Washington committee hears competing views on bill to require disclosure of third‑party litigation funders

A state legislative committee heard nearly three hours of testimony January 21 on House Bill 2,255, a proposal to require disclosure of third‑party litigation funding and to place limits on certain funder practices.

The bill, explained by committee staff, would create a new statutory chapter governing litigation‑financing agreements governed by Washington law. It would require claimants to disclose the name, address and citizenship or country of incorporation of any entity with a financial stake in a lawsuit and to produce unredacted copies of the financing agreement. The proposal also lists prohibited funder conduct, including directing attorney strategy or sharing proprietary or national‑security information, and it would void agreements that fail to comply. HB 2,255 would authorize statutory damages of $10,000 per violation and disgorgement of funds paid under a noncompliant agreement. Representative Amy Wallen, the bill sponsor, described the measure as “a transparency bill, not a ban.”

Why it matters: Supporters say undisclosed investor involvement can complicate settlements, prolong litigation and raise costs that flow into higher insurance premiums and consumer prices. Opponents say mandatory production of agreements risks exposing attorney work product and could make litigation more expensive for plaintiffs rather than less.

Supporters, including speakers from the Washington Liability Reform Coalition and the National Association of Mutual Insurance Companies, told the committee that courts and litigants need to know when outside investors have a stake so disputes can be managed efficiently. “When outside investors have a financial stake in a lawsuit, the court and the parties should know about it,” said Chris Tefft of the Washington Liability Reform Coalition.

Opponents argued the bill as drafted would chill access to capital for plaintiffs who rely on contingent financing to pursue complex, capital‑intensive cases. “Transparency should not be one‑sided,” said John Weber of the Washington State Association for Justice, who testified in opposition. Weber and other critics warned that forced disclosure to defendants could prompt satellite discovery over financing arrangements and thereby disadvantage plaintiffs.

A central policy choice is the bill’s proposed 25% cap on a funder’s recovery from a settlement or verdict. Supporters described the cap as a starting point to prevent excessive pass‑through costs to claimants; multiple insurance industry witnesses said such a cap would protect consumers and lower systemic costs. Industry‑funding representatives said the cap may be inappropriate for large commercial financings and could raise returns for some funders; one funder warned that rigid caps could make commercial financing more expensive.

Committee staff and multiple witnesses discussed timing: the bill text, as understood by staff and some testifiers, would require disclosure no later than when a case is filed, though there may be earlier triggers depending on the financing arrangement. The committee asked witnesses to submit written comments for further review; no vote was taken.

Next steps: The committee closed the HB 2,255 hearing and requested written submissions from all testifiers to help staff and lawmakers refine the bill language and address concerns about privilege, timing, and the 25% cap.