectively only and 30
not retroactively. It applies to litigation financing agreements 31
entered into on or after the effective date of this section.32
NEW SECTION. Sec. 9. If any provision of this act or its 33
application to any person or circumstance is held invalid, the 34
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remainder of the act or the application of the provision to other 1
persons or circumstances is not affected. 2
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