This op-ed was published by DC Journal
State lawmakers in Washington are considering a bill that could finally bring transparency to one of the fastest-growing — and unknown — forces deteriorating the state’s legal system: third-party litigation funding.
Lawsuit financing allows outside investors — including foreign adversaries — who have no direct stake in a case to bankroll lawsuits in exchange for a cut of any judgment or settlement. In theory, funders claim they help level the playing field by giving plaintiffs the resources to take on large corporations. In practice, they’re distorting our courts and allowing foreign interests to manipulate our judicial system. Left unchecked, this outside funding is warping litigation into a lucrative investment product and Washington into a national magnet for lawsuit abuse.
That’s partly why King County and the Washington Supreme Court have been among the nation’s worst “Judicial Hellholes®” for the past two years. The state’s plaintiff-friendly courts and record-breaking verdicts have made it an attractive playground for trial lawyers and funders alike. Last year, the Washington Supreme Court reinstated a $185 million nuclear verdict®based on questionable science and even applied Missouri law — complete with punitive damages not permitted under Washington law. The result was exactly what investors look for: unpredictability, high payouts, and leverage for settlements.
Now, as litigation funders take note, everyday Washingtonians are footing the bill at nearly $2,700 per resident, or more than $10,000 for a family of four each year. The state has one of the most expensive “tort taxes” in the nation — second only to the “other” Washington, the District of Columbia. Experts estimate that lawsuit abuse costs Washington state more than 170,000 jobs each year and siphons upward of $20 billion from the state’s GDP.
New research shows lawsuit financing further exacerbates those economic impacts by reducing household purchasing power by more than $600 a year on average for American families. These costs ripple across the economy, contributing to higher insurance premiums, pricier consumer goods, and lost economic productivity.
Bellevue-based video game company, Valve, has found itself the target of a wave of funder-backed lawsuits and arbitrations both in Washington and abroad. In one astonishing investor presentation, lawyers pitching funders described Valve as a “good target” with deep pockets and an incentive to settle quickly — and said investors could profit even if their recruited claimants were weak. That’s not justice. It’s an investment strategy built on legal intimidation.
House Bill 2255 is a modest, common-sense measure that would require disclosure when lawsuits are secretly financed by hedge funds, private equity groups, or even foreign entities betting on courtroom outcomes. This reform would help restore fairness by ensuring courts, parties, and judges at least know when outside financiers are pulling the strings.
