wa-law.org > bill > 2025-26 > HB 2255 > Original Bill
The definitions in this section apply throughout this chapter unless the context clearly requires otherwise.
"Attorney" means an attorney, group of attorneys, or law firm that represents a party in any legal action.
"Claimant" means any individual who is or may become a plaintiff, claimant, or complainant in a legal action in this state.
"Foreign country of concern" includes the following:
A foreign government listed in 15 C.F.R. Sec. 791.4; and
A country designated as a threat to critical infrastructure by the federal government or the governor.
"Foreign entity of concern" means a partnership, association, corporation, organization, or other combination of persons that:
Is organized or incorporated in a foreign country of concern;
Is owned or controlled by the government, a political subdivision, or a political party of a foreign country of concern;
Has a principal place of business in a foreign country of concern; or
Is owned, organized or controlled by, or affiliated with a foreign organization that has been:
Placed on the federal office of foreign assets control specially designated nationals and blocked persons list; or
Designated by the United States secretary of state as a foreign terrorist organization.
"Legal action" means any legal claim, civil action, administrative proceeding, or cause of action.
"Litigation expenses" means any typical fees, costs, expenditures, or other expenses incurred to pursue a legal action including, but not limited to, court costs, filing fees, attorneys' fees, expert witness fees, travel expenses, discovery costs, expenses related to identifying or soliciting potential claimants to participate in a legal action, or expenses related to collecting a judgment. "Litigation expenses" does not include funds intended for use by a party for personal or familial expenses such as food, rent, mortgage payments, car payments, or medical bills.
"Litigation financing" means the financing, funding, advancing, or lending of money to pay for litigation expenses for a legal action or a group of legal actions, or an agreement to pay litigation expenses related to pursuing a legal action or group of legal actions, regardless of whether the financing is tied to a specific case, if the financing, funding, advancing, or lending of money is provided by a person who is not:
A party to the legal action;
An attorney engaged directly or indirectly through another legal representative to represent a party in the legal action; or
An entity or insurer with a preexisting contractual obligation to indemnify or defend a party to the legal action.
"Litigation financing agreement" means a transaction that provides litigation financing to a claimant, a claimant's attorney, or a person affiliated with a claimant or a claimant's attorney, in return for assigning the third-party litigation funder a right to receive any amount including the payment of all or part of a monetary award or settlement, interest, fees, or any other consideration contingent on the outcome of the legal action or a group of legal actions. "Litigation financing agreement" does not include:
Legal services provided to a party by an attorney on a contingency fee basis or legal costs advanced by an attorney when the services or costs are provided to or on behalf of a party by an attorney in the dispute and in accordance with the rules of professional conduct;
Bills, receivables, or liens held by a health care provider or their assignee;
Loans made directly to a party or a party's attorney when repayment of the loan is not contingent upon the judgment, award, settlement, or verdict in a claim or action; or
Funding provided by a nonprofit organization exempt from federal income taxation under section 501(c)(3) of the federal internal revenue code of 1986.
"National security interest" means interests relating to the national defense, foreign intelligence and counterintelligence, international and domestic security, and foreign relations.
"Party" means a person or entity in a legal action.
"Proprietary information" means information developed, created, or discovered by a person, or that became known by or was conveyed to the person, that has a commercial value in the person's business and includes domain names, trade secrets, copyrights, ideas, techniques, inventions, and other information relating to designs, configurations, documentation, recorded data, schematics, circuits, mask works, layouts, source code, object code, master works, master databases, algorithms, flow charts, formulas, works of authorship, mechanisms, research, manufacture, improvements, assembly, installation, intellectual property including patents and patent applications, and information concerning a person's actual or anticipated business, research, or development.
"Third-party litigation funder" means a person or entity that provides litigation financing to a party or attorney in a legal action and has the contractual right to receive or make a payment that is contingent on the outcome of an identified legal action by settlement, judgment, or otherwise on the outcome of a matter within a portfolio that includes the legal action. This term does not apply to:
The named parties or attorneys who provide funding for litigation expenses related to the legal action;
A person or entity providing funding solely intended to pay costs of living or other personal or familial expenses during the pendency of the legal action;
The named parties or attorneys who provide funding, including on a contingency fee basis or to advance the named parties' legal expenses related to the legal action;
A health insurer, medical provider, or assignee that has paid, is obligated to pay, or is owed money for health care services rendered to an injured person who is a party to the legal action pursuant to the terms of a health insurance plan or other agreement;
A financial institution providing loans made directly to a party or attorney when repayment of the loan is not contingent upon the outcome of the legal action or on the outcome of a matter within a portfolio that includes the legal action and involves the same attorney; or
A nonprofit legal organization exempt from federal income taxation under section 501(c)(3) of the federal internal revenue code of 1986, or a person providing funding to a nonprofit legal organization that represents clients on a pro bono basis.
The requirements and limitations this chapter places on third-party litigation funders apply to any third-party litigation funder that enters into a litigation financing agreement:
In Washington;
Subject to Washington law;
That provides litigation financing for a legal action in Washington; or
That provides litigation financing to a party who resides in or conducts business in Washington, or such parties' attorney.
A litigation financing agreement that does not comply with the requirements and limitations of this chapter is void.
This chapter does not affect the award of costs or attorney fees to a nonprofit legal organization or related attorney.
A claimant or claimant's attorney who is a party to a litigation financing agreement shall: (a) Disclose and certify in writing to all named parties to the underlying legal action and their attorneys the name, address, and citizenship or country of incorporation or registration, of any person or entity that, pursuant to the litigation financing agreement, has a financial stake in the outcome of the legal action or portfolio that includes the legal action; and (b) produce to all named parties to the underlying legal action an unredacted and complete copy of the litigation financing agreement creating the contingent right to receive payment.
An attorney who enters into, arranges, or is a beneficiary of a litigation financing agreement in connection with representing a claimant in a legal action shall disclose in writing to the claimant the existence of the litigation financing agreement, the identity of the third-party litigation funder, any rights of the third-party litigation funder under the agreement that may affect the claimant's interests, including any rights relating to settlement, litigation strategy, or recovery, and any compensation, fee, commission, or other benefit the attorney or the attorney's firm may receive in connection with the litigation financing agreement.
The disclosure, certification, and production required by subsection (1) of this section must be made upon filing the legal action or, if the legal action is filed prior to the execution of a litigation financing agreement, within 35 days after the execution of the litigation financing agreement.
The disclosure, certification, and production required by subsection (1) of this section shall be made under penalty of perjury based on actual knowledge of the declarant formed after reasonable inquiry. The claimant or claimant's attorney shall provide the disclosure, certification, and production required by subsection (1) of this section to all named parties to the underlying legal action, and such recipients shall maintain the disclosure, certification, and production to preserve the confidentiality of the parties and attorneys, and terms of the litigation financing agreement.
If, after submitting the disclosure, certification, and production required by subsection (1) of this section, the third-party litigation funder learns that the information or documents disclosed are incomplete or inaccurate, the third-party litigation funder must supplement or correct the incomplete or inaccurate disclosure, certification, and production within 35 days after learning of the incomplete or inaccurate information or documents.
The existence and terms of a litigation financing agreement are subject to discovery in the legal action to which the litigation financing agreement pertains.
A third-party litigation funder may not:
Decide, influence, or direct an attorney with respect to the conduct of the underlying legal action or any settlement or resolution of the underlying legal action including, but not limited to, decisions concerning appointing or changing legal counsel, choice or use of lay or expert witnesses, discovery, motions, arguments, and litigation strategy. The right to decide, influence, or direct matters related to a legal action belongs solely to the parties and attorneys;
Be assigned rights to profits other than the right to receive a share of the proceeds obtained in the legal action, or an agreed payment of fees or interest, contingent on the outcome of the legal action, as outlined in the litigation financing agreement;
Share with anyone who is not a party to the underlying legal action, or attorney to such party, any proprietary information or information affecting national security interests obtained as a result of the litigation financing agreement for the legal action;
Provide funding to or in connection with a litigation financing agreement that is directly or indirectly financed by a foreign country of concern or foreign entity of concern;
Pay or offer commissions, referral fees, rebates, or other forms of consideration to any person in exchange for referring a claimant to a third-party litigation funder;
Accept any commissions, referral fees, rebates, or other forms of consideration from any person providing any goods or rendering any services to a claimant;
Charge a rate of interest that exceeds the rate of interest allowed under RCW 19.52.020;
Receive or recover any payment that exceeds 25 percent of the amount of any judgment, award, settlement, verdict, or other form of monetary relief obtained in the legal action that is the subject of the litigation financing agreement;
Refer or require a claimant to hire or engage any person providing any goods or rendering any services to the claimant;
Fail to promptly deliver a fully completed and signed litigation financing agreement to all parties to the agreement and their legal representatives;
Attempt to secure a remedy or obtain a waiver of any remedy including, but not limited to, compensatory, statutory, or punitive damages, a party to the litigation financing agreement may or may not be entitled to pursue or recover otherwise;
Offer or provide legal advice to a claimant;
Assign, including securitizing, a litigation financing agreement in whole or in part;
Report a party to the litigation financing agreement to a credit reporting agency.
A person who provides any goods or renders any services to a claimant is prohibited from having a financial interest in litigation financing and may not receive any commissions, referral fees, rebates, or other forms of consideration from any third-party litigation funder or its employees, owners, or affiliates.
The legislature finds that the practices covered by this chapter are matters vitally affecting the public interest for the purpose of applying the consumer protection act, chapter 19.86 RCW. A violation of this chapter is not reasonable in relation to the development and preservation of business and is an unfair or deceptive act in trade or commerce and an unfair method of competition for purposes of applying the consumer protection act, chapter 19.86 RCW.
In any suit brought to enforce this chapter, in addition to all relief available under chapter 19.86 RCW, the plaintiff may seek any or all of the following remedies: (a) Statutory damages equal to $10,000 per violation; (b) disgorgement of any funds paid or received pursuant to the litigation financing agreement; and (c) any other equitable relief deemed appropriate by the court.
This act takes effect July 1, 2026.
This act applies prospectively only and not retroactively. It applies to litigation financing agreements entered into on or after the effective date of this section.
If any provision of this act or its application to any person or circumstance is held invalid, the remainder of the act or the application of the provision to other persons or circumstances is not affected.