Alternative Credit, Commercial Litigation Finance & Settlement Waterfalls
Litigation Finance Non-Recourse Funding Waterfall Formula
Calculate Commercial Litigation Finance Non-Recourse Senior Funder Return + Multiple Payout, Remaining-Pool Capped Trial Counsel Contingency Fee, Claimant Net Settlement Proceeds, and Claimant Recovery Share.
Enforce non-recourse priority caps so settlement waterfalls never go negative on low awards!
In commercial arbitration and patent/antitrust litigation finance, a funder advances non-recourse capital (Funded_Capital) in exchange for priority return of principal plus a contractual multiple (Funder_Entitlement = Funded_Capital * (1 + Profit_Multiple)), capped strictly at Gross_Settlement! Trial counsel also earns a partial contingency percentage (Gross_Settlement * Contingency_Pct), capped at the remaining pool (Gross_Settlement - Funder_Payout), leaving Claimant_Net_Proceeds = MAX(0, Gross_Settlement - Funder_Payout - Counsel_Fee)! Subtracting uncapped funder multiples without MIN(Gross_Settlement, ...) breaks non-recourse economics whenever cases lose or settle modestly!
Verify on a Commercial Patent Settlement—Funded_Capital = $8.00M (B2), Gross_Settlement = $50.00M (B3), Funder_Profit_Multiple = 2.00x (1x principal + 2x profit = 3.00x total entitlement, B4 -> Funder Senior Payout = MIN(50, 8 * 3) = $24.00M in E2), and Counsel_Contingency_Rate = 0.20 (20.0% hybrid contingency, B5 -> Counsel Fee = MIN(50 - 24, 50 * 0.20) = $10.00M in E3): Claimant Net Proceeds equal 50.00 - 24.00 - 10.00 = $16.00M (E4), representing a 0.3200 (32.00% in E5) net claimant recovery share!
| Litigation Waterfall Metric ($8M Funded, $50M Award, 2.0x Profit Mult, 20% Counsel) | Formula | Verified Output |
|---|---|---|
| Funder Senior Payout ($M) | MIN(Gross_Settlement, Funded * (1 + Profit_Mult)) | $24.00M ($0.00M @ Dismissal) |
| Counsel Contingency Fee ($M) | MAX(0, MIN(Gross - Funder, Gross * Counsel_Pct)) | $10.00M ($0.00M @ Dismissal) |
| Claimant Net Proceeds ($M) | MAX(0, Gross - Funder_Payout - Counsel_Fee) | $16.00M ($0.00M @ Dismissal) |
| Claimant Net Recovery Share | IF(Gross = 0, 0, Claimant_Net / Gross) | 0.3200 (32.00%) |
Non-Recourse Litigation Settlement Waterfall Formula
Validate Funded_Capital > 0, Gross_Settlement >= 0, Profit_Multiple > 0, and Contingency_Rate in [0, 0.60)!
=LET(fn_m, B2, st_m, B3, ml_p, B4, cn_r, B5, IF(OR(fn_m <= 0, st_m < 0, ml_p <= 0, cn_r < 0, cn_r >= 0.6), "Invalid Claim Waterfall", LET(fd_p, MIN(st_m, fn_m * (1 + ml_p)), lw_f, MAX(0, MIN(st_m - fd_p, st_m * cn_r)), ROUND(MAX(0, st_m - fd_p - lw_f), 2))))Summary-Judgment Dismissal Non-Recourse Check (Set Gross Settlement = $0)
Verify true non-recourse protection by setting Gross_Settlement B3 = $0.00M: Funder Payout E2, Counsel Fee E3, Claimant Proceeds E4, and Recovery Share E5 all evaluate cleanly to 0—the plaintiff owes nothing back on the $8.00M advance!
=IF(ISTEXT(E4), E4, IF(B3 = 0, 0, ROUND(E4 / B3, 4)))Try the example
Use the original values or change them to test your understanding.