Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-14-01453/USCOURTS-ca10-14-01453-0/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 

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UNITED STATES COURT OF APPEALS 

FOR THE TENTH CIRCUIT 

_________________________________ 

FORREST DARYL TEMPLETON, 

 Plaintiff Counter Defendant - 

 Appellant, 

v. 

CATLIN SPECIALTY INSURANCE 

COMPANY, 

 Defendant Counterclaimant – 

 Appellee, 

and 

H. THOMAS FEHN; ORLY DAVIDI; 

GREGORY J. SHERWIN; FIELDS, 

FEHN & SHERWIN, 

 Defendants. 

____________________________ 

FORREST DARYL TEMPLETON, 

 Plaintiff Counter Defendant - 

 Appellant, 

v. 

DALE K. HALL, 

 Defendant - Appellee, 

and 

CATLIN SPECIALTY INSURANCE 

COMPANY; H. THOMAS FEHN; ORLY 

No. 14-1261 

(D.C. No. 1:12-CV-00859-RPM) 

(D. Colo.) 

14-1381 

(D.C. No. 1:12-CV-00859-RPM) 

(D. Colo.) 

FILED 

United States Court of Appeals 

Tenth Circuit 

July 6, 2015

Elisabeth A. Shumaker 

Clerk of Court

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DAVIDI; GREGORY J. SHERWIN; 

FIELDS, FEHN & SHERWIN, 

 Defendants. 

_____________________________ 

FORREST DARYL TEMPLETON, 

 Plaintiff Counter Defendant - 

 Appellant, 

v. 

H. THOMAS FEHN; ORLY DAVIDI; 

GREGORY J. SHERWIN; FIELDS, 

FEHN & SHERWIN, 

 Defendants - Appellees, 

and 

CATLIN SPECIALTY INSURANCE 

COMPANY, 

 Defendant - Counterclaimant, 

and 

 DALE K. HALL, 

 Defendant. 

14-1453 

(D.C. No. 1:12-CV-00859-RPM) 

(D. Colo.) 

ORDER AND JUDGMENT*

 

* This order and judgment is not binding precedent, except under the doctrines of 

law of the case, res judicata, and collateral estoppel. It may be cited, however, for its 

persuasive value consistent with Fed. R. App. P. 32.1 and 10th Cir. R. 32.1. 

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Before TYMKOVICH, MATHESON, and MORITZ, Circuit Judges. 

 Forrest Daryl Templeton was a licensed securities broker. Between 2004 and 

2007, he sold high-risk investments to Robert and Lisa Cordaro. Mr. Templeton sold one 

of those investments, a secured note in Medical Providers Financial Corporation IV 

(“MedCap IV”), while he was a registered representative for CapWest Securities, Inc. 

(“CapWest”). After the investments failed, the Cordaros filed claims against Mr. 

Templeton, CapWest, their former broker-dealer, and others with the Financial Industry 

Regulatory Authority (“FINRA”), which resolves disputes between broker-dealers and 

their customers through arbitration. 

Catlin Specialty Insurance Company (“Catlin”) insured Mr. Templeton and 

CapWest under an errors and omissions policy (the “Policy”). The Policy covered claims 

against Mr. Templeton and CapWest regarding sales of securities while Mr. Templeton 

was a registered representative at CapWest. Catlin agreed to defend Mr. Templeton and 

CapWest against the Cordaros’ claim subject to a reservation of rights. 

Catlin retained counsel for Mr. Templeton and CapWest, but the law firm it 

retained withdrew after a dispute with CapWest over legal fees. A dispute ensued 

between Catlin and CapWest over replacement counsel. CapWest requested Catlin to 

retain Fields, Fehn & Sherwin (“FF&S”), which had been serving as general counsel for 

CapWest in the Cordaro matter. Catlin objected but eventually gave FF&S limited 

authority to attempt to settle with the Cordaros. 

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Shortly before the FINRA arbitration hearing, FF&S negotiated a settlement, 

which resulted in the Cordaros dismissing CapWest—but not Mr. Templeton—from the 

FINRA proceeding. Mistakenly believing the settlement had also resolved the claims 

against him, Mr. Templeton did not attend the FINRA arbitration hearing. The 

arbitration panel awarded the Cordaros $500,000 in damages, plus interest and costs. 

Mr. Templeton paid the Cordaros $555,000 to settle the arbitration award. He 

then initiated this action in the District of Colorado against Catlin; Dale Hall, the 

President and Chief Executive Officer of CapWest; FF&S; and FF&S attorneys H. 

Thomas Fehn, Orly Davidi, and Gregory Sherwin (collectively with FF&S, “attorneydefendants”). The district court granted Mr. Hall’s motion to dismiss and Catlin’s and 

FF&S’s motions for summary judgment, thereby dismissing all of Mr. Templeton’s 

claims against the defendants. Mr. Templeton now appeals those orders. 

 Mr. Templeton argues the district court erred when it: (1) dismissed his negligent 

misrepresentation claim against Mr. Hall, (2) granted summary judgment to Catlin on his 

indemnification claim and Catlin’s counterclaim, (3) granted summary judgment to 

Catlin on his breach of the duty to defend claim, and (4) granted summary judgment to 

the attorney-defendants on his legal malpractice and breach of fiduciary duty claims. 

Exercising jurisdiction under 28 U.S.C. § 1291, we affirm on the first, second, and fourth 

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issues, and affirm in part and reverse and remand in part on the third issue.1 

I. BACKGROUND 

A. Factual Background 

1. Mr. Templeton Sells Securities to the Cordaros 

 From February 14, 2002 to September 15, 2005, Mr. Templeton worked as a 

registered representative for United Securities Alliance, Inc. (“USA”). During that time, 

he established a broker-customer relationship with the Cordaros. Between June 2004 and 

August 2005, Mr. Templeton sold the Cordaros the following five private placement 

investments totaling $515,000: In June 2004, the Cordaros purchased (1) a $100,000 

three-year note and (2) a $130,000 five-year note in Medical Provider Financial 

Corporation II (“MedCap II”), a subsidiary of Medical Capital Holdings, Inc. (“MedCap 

Holdings”); (3) a $150,000 investment instrument in Triple Net NNN 2003 Value Fund 

LLC (“Triple Net”); and (4) a $100,000 investment instrument in DBSI State Office 

Fund, LLC (“DBSI”). In August 2005, they purchased an additional (5) $35,000 five-

 1

 Mr. Templeton initially filed a notice of appeal as to the Catlin judgment (No. 

14-1261) before final judgment as to all defendants and without district court approval 

under a Federal Rule of Civil Procedure 54(b) certification. Catlin moved to dismiss the 

appeal because the judgment was not final. At Mr. Templeton’s request, the district court 

subsequently entered a Rule 54(b) certification as to its judgments against Catlin and Mr. 

Hall, making Mr. Templeton’s appeal as to Catlin valid. Mr. Templeton also filed a 

notice of appeal of the judgment in favor of Mr. Hall at that time (No. 14-1381). After 

the district court granted summary judgment to the attorney-defendants, it entered a final 

judgment dismissing the action. Mr. Templeton then filed a notice of appeal as to the 

attorney-defendants (No. 14-1453). The motion to dismiss is denied as moot because the 

judgment as to all defendants is now final and appealable. 

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year note in MedCap II. In total, the Cordaros invested $265,000 in MedCap II while Mr. 

Templeton was employed with USA. 

 On September 16, 2005, Mr. Templeton began working at CapWest. The 

Cordaros transferred their investment account to CapWest. In June 2007, the Cordaros’ 

investment on their $100,000 MedCap II note matured. They worked with Mr. 

Templeton to reinvest the $100,000 they received into a seven-year note in Medical 

Provider Financial Corporation IV (“MedCap IV”), another subsidiary of MedCap 

Holdings. CapWest was the broker-dealer on the MedCap IV transaction. 

 In fall 2008, the Cordaros stopped receiving payments on all of their investments 

with Mr. Templeton, including the MedCap IV investment. 

 In July 2009, the U.S. Securities and Exchange Commission (“SEC”) sued 

MedCap Holdings for violating federal securities laws. In August 2009, the district court 

appointed a temporary receiver and then a permanent receiver for MedCap Holdings and 

its subsidiaries, including MedCap IV. The court’s orders also froze MedCap IV’s assets. 

2. The Cordaros Initiate the FINRA Action 

 On November 18, 2009, the Cordaros filed a statement of claim with FINRA 

against Mr. Templeton, CapWest, USA, and USA’s principals for Mr. Templeton’s sales 

of the Triple Net, DBSI, MedCap II, and MedCap IV notes. The Cordaros demanded 

arbitration and sought to recover the $515,000 they had invested with Mr. Templeton, 

claiming that Mr. Templeton had sold them speculative securities without adequate 

investigation or disclosure. 

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 The statement of claim described each of Mr. Templeton’s sales of securities to 

the Cordaros, including the MedCap IV note, as to which the Cordaros alleged: 

In 2007, when the [$100,000 MedCap II note] matured, respondent 

Templeton induced claimants to roll it over into a new, 7 year note for the 

same amount. By that time, Templeton was working for another broker 

dealer, CapWest Securities, which is named as a respondent herein by 

virtue of the offer and sale of that note to claimants. 

App. at 790. They alleged the prospectuses for both the MedCap II and MedCap IV sales 

were inadequate because they did not disclose lawsuits involving a MedCap Holding 

principal that should have been disclosed and because they included unsupported 

financial information. They further alleged that Mr. Templeton and CapWest should 

have known the MedCap IV investment was too risky because it was unsuitable for any 

customer “who was not a speculator,” and the Cordaros specifically told them that 

“preservation of capital was their primary invest[ment] objective.” Id. 

3. Mr. Templeton and CapWest’s Insurance Policy 

 When the Cordaros filed their FINRA action, Catlin insured CapWest and Mr. 

Templeton through an errors and omissions policy. The Policy’s coverage period was 

September 1, 2009 through September 1, 2010. The Policy covered: 

Damages which the Insured becomes legally obligated to pay because of a 

Claim that is both made against the Insured and reported to the Insurer in 

writing during the Policy Period . . . for a Wrongful Act committed solely 

in the rendering or failing to render Professional Services for a Client, 

provided . . . such Wrongful Act occurred on or after the Retroactive Date. 

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Id. at 876 (Policy § I.A).2 The Policy defined “Wrongful Act” as “a negligent act or 

omission . . . committed by an Insured in the rendering of Professional Services,” id. at 

882 (Policy § II.V), and “Professional Services” to include a registered representative’s 

“sale, attempted sale or servicing of Securities that are approved and authorized by and 

actually distributed through the Broker/Dealer,” id. at 881 (Policy § II.Q.1.b). 

The Policy’s “Retroactive Date” was defined as the later of January 1, 2005, or the 

date when the Insured Registered Representative “first entered into an uninterrupted or 

continuously renewed contract with the Broker/Dealer.” Id. at 882 (Policy § II.T.2). Mr. 

Templeton began working at CapWest on September 16, 2005. Thus, the Policy covered 

claims within the policy period arising from Mr. Templeton’s negligent acts or omissions 

in rendering professional services that occurred on or after September 16, 2005. The 

Policy therefore potentially provided coverage for the MedCap IV note Mr. Templeton 

sold to the Cordaros. It did not cover the sales Mr. Templeton made to the Cordaros 

while employed with USA. 

 The Policy contained exclusions from coverage, two of which are relevant here—

the “Interrelated Wrongful Acts” exclusion (“Exclusion D.1.b”) and the 

“Insolvency/Receivership” exclusion (“Exclusion N”). Exclusion D.1.b stated, in 

relevant part: 

 2

 The Policy defined “Insured” to include the Named Insured Broker/Dealer, 

CapWest, and “Insured Registered Representative(s).” App. at 878-79 (Policy § II.K 

(“Insured(s)”), II.B (“Broker/Dealer”). Mr. Templeton was an Insured Registered 

Representative. 

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This Policy shall not apply to and the Insurer shall pay neither Damages nor 

Defense Expenses for any Claim . . . arising out of, based upon or in 

consequence of, directly or indirectly resulting from or in any way 

involving . . . any Wrongful Act occurring on or after the Retroactive Date 

which, together with a Wrongful Act occurring on or prior to such 

Retroactive Date, would constitute Interrelated Wrongful Acts. . . . 

Id. at 882 (Policy § III.D.1.b). The Policy defined “Interrelated Wrongful Act” as: 

 [A]ny Wrongful Acts that are: 

1. similar, repeated or continuous; or 

2. connected by reason of any common fact, circumstance, situation, 

transaction, casualty, event, decision or policy or one or more series of 

facts, circumstances, situations, transactions, casualties, events, decisions or 

policies. 

Id. at 880 (Policy § II.M). 

 Exclusion N excluded from coverage any claim: 

arising out of, based upon or in consequence of, directly or indirectly 

resulting from or in any way involving insolvency, receivership, . . . or 

inability to pay of . . . any company, organization, entity, . . . direct private 

placement, . . . or arrangement of any nature in which any Insureds . . . 

placed or recommended to be placed funds. 

Id. at 884 (Policy § III.N). 

 The Policy also imposed upon Catlin a duty to defend “any civil litigations or 

arbitrations against the Insureds that are covered by [the] Policy.” Id. at 876 (Policy 

§ I.B). It provided that Catlin “shall appoint counsel of its selection to defend the 

Insureds and pay associated Defense Expenses.” Id. The Policy had a $500,000 

aggregate coverage limit, including defense expenses, for claims arising from the sale of 

private placements, such as the MedCap IV sale, subject to a $100,000 self-insured 

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retention per claim. 

4. Catlin Agrees to Provide Representation to Mr. Templeton and CapWest in the 

Cordaro Matter Subject to a Reservation of Rights 

 On February 4, 2010, CapWest received the Cordaros’ statement of claim, and 

reported the action to Catlin’s claims office a week later. It also notified Mr. Fehn, a 

general partner at FF&S, who regularly did legal work for CapWest as general counsel. 

On February 19, 2010, Mr. Hall sent an email to Mr. Templeton and other CapWest 

registered representatives notifying them that those registered representatives named in 

FINRA arbitrations would be required to pay 75% of the legal fees incurred in defending 

those claims. 

On May 5, 2010, Catlin’s coverage counsel, Richard Rogers, sent a letter to 

CapWest and Mr. Templeton stating that Catlin would defend them against the Cordaros’ 

claims subject to a “full reservation of rights.” Id. at 814. The letter explained the 

relevant coverage provisions of the Catlin Policy, and reserved the right to deny 

indemnification for the Cordaros’ claims to the extent they were not covered. It also said 

Catlin was reserving its right to deny indemnity based on Exclusion N, because the 

Cordaro “matter arises f[ro]m Securities that are now insolvent, bankrupt, or in 

receivership.” Id. at 819. It also stated that “Catlin further reserves its right to deny 

coverage for the arbitration, in whole or in part, based on other exclusions contained in 

the policy, including . . . Exclusion D which applies to claims that were reported or 

noticed prior to the policy period . . . .” Id. 

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5. Catlin’s Initial Choice of Counsel and Counsel’s Withdrawal 

 Catlin initially retained the law firm Markun Zusman & Compton LLP (“Markun 

Zusman”) to represent Mr. Templeton and CapWest in the Cordaro arbitration. On April 

20, 2010, Markun Zusman filed an answer to the Cordaros’ statement of claim. The 

answer responded to all of the Cordaros’ claims against Mr. Templeton, including those 

arising out of the investments he sold while at USA. 

 In August 2010, Mr. Templeton left CapWest. 

 Around that time, CapWest became dissatisfied with the amount of Markun 

Zusman’s legal bills, which it was paying under its self-insured retention, and stopped 

paying its invoices. On September 28, 2010, Mr. Fehn submitted a “global settlement” 

proposal to counsel representing four FINRA claimants with arbitrations pending against 

CapWest, including the Cordaros, attempting to settle the claims for “approximately 

3.6% of the claimed amount[s].”3

 Id. at 931. The letter said that if all claimants did not 

agree to the settlement, CapWest would defend the cases on a “first come, first served 

basis, and then once its coverage and funds are exhausted, it will cease business activity.” 

Id. The letter referred only to CapWest and not to CapWest’s registered representatives. 

The claimants did not accept the settlement. 

 On November 5, 2010, Markun Zusman sent a letter to FINRA withdrawing as 

 3

 At the time of the Cordaro arbitration, CapWest had a number of other FINRA 

arbitrations pending against it, which were subject to the same Catlin Policy. 

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counsel for CapWest and Mr. Templeton. Markun Zusman advised FINRA that Mr. 

Fehn was CapWest’s general counsel and provided his contact information. Although 

Markun Zusman did not send a copy of the letter to Mr. Templeton, on November 12, 

2010, a lawyer with Markun Zusman notified Mr. Templeton the firm was no longer 

representing him in the Cordaro arbitration. On December 13, 2010, Mr. Templeton sent 

FINRA an email updating his contact information to a mail forwarding service in South 

Dakota.4

 In February 2011, FINRA apparently requested Mr. Templeton’s contact 

information from Markun Zusman so that it could remove Markun Zusman as Mr. 

Templeton’s attorney of record. Markun Zusman provided an outdated address, a P.O. 

Box in Santa Fe, New Mexico. FINRA thereafter recognized Mr. Templeton as 

appearing pro se. 

 In February 2011, Mr. Templeton emailed Mr. Hall and Ed Price, CapWest’s 

Chief Operating Officer, to ask about the status of the Cordaro arbitration. Mr. 

Templeton asked if Mr. Fehn was representing CapWest and him in the matter, inquired 

about the status of settlement negotiations, and said he would need to adjust his travel 

plans if he needed to be in Albuquerque at the end of March for the arbitration. Mr. Hall 

responded, stating that “[a]t this moment [Mr. Fehn] is [representing Mr. Templeton],” 

and that CapWest was working “with Catlin to make that permanent.” Id. at 935. Mr. 

 4

 The letter explained he is a legal resident of South Dakota but travels full time 

and does not have a residential address where he receives mail. It also provided his email 

address, noting that email was the best way to contact him because he only receives mail 

forwarding one or two times a month. 

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Hall also stated that Mr. Fehn was working on a settlement with the Cordaros. 

6. Catlin and CapWest’s Disagreement over Replacement Counsel 

On March 1, 2011, Mr. Hall emailed Mr. Rogers requesting authorization of 

$10,000 to $15,000 to settle the Cordaro matter. Mr. Fehn was copied on the email. Mr. 

Rogers responded later that day, explaining that he would need time to review the matter 

before responding to the settlement request. He further stated that handling the matter 

was “being hampered by the state of defense counsel arrangements.” Id. at 940. 

Mr. Rogers attached a letter to his email explaining Catlin’s position on retaining 

defense counsel. In the letter, he summarized that CapWest rejected the law firm Catlin 

proposed to represent it and Mr. Templeton and instead insisted FF&S handle the matter. 

Mr. Rogers objected to retaining FF&S. He explained, 

Catlin does not agree that FF&S would be appropriate for the defense, for 

the reasons stated at the inception of these matters, with reference to the 

firm’s specialty in the representation of claimants and related issues. 

Moreover, that firm has served as the general counsel for CapWest during 

these proceedings. As such, it would not be appropriate for FF&S to also 

serve as independent defense counsel due to potential conflicts of interest. 

Id. at 945. In addition, Mr. Rogers agreed to pay FF&S a separate $15,000 for services it 

had rendered in connection with the global settlement offer after Catlin received an 

itemized invoice. 

 On March 7, 2011, Mr. Rogers emailed Mr. Hall, copying Mr. Fehn, approving the 

$15,000 settlement authority Mr. Hall had requested. Mr. Rogers further stated that the 

approaching Cordaro arbitration “underscores the need for an agreed-to defense counsel 

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approach to be put in place immediately.” Id. at 939. The next day, Mr. Hall replied to 

Mr. Rogers, objecting to his refusal to allow FF&S handle the Cordaro matter. Mr. 

Rogers and Mr. Hall continued discussing their dispute over defense counsel. On March 

9, 2011, Mr. Rogers explained that CapWest wanted “Mr. Fehn, but Catlin does not agree 

to him, and that they would “have to continue discussions to bridge the divide.” Id. at 

949. 

 On March 11, 2011, Mr. Hall responded, agreeing that they would have to 

continue discussions. He also provided Catlin with invoices for FF&S’s services. Mr. 

Rogers responded, acquiescing to Mr. Hall’s request to pay FF&S the agreed-upon 

$15,000, but renewing Catlin’s objection to FF&S providing defense services going 

forward. 

 On March 13, 2011, at Mr. Hall’s request, Mr. Templeton sent Mr. Hall updated 

financial information to pass along to Mr. Fehn. On March 17, 2011, Mr. Templeton sent 

Mr. Hall another email asking if there was “anything new” in the Cordaro matter and if 

Mr. Hall had received his financial information. Id. at 966. Mr. Hall responded that day, 

stating: “Got the statement. Tom Fehn was to talk to the [Cordaros’] lawyer this week. 

[W]ill let you know.” Id. Mr. Templeton did not communicate with anyone at Catlin or 

FF&S about the Cordaro matter. 

 On March 21, 2011, Mr. Hall emailed a legal assistant at FF&S requesting an 

update on the Cordaro matter. The legal assistant responded on March 23, 2011, stating: 

“[Mr. Fehn] asked me to remind you that we don’t represent Daryl Templeton. [Mr. 

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Fehn] is out this week, but the update is that we are trying to settle the case.” Id. at 973. 

Mr. Hall replied later that day: “We should be representing Daryl. I mentioned that to 

Tom. If we alienate Daryl our goose could be cooked.” Id. at 972-73. The legal 

assistant responded, “I will let [Mr. Fehn] know asap.” Id. at 972. 

7. FF&S Negotiates with the Cordaros to Settle their Claim and Dismiss CapWest 

 On March 25, 2011, Ms. Davidi, an associate at FF&S, reached an oral agreement 

with the Cordaros’ representatives, Richard Sacks and Irwin Stein, to settle their claim 

for $13,500. The Cordaros accepted the offer. But when Ms. Davidi contacted Mr. 

Sacks to confirm that the settlement was with all the parties, Mr. Sacks stated the 

settlement was with CapWest only and did not include Mr. Templeton. Ms. Davidi then 

notified FINRA of the settlement, stating that the Cordaros had “reached a settlement 

with Respondent CapWest Securities, Inc. only.” Id. at 987. 

 That same day, the Cordaros notified FINRA that they were dismissing their 

claims against CapWest with prejudice. Mr. Stein sent Mr. Templeton notice of the 

settlement to the address FINRA had on file, which was apparently the outdated New 

Mexico address provided by Markun Zusman. 

8. Mr. Hall Notifies Mr. Templeton and Catlin that the Cordaro Matter Had 

Settled 

 On March 25, 2011, Mr. Hall told Mr. Templeton that the Cordaro matter had 

settled. On March 28, 2011, Mr. Hall also notified Mr. Rogers that FF&S had settled the 

Cordaro matter for $13,500. Neither Mr. Templeton nor Mr. Rogers were informed that 

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the matter had been settled with CapWest only. 

9. Mr. Templeton Does Not Attend the Cordaro Arbitration 

 Unbeknownst to Mr. Templeton and Catlin, the FINRA arbitration proceeded on 

March 29, 2011, in Mr. Templeton’s absence. USA, the only other remaining 

respondent, also did not appear.5

 At the hearing, the FINRA panel heard uncontested 

testimony from Mr. Cordaro and argument from Mr. Stein. At the end of the hearing, the 

panel asked Mr. Stein for an accounting of damages. Mr. Stein stated: “I show 100,000 

in DBSI, 150 in Triple Net; . . . 265 in Medical Capital, which I added to 515.” Id. at 

1186. He then acknowledged the $515,000 should be reduced by the $13,500 settlement 

reached with CapWest. 

10. The Cordaros Refuse to Finalize their Settlement with CapWest Because FF&S 

Attempts to Include Mr. Templeton in the Settlement Agreement 

 On April 4, 2011, Ms. Davidi sent a draft settlement to the Cordaros that included 

CapWest and Mr. Templeton as released parties. The proposed settlement agreement 

sought to release CapWest and Mr. Templeton from liability for the $100,000 MedCap 

IV investment. The Cordaros refused to sign the agreement, explaining they never 

agreed to the release of Mr. Templeton. 

11. The FINRA Arbitration Panel Issues an Award against Mr. Templeton 

 On April 12, 2011, the FINRA panel issued a written decision in favor of the 

 5

 The USA principals had been dismissed before the hearing. 

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Cordaros. The panel awarded them $500,000 in damages plus costs and interest, and 

held Mr. Templeton and USA jointly and severally liable for the award. The panel 

declined to impose punitive damages. It did not make findings of fact and therefore did 

not separate the investments the Cordaros made through Mr. Templeton when he was at 

USA from the investment he made while at CapWest. A copy of the award was sent to 

Mr. Templeton at the Santa Fe, New Mexico address. 

12. Mr. Templeton, Mr. Hall, and Mr. Rogers Learn of the FINRA Award 

 On April 15, 2011, Mr. Templeton asked Mr. Hall for an update on the Cordaro 

settlement. Mr. Hall then contacted Ms. Davidi to ask if she knew anything about the 

“Cordaro settlement paperwork.” Id. at 1008. Ms. Davidi responded, 

The latest update is that Plaintiff’s attorney is upset that Daryl Templeton is 

included in the settlement at all. We told him that Mr. Templeton must be 

included as he is an insured under the policy (with respect to the investment 

MedCap IV at CapWest Securities, Inc[.]). Plaintiff’s attorney said he 

would take that news back to his client. We have not heard from them yet, 

but the case has already been taken off [sic] calendar at FINRA. 

Id. 

 On April 25, 2011, Mr. Hall learned of the FINRA panel’s decision. Mr. Hall 

emailed it to Mr. Fehn and asked: “Did FINRA misread something? I thought [the 

Cordaro matter] was adjourned with a settlement.” Id. at 1010. Mr. Fehn replied that the 

settlement pertained to CapWest and Mr. Templeton only as to the MedCap IV note, and 

that the matter “went forward as to the rest” of the Cordaros’ claims against Mr. 

Templeton. Id. 

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 In late April, Mr. Templeton received notice of the FINRA arbitration award.6 On 

April 28, 2011, he emailed Mr. Hall the following: 

Let me make sure I understand this situation. Please let me know if I have 

it straight. 

Tom Fehn or his firm obtained a settlement with Cordaro regarding the 

CapWest Arb[itration], on behalf of our E&O Insurance. Did this 

settlement include me, if not why not? It was my understanding from you 

that [Mr. Fehn] was representing CapWest and Me in this Arb[itration]. If 

so, will I receive some type of settlement agreement? 

The arbitration went ahead with regard to the United Securities [arbitration] 

with an award made to Cordaro. This amounted to a default award on my 

part because USA and I did not show up. 

I now need to hire an attorney to represent me in an appeal to FINRA 

explaining my side of the case. 

Id. at 1013. Mr. Hall replied, 

I would say you have it straight. The way Tom Fehn has explained it to me 

is that the portion that was a sale with CapWest is settled with you included 

in that and we should have settlement paperwork for that shortly. . . . The 

sales that occurred at USA was [sic] not. I was unaware that this case 

involved two sets of sales in the claim with two different [broker-dealers]. 

Id. at 1012. 

 On May 4, 2011, Mr. Templeton emailed an attorney at Markun Zusman seeking 

advice on how to appeal or vacate the FINRA award. On May 9, another Markun 

Zusman attorney forwarded the email to Mr. Rogers and Joe Mooney, Catlin’s claims 

director. He notified Catlin that he had spoken to the Cordaros’ counsel and had 

 6

 His mail forwarding service sent the award notice from his Santa Fe address to 

his South Dakota address. 

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requested that they “hold off on collection efforts until [they] all collectively figure out, 

what if anything can be done.” Id. at 1261. Markun Zusman eventually told Mr. 

Templeton they would not be able to represent him. 

 The day after receiving Markun Zusman’s email, Mr. Rogers emailed Mr. Hall 

stating that he had learned about the FINRA award against Mr. Templeton and asking 

Mr. Hall for a copy of the settlement agreement. Mr. Hall responded the next day, as 

follows: 

You may be assuming, as I did, that the Cordaro v. CapWest, et al., as you 

have titled it, was a case involving only CapWest and Daryl Templeton. 

The case was actually titled “Cordaro v. United Securities Alliance Inc. [et 

al.]” Tom Fehn offered and had the agreement, with your authority to settle 

for up to $15K, to settle the case for CapWest and Daryl Templeton for 

$13.5K for the amount that included CapWest. As I am sure you would 

agree, he had no authority to settle for anyone else. 

I told Daryl that we had settled the case, meaning CapWest’s part of the 

case, not realizing there were other respondents involved. I did not instruct 

him not to attend but would understand how he may have interpreted it. . . . 

The claimants [sic] representative was upset that we had included Daryl 

Templeton in the settlement for the CapWest portion. This is indeed an 

unfortunate turn of events, however it was nothing more than a 

misunderstanding on both my part and Daryl’s. 

Catlin Supp. App. at 744. Mr. Rogers responded to Mr. Hall’s email, asking him to 

provide documentation that the Cordaro settlement included Mr. Templeton. 

 On May 20, 2011, FINRA sent Mr. Templeton a notice at his South Dakota 

address that he had until June 10 to satisfy the Cordaro award or his license to sell 

securities would be suspended. On May 27, 2011, the Cordaros filed a complaint against 

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Mr. Templeton in New Mexico state court to confirm and enforce the arbitration award. 

Mr. Templeton retained counsel to represent him in the New Mexico action. His counsel 

never moved to vacate, modify, or set aside the FINRA award in state court. 

13. Mr. Templeton Retains Counsel and Attempts to Negotiate with CapWest and 

Catlin 

 Mr. Templeton then retained another attorney, Ben White, to assist him in dealing 

with CapWest and Catlin. On June 14, 2011, Mr. White emailed Mr. Rogers, Mr. Hall, 

and Ms. Davidi alerting them that the Cordaros were willing to settle their claims against 

Mr. Templeton for $485,000. Mr. White asked that Catlin, CapWest, and FF&S “put 

together a counter-proposal to take back to the Cordaros’ attorney, and to take any and all 

necessary steps to resolve this matter,” failing which Mr. Templeton would initiate 

litigation against them. App. at 1281. 

 Mr. Rogers then emailed Mr. Fehn to ask for assurances that the claim against Mr. 

Templeton had been settled. On June 20, 2011, Mr. Fehn responded that the Cordaros 

“falsely told the arbitration panel that the case had been settled as to [CapWest] but not as 

to Templeton for his trades while at [CapWest].” Id. at 1014. After Mr. Rogers asked if 

he had any documentation of that, Mr. Fehn responded: “I sent a draft agreement a few 

days after the settlement was reached. [I]t included [Mr. Templeton]. I knew he had to 

be part of the deal.” Id.

 On June 20, 2011, Mr. Rogers also responded to Mr. White, copying Mr. Fehn and 

Mr. Hall, stating: 

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[A]s we discussed, Catlin did provide the Insureds, including Mr. 

Templeton and CapWest, with a defense in this arbitration, subject to full 

reservations of rights. The Insureds, however, raised objections to fee 

statements for the firm that they originally agreed to undertake the defense, 

and while these fees were still subject to a self-insured retention under the 

Catlin policy. That resulted in the original firm withdrawing from the 

Insureds’ representation, which was to be taken over by the other firm that 

CapWest had requested. Catlin’s understanding was that the new firm 

would represent both Insureds. Moreover, as per CapWest’s request, 

settlement was also agreed to by Catlin as to both Insureds. It appears from 

your statements below that something may have gone wrong with 

implementing the defense and settlement of the Insureds, in accordance 

with the understandings of Catlin and CapWest. Nevertheless, Catlin is 

still amenable to resolution of this matter, if possible, in a manner 

consistent with the terms of the policy, and with any other culpable parties 

participating in same. 

Catlin Supp. App. at 751. On June 28, 2011, Mr. Hall proposed that Mr. White approach 

FINRA and request that the arbitration award be set aside. Mr. White rejected the 

proposal, stating that “[t]here is absolutely zero chance that FINRA would ‘set aside’ the 

award.” App. at 1198. 

 In the months that followed, Catlin continued to communicate with Mr. White in 

an attempt to settle the Cordaro award against Mr. Templeton. On August 5, 2011, Mr. 

White communicated a $450,000 offer from the Cordaros. On September 14, 2011, Mr. 

Rogers proposed to Mr. Hall offering $50,000 of the Policy limit toward the settlement of 

the Cordaros’ award against Mr. Templeton. Mr. Hall, however, objected to the 

remaining funds under the Policy being used to settle the Cordaros’ award against Mr. 

Templeton. 

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14. Mr. Templeton Settles with the Cordaros 

 On April 26, 2012, the New Mexico state court confirmed the arbitration award 

against Mr. Templeton for $500,000 plus interest and arbitration fees. On September 25, 

2012, Mr. Templeton settled the New Mexico judgment with the Cordaros for $555,000. 

B. Procedural History 

 On April 3, 2012, Mr. Templeton filed this action in the U.S. District Court for the 

District of Colorado against Mr. Hall, Catlin, and the attorney-defendants. Mr. 

Templeton claimed negligent misrepresentation against Mr. Hall; indemnification and 

breach of duty to defend against Catlin; and legal malpractice, breach of fiduciary duties, 

and negligent misrepresentation against the attorney-defendants. The attorneydefendants answered the complaint. Catlin answered and counterclaimed for a judgment 

declaring it owed no duty to indemnify Mr. Templeton against the arbitration award. 

 On June 11, 2012, Mr. Hall moved to dismiss. In response, Mr. Templeton filed 

an amended complaint and an opposition to Mr. Hall’s motion. The district court granted 

Mr. Hall’s motion to dismiss, concluding that Mr. Templeton failed to allege sufficient 

facts to state a claim for negligent misrepresentation against Mr. Hall. 

 After discovery, Mr. Templeton and Catlin cross-moved for summary judgment on 

Mr. Templeton’s indemnification and breach of duty to defend claims. Catlin further 

moved for summary judgment on its counterclaim for a declaration that it did not owe 

Mr. Templeton a duty to defend. The district court entered judgment on all three claims 

in Catlin’s favor. 

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 Mr. Templeton also moved for partial summary judgment on his legal malpractice 

claim against the attorney-defendants, arguing there was an attorney-client relationship 

between FF&S and Mr. Templeton. The court denied Mr. Templeton’s motion in an oral 

ruling. The attorney-defendants then moved for summary judgment on all of Mr. 

Templeton’s claims against them. Mr. Templeton filed a cross-motion for 

reconsideration of his earlier motion for partial summary judgment. The court granted 

the attorney-defendants’ motion in its entirety and denied Mr. Templeton’s request for 

reconsideration, concluding that Mr. Templeton’s legal malpractice and breach of 

fiduciary duty claims failed because there was no attorney-client relationship between the 

attorney-defendants and Mr. Templeton, nor did the attorney-defendants owe Mr. 

Templeton a duty of care in the absence of an attorney-client relationship.7

 

II. DISCUSSION 

 On appeal, Mr. Templeton argues the district court erred when it: (A) dismissed 

his negligent misrepresentation claim against Mr. Hall, (B) granted summary judgment to 

Catlin on his indemnification claim and Catlin’s counterclaim, (C) granted summary 

judgment to Catlin on his breach of the duty to defend claim, and (D) granted summary 

judgment to the attorney-defendants on his legal malpractice and breach of fiduciary duty 

 7

 The court also granted summary judgment to the attorney-defendants on Mr. 

Templeton’s negligent misrepresentation claim. Mr. Templeton does not challenge the 

dismissal of this claim on appeal. 

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claims. We affirm on all issues except the duty to defend issue, on which we affirm in 

part and reverse and remand in part. 

A. District Court’s Dismissal of Mr. Hall 

Mr. Templeton argues the district court erred in dismissing his negligent 

misrepresentation claim against Mr. Hall. We conclude the district court properly 

dismissed this claim because it failed to allege Mr. Hall’s statements were made for Mr. 

Templeton’s guidance in a business transaction. Accordingly, we affirm.8

 

1. Standard of Review and Legal Background 

a. Standard of review 

 We review a district court’s dismissal of a claim under Rule 12(b)(6) de novo, 

Thomas v. Kaven, 765 F.3d 1183, 1190 (10th Cir. 2014), applying the same legal 

standard as the district court, Teigen v. Renfrow, 511 F.3d 1072, 1078 (10th Cir. 2007). 

We accept all well-pled allegations as true and construe them in the light most favorable 

to the non-moving party. Thomas, 765 F.3d at 1190. “To survive dismissal, ‘a complaint 

must contain sufficient factual matter, accepted as true, to state a claim to relief that is 

plausible on its face.’” Id. (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). 

b. Legal background on negligent misrepresentation 

 To state a claim for negligent misrepresentation under Colorado law, a plaintiff 

must allege: (1) the defendant, in the course of his or her business, profession or 

 8

 Because this issue was decided based on a motion to dismiss, we must review 

this issue based solely on the allegations made in Mr. Templeton’s amended complaint. 

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employment; (2) made a misrepresentation of material fact, without exercising reasonable 

care; (3) for the guidance of others in a business transaction; (4) with knowledge that the 

plaintiff would rely on his or her representation; and (5) the plaintiff justifiably relied on 

the misrepresentation to his or her detriment. Allen v. Steele, 252 P.3d 476, 482 (Colo. 

2011). 

 “[T]he requirement that the misrepresentation was made ‘for the guidance of 

others in their business transactions’ is an essential element of the tort of negligent 

misrepresentation.” Id. at 483. The Colorado Supreme Court has defined “business 

transaction” for purposes of a negligent misrepresentation claim to mean a business or 

commercial transaction. Id. at 483-84. Therefore, “to state a claim of negligent 

misrepresentation, the misrepresentation must be given for the plaintiff’s business or 

commercial purposes.” Id. at 484 (emphasis added). 

 In Allen, an attorney provided the plaintiffs incorrect information regarding the 

statute of limitations for a personal injury claim during an initial consultation, which 

caused them to miss a filing deadline. Id. at 479. The court held that the plaintiffs failed 

to state a claim for negligent misrepresentation because “an initial consultation to discuss 

a potential civil lawsuit is not sufficient” to meet the “guidance of others in their business 

transactions” requirement. Id. at 484. The court explained that “[a]lthough a negligence 

lawsuit against another party has the potential to affect indirectly a non-client’s financial 

or economic interests, a civil lawsuit does not involve a business or commercial 

relationship or transaction.” Id. 

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2. Analysis 

 In his amended complaint, Mr. Templeton alleged that Mr. Hall negligently 

misrepresented that FF&S was representing Mr. Templeton in the Cordaro arbitration, the 

matter had settled, and Mr. Templeton did not need to attend the arbitration hearing. Mr. 

Hall made these statements concerning the Cordaros’ FINRA arbitration. Although Mr. 

Templeton appears to have made sufficient factual allegations to state a claim under four 

of the five elements of negligent misrepresentation, we do not see how the FINRA 

arbitration here is distinct from the civil lawsuit in Allen for purposes of the “business 

transaction” element of the claim. 

Mr. Templeton argues that the FINRA arbitration qualifies as a business 

transaction because Mr. Templeton’s financial and professional interests were affected 

the outcome of the proceeding. In Allen, the court acknowledged that a civil lawsuit 

could affect the parties’ financial interests but concluded that the nature of the proceeding 

fell outside the definition of a “business transaction.” Id. The same analysis applies here. 

 We conclude Mr. Hall’s statements to Mr. Templeton about the Cordaro 

arbitration were insufficient to meet the “guidance of others in their business 

transactions” requirement of a negligent misrepresentation claim. 9 Accordingly, we 

 9

 In his Reply Brief, Mr. Templeton argues for the first time that Mr. Hall assumed 

an agency role regarding the Cordaros’ claim and Mr. Hall was negligent in fulfilling his 

agency responsibilities to Mr. Templeton. We decline to address this argument because 

Mr. Templeton did not raise it until his reply brief. Stump v. Gates, 211 F.3d 527, 533 

(10th Cir. 2000) (“This court does not ordinarily review issues raised for the first time in 

Continued . . . 

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affirm the district court’s dismissal of Mr. Hall.10

B. Catlin’s Duty to Indemnify11 

 

a reply brief.”). This argument is otherwise forfeited because Mr. Templeton did not 

present it to the district court and does not argue plain error on appeal. See Richison v. 

Ernest Grp., Inc., 634 F.3d 1123, 1127-28 (10th Cir. 2011). 

10 Mr. Hall requests costs and attorney fees for successfully defending this appeal 

under C.R.S. §§ 13-16-113 and 13-17-201. See Hall Br. at 28-29. We leave the 

determination of costs and attorney fees to the district court on remand. 

 11 Catlin argues we lack jurisdiction to review the court’s grant of summary 

judgment on its counterclaim because Mr. Templeton’s July 3, 2014 notice of appeal 

concerned only the district court’s June 24, 2014 order entering judgment for Catlin on 

Mr. Templeton’s claims against it, and not the district court’s August 1, 2014 order, 

which entered judgment for Catlin on its counterclaim. Catlin further argues that Mr. 

Templeton’s appeal of the district court’s grant of summary judgment to Catlin on his 

indemnification claim is therefore moot because reversing would have no effect on the 

counterclaim, which granted Catlin a declaration that it owed no duty to indemnify Mr. 

Templeton. We reject both arguments. 

 Even though Mr. Templeton’s July 3, 2014 notice of appeal was inadequate to 

appeal the court’s judgment with respect to Catlin’s counterclaim, Mr. Templeton’s 

August 28, 2014 “Status Report re Rule 54(b) Certification and Supplement to His Notice 

of Appeal and Docketing Statement” qualifies as a “functional equivalent” of a notice of 

appeal. See Smith v. Barry, 502 U.S. 244, 248-49 (1992) (“If a document filed within the 

time specified by Rule 4 gives the notice required by Rule 3, it is effective as a notice of 

appeal.”). Mr. Templeton’s Status Report was filed within 30 days of the district court’s 

judgment on Catlin’s counterclaim, see Fed. R. App. P. 4(a)(1)(A) (providing a 30-day 

time period after the entry of judgment for filing a notice of appeal), and provides the 

notice required by Federal Rule of Appellate Procedure 3(c)(1), including specifying the 

district court’s judgment on Catlin’s counterclaim as an issue on appeal. See Fed. R. 

App. P. 3(c)(1) (stating that a notice of appeal must “specify the party or parties taking 

the appeal . . . ; designate the judgment, order, or part thereof being appealed; and . . . 

name the court to which the appeal is taken”). We therefore have jurisdiction to review 

Mr. Templeton’s appeal of the counterclaim summary judgment, and his appeal of his 

indemnity claim is not moot. 

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 Mr. Templeton argues the district court erred in granting summary judgment to 

Catlin on his indemnification claim and Catlin’s counterclaim for declaratory relief. The 

district court concluded coverage was excluded under Exclusion D.1.b and that Catlin 

should not be equitably estopped from relying on the exclusion.12 We affirm because Mr. 

Templeton is not entitled to indemnification based on Exclusion D.1.b of the Policy and 

the district court did not abuse its discretion in denying Mr. Templeton’s request for 

equitable estoppel.13 

1. Standard of Review and Summary Judgment Law 

 We review a grant of summary judgment de novo, “using the same standard 

applied by the district court pursuant to Fed. R. Civ. P. 56(a).” Cillo v. City of 

Greenwood Vill., 739 F.3d 451, 461 (10th Cir. 2013). “The evidence of the non-movant 

is to be believed, and all justifiable inferences are to be drawn in [its] favor.” Anderson v. 

Liberty Lobby, Inc., 477 U.S. 242, 255 (1986). Moreover, we must not “weigh the 

evidence and determine the truth of the matter,” but instead must merely determine 

“whether there is a genuine issue for trial.” Id. at 249. Summary judgment shall be 

granted if “there is no genuine dispute as to any material fact” and the moving party is 

 12 The court also rejected Mr. Templeton’s argument that Catlin waived its right to 

invoke Exclusion D.1.b. Mr. Templeton does not contest this ruling on appeal. 

13 The district court also concluded Catlin had no duty to indemnify Mr. 

Templeton based on Exclusion N, the “insolvency/receivership” exclusion. Because we 

conclude Exclusion D.1.b bars coverage, we decline to reach whether Exclusion N also 

supports summary judgment. 

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“entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). 

 The moving party must first demonstrate the absence of a genuine issue of 

material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). “[A] movant that will 

not bear the burden of persuasion at trial need not negate the nonmovant’s claim.” Adler 

v. Wal-Mart Stores, Inc., 144 F.3d 664, 671 (10th Cir. 1998). Instead, the moving party 

may “simply . . . point[] out to the court a lack of evidence for the nonmovant on an 

essential element of the nonmovant’s claim.” Id. If the movant meets its initial burden, 

“the burden shifts to the nonmovant to go beyond the pleadings and set forth specific 

facts that would be admissible in evidence in the event of trial from which a rational trier 

of fact could find for the nonmovant.” Id. (quotations omitted). 

2. Analysis14

a. Exclusion D.1.b 

i. Interpreting insurance contracts under New York law 

 The district court concluded Exclusion D.1.b barred coverage for Mr. Templeton’s 

claim because the MedCap II transactions and MedCap IV transaction were interrelated 

wrongful acts under the Policy. We agree. Exclusion D.1.b states, in relevant part: 

This policy shall not apply to and the Insurer shall pay neither Damages nor 

Defense Expenses for any Claim . . . arising out of, based upon or in 

consequence of, directly or indirectly resulting from or in any way 

 14 The parties dispute whether Catlin should be able to rely on Mr. Cordaro’s 

testimony before the FINRA arbitration panel to support its position. Because we 

conclude Exclusion D.1.b applies without considering this evidence, we do not reach this 

issue. 

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involving . . . any Wrongful Act occurring on or after the Retroactive Date 

which, together with a Wrongful Act occurring on or prior to such 

Retroactive Date, would constitute Interrelated Wrongful Acts. . . . 

App. at 882 (Policy § III.D.1.b). The Policy defines wrongful acts as “Interrelated 

Wrongful Acts” if they are “similar, repeated or continuous,” or “connected by reason of 

any common fact, circumstance, situation, transaction, casualty, event, decision or policy 

or one or more series of facts, circumstances, situations, transactions, casualties, events, 

decisions or policies.” Id. at 880 (Policy § II.M). 

 The Catlin Policy contains a choice-of-law provision stating that New York law 

governs claims brought under the Policy. Id. at 894 (Policy § XIII). New York law 

therefore applies to Mr. Templeton’s indemnification claim. Under New York law, 

interpretation of an insurance contract is a question of law. Int’l Multifoods Corp. v. 

Commercial Union Ins. Co., 309 F.3d 76, 83 (S.D.N.Y. 2002). Summary judgment is 

appropriate when the words of a contract convey a definite and precise meaning without 

any ambiguity. Seiden Assocs., Inc. v. ANC Holdings, Inc., 959 F.2d 425, 428 (2d Cir. 

1992). An insurer bears the burden of proving that a claim falls within the scope of a 

policy exclusion. Vill. of Sylvan Beach v. Travelers Indem. Co., 55 F.3d 114, 115 (2d 

Cir. 1995). The insurer meets this burden by establishing “that the exclusion is stated in 

clear and unmistakable language, is subject to no other reasonable interpretation, and 

applies in the particular case.” Id. at 115-16 (quotations omitted). 

 ii. Exclusion D.1.b is not ambiguous 

 Mr. Templeton appears to argue the exclusion is ambiguous. He contends that 

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affording the ordinary meaning to the term “similar” is too broad and would be contrary 

to the reasonable expectations of the average insured. We discern no ambiguity in this 

provision because the exclusion’s language is “complete, clear, and unambiguous.” 

Greenfield v. Phillies Records, Inc., 780 N.E.2d 166, 170 (N.Y. 2002). 

 Mr. Templeton correctly identifies that the focus of our inquiry is “on the 

reasonable expectations of the average insured upon reading the policy and employing 

common speech.” Mostow v. State Farm Ins. Cos., 668 N.E.2d 392, 394 (N.Y. 1996) 

(citations omitted). His reliance on such reasonable expectations, however, is 

unpersuasive because the terms of the exclusion are subject to only one meaning. Mr. 

Templeton himself acknowledges the term “similar” is “extremely broad in everyday 

usage.” Aplt. Br. at 52; see Fed. Ins. Co. v. Int’l Bus. Machs. Corp., 965 N.E.2d 934, 936 

(N.Y. 2012) (explaining that a policy term will be considered ambiguous only where 

“there is a ‘reasonable basis for a difference of opinion’ as to the meaning of the policy” 

(quoting Greenfield, 780 N.E.2d at 170-71)). In other words, the reasonable expectation 

of the average insured would be to understand the word “similar” in its common usage. 

Moreover, courts have uniformly concluded that policy provisions similar to this one are 

unambiguous. Glascoff v. OneBeacon Midwest Ins. Co., No. 13 Civ. 1013(DAB), 2014 

WL 1876984, at *5 (S.D.N.Y. May 8, 2014) (unpublished); Zahler v. Twin City Fire Ins. 

Co., No. 04 Civ. 10299(LAP), 2006 WL 846352, at *5 (S.D.N.Y. Mar. 31, 2006) 

(unpublished). We therefore apply the exclusion’s plain meaning. See Greenfield, 780 

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N.E.2d at 170.15 

iii. Exclusion D.1.b excludes coverage under its plain meaning 

 Under its plain meaning, Exclusion D.1.b excludes coverage for Mr. Templeton’s 

claim. As stated above, the Policy defines “Interrelated Wrongful Acts” as wrongful acts 

that are “similar, repeated or continuous,” or “connected by reason of any common fact, 

circumstance, situation, transaction, casualty, event, decision or policy or one or more 

series of facts, circumstances, situations, transactions, casualties, events, decisions or 

policies.” App. at 880 (Policy § II.M). Catlin argues the exclusion bars coverage 

because the MedCap II and MedCap IV transactions are “similar” or “connected” by 

common facts and circumstances. 

 In common usage, “similar” means “having characteristics in common.”16 

Merriam-Webster Online Dictionary, http://www.merriamwebster.com/dictionary/similar (last visited June 24, 2015); see also Oxford English 

Dictionary Online, http://www.oed.com/view/Entry/179873 (last visited June 24, 2015) 

(defining similar as “[h]aving a marked resemblance or likeness; of a like nature or 

 15 Because we conclude the policy language is unambiguous, we reject Mr. 

Templeton’s argument that we should apply the doctrine of contra proferentem, which 

provides that an ambiguity in an insurance contract should be resolved in favor of the 

insured. See Morgan Stanley Grp. Inc. v. New England Ins. Co., 225 F.3d 270, 276 (2d 

Cir. 2000) (explaining rules of contract construction, such as contra proferentem, are 

only applicable where the contract language is ambiguous). 

16 New York courts commonly refer to dictionary definitions to ascertain the 

common and ordinary meaning of the words of an insurance policy. See 2619 Realty, 

LLC v. Fid. & Guar. Ins. Co., 756 N.Y.S.2d 564, 566 (App. Div. 2003). 

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kind”). “Connected” is defined as “joined or linked together.” Merriam-Webster Online 

Dictionary, http://www.merriam-webster.com/dictionary/connected (last visited June 24, 

2015); see also Oxford English Dictionary Online, 

http://www.oed.com/view/Entry/39329 (last visited June 24, 2015) (defining “connected” 

as “[r]elated, associated (in nature or idea).” These definitions are consistent with 

applying a “sufficient factual nexus” test, which this and other courts have used in 

considering similar interrelated wrongful acts provisions under New York law. See 

Brecek & Young Advisors, Inc. v. Lloyds of London Syndicate 2003, 715 F.3d 1231, 1238 

& n.3 (10th Cir. 2013).17 

 In Brecek, we considered an identical interrelated wrongful acts provision under 

New York law and found claims asserted in three separate arbitration proceedings were 

interrelated wrongful acts. Id. at 1238-39. Our conclusion was based on the fact 

“[s]everal common facts” connected the arbitrations, including that the arbitrations had 

overlapping (although not identical) respondents, all the misconduct was alleged to have 

occurred during the same time frame—from the late 1990s to the mid-2000s, and all the 

 17 See also Glascoff, 2014 WL 1876984, at *5 (“To demonstrate a sufficient 

factual nexus, the claims need not involve precisely the same parties, legal theories, 

Wrongful Acts, or requests for relief.” (quotations omitted)); Quanta Lines Ins. Co. v. 

Investors Capital Corp., No. 06 Civ. 4624(PKL), 2009 WL 4884096, at *14 (S.D.N.Y. 

Dec. 17, 2009) (unpublished) (explaining that “[a] sufficient factual nexus exists where 

the Claims are neither factually nor legally distinct, but instead arise from common facts 

and where the logically connected facts and circumstances demonstrate a factual nexus 

among the Claims” (quotations omitted)); Seneca Ins. Co. v. Kemper Ins. Co., No. 02 

Civ. 10088(PKL), 2004 WL 1145830, at *9 (S.D.N.Y. May 21, 2004), aff’d, 133 F. 

App’x 770 (2d Cir. 2005) (unpublished). 

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claims had similar allegations and were premised on similar legal theories of liability. Id.

at 1238. Specifically, we noted that all of the claims had similar allegations that the 

respondents sold unsuitable investment products involving various annuities, all the 

claims included allegations of “churning and flipping,” and Brecek’s liability in all the 

actions was predicated on the same theories—vicarious liability and failure to supervise. 

Id. 

 We conclude the MedCap II transactions and the MedCap IV transaction 

constitute “Interrelated Wrongful Acts” under the Policy. First, the Policy’s definition of 

“Interrelated Wrongful Acts” is broad, requiring only that the wrongful acts be “similar” 

or “connected by reason of any common fact, circumstance, situation, transaction, 

casualty, event, decision or policy.” App. at 880 (Policy § II.M) (emphasis added). 

Second, common facts connect the MedCap II and MedCap IV transactions. They were 

sales to the same clients—the Cordaros, investments in subsidiaries of the same 

company, and sales by the same securities broker—Mr. Templeton. Even if the Cordaros 

did not merely “roll over” the proceeds from their MedCap II investment into MedCapIV, 

they reinvested the entire return on their MedCapII investment into MedCap IV. Third, 

the Cordaros’ claims regarding the MedCap II and MedCap IV transactions alleged 

liability based on the same conduct by Mr. Templeton—his failure to disclose the same 

material facts about MedCap Holdings, his failure to investigate the products he sold, and 

his failure to conduct a proper suitability analysis of the Cordaros before selling them the 

MedCap II and MedCap IV notes. The MedCap II and MedCap IV transactions are 

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“similar” and “connected by reason of any common fact [or] circumstance.” They 

therefore meet the Policy definition of “Interrelated Wrongful Acts.” 

 Mr. Templeton’s attempt to distinguish the MedCap II and MedCap IV 

transactions is not persuasive. He posits the MedCap II transactions occurred when he 

was a USA registered representative, whereas the MedCap IV transaction occurred when 

he was with CapWest. He further argues the Cordaros did not merely “roll over” the 

funds they received when the MedCap II notes matured to purchase the MedCap IV note, 

but they instead paid separately for the MedCap IV note, so he and CapWest did not 

maintain control of the funds. He also contends the Cordaros filled out new account 

forms with CapWest, including new suitability and risk tolerance forms.18 These 

dissimilarities, however, do not show the wrongful acts were not “similar” or 

“connected.” 

 Because the MedCap II and MedCap IV transactions qualify as “Interrelated 

Wrongful Acts,” and the MedCap II transactions occurred before the Retroactive Date of 

the Catlin Policy, Mr. Templeton’s indemnification claim is barred by Exclusion D.1.b.19 

 18 The Cordaros filled out new account forms, which included a customer 

suitability and risk tolerance section, when Mr. Templeton transferred their account to 

CapWest in 2005. There is no indication they filled out additional risk tolerance or 

suitability forms prior to their purchase of the MedCap IV note in 2007. 

19 Mr. Templeton’s argues we should reverse based on the deposition testimony of 

Mr. Mooney, Catlin’s claims director and designated corporate representative, under 

Federal Rule of Civil Procedure 30(b)(6). Mr. Mooney testified Mr. Templeton was 

owed indemnity for the Cordaros’ claims regarding MedCap IV. This court has not 

Continued . . . 

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b. Equitable estoppel 

 Mr. Templeton argues that even if Exclusion D.1.b otherwise bars coverage under 

the Policy, we should nonetheless apply equitable estoppel to prevent Catlin from relying 

on it because Catlin did not invoke Exclusion D.1.b in its reservation of rights letter. 

 Under New York law, “[w]here an insurer defends an action on behalf of an 

insured, with knowledge of a defense to the coverage of the policy, it thereafter is 

estopped from asserting that the policy does not cover the claim.” Hartford Ins. Grp. v. 

Mello, 437 N.Y.S.2d 433, 434 (App. Div. 1981); see also Albert J. Schiff Assocs., Inc. v. 

Flack, 417 N.E.2d 84, 87 (N.Y. 1980) (“[T]he intervention of principles of equitable 

estoppel [is appropriate] . . . where an insurer, though in fact not obligated to provide 

coverage, without asserting policy defenses or reserving the privilege to do so, undertakes 

the defense in the case, in reliance on which the insured suffers the detriment of losing 

the right to control its own defense.”). Estoppel applies only if the insurer’s actions have 

prejudiced the insured. Hartford, 437 N.Y.S.2d at 434. Prejudice “is established only 

 

addressed whether the testimony of a Rule 30(b)(6) representative qualifies as a judicial 

or evidentiary admission. The majority of courts to reach the issue, however, treat the 

testimony of a Rule 30(b)(6) representative as merely an evidentiary admission, and do 

not give the testimony conclusive effect. See, e.g., A.I. Credit Corp. v. Legion Ins. Co., 

265 F.3d 630, 637 (7th Cir. 2001); 8A Charles Alan Wright, Arthur R. Miller & Richard 

L. Marcus, Federal Practice & Procedure § 2103 (3d ed. 2010) (“Testimony given at a 

deposition of a designated corporate representative is not a judicial admission that 

ultimately decides the case.”); but see Rainey v. Am. Forest & Paper Ass’n, Inc., 26 F. 

Supp. 2d 82, 96 (D.D.C. 1998) (refusing to consider an affidavit that contradicted a Rule 

30(b)(6) deposition). We do not need to decide this issue because coverage is a question 

of law. Regardless of whether Mr. Mooney’s testimony qualifies as a judicial or 

evidentiary admission, his testimony does not create a triable issue of fact. 

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where the insurer’s control of the defense is such that the character and strategy of the 

lawsuit can no longer be altered.” Brecek, 715 F.3d at 1242 (quotations omitted). 

 The district court denied Mr. Templeton’s equitable estoppel claim because the 

reservation of rights letter specifically referenced Exclusion D and contained a broad 

reservation of Catlin’s rights to deny coverage at any time. We review the district court’s 

denial of equitable estoppel for abuse of discretion. Id. at 1240. “A district court abuses 

its discretion when its judgment is arbitrary, capricious, whimsical, or manifestly 

unreasonable.” Id. 

 As the district court concluded, Catlin provided Mr. Templeton notice that it was 

reserving its rights to deny coverage of the Cordaros’ claim, and the reservation of rights 

letter referenced Exclusion D as a possible basis for denying coverage. Although the 

letter did not specifically mention the “Interrelated Wrongful Acts” exclusion, that 

exclusion is part of Exclusion D, and Mr. Templeton cites no authority that notice here 

was inadequate. In fact, an insurer’s reservation of rights prevents an insured from later 

claiming detrimental reliance, “even if the insurer later disclaims [coverage] on a basis 

different from the ground originally asserted in the reservation of rights.” Federated 

Dep’t Stores, Inc. v. Twin City Fire Ins. Co., 807 N.Y.S.2d 62, 67 (App. Div. 2006). The 

district court did not abuse its discretion in denying Mr. Templeton’s request to estop 

Catlin from relying on Exclusion D.1.b. 

* * * * 

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 Accordingly, we conclude Exclusion D.1.b bars coverage to Mr. Templeton for 

the MedCap IV transaction, and Catlin is not equitably estopped from relying on the 

exclusion. We therefore affirm the district court’s grant of summary judgment to Catlin 

on Mr. Templeton’s indemnification claim and Catlin’s counterclaim. 

C. Catlin’s Duty to Defend 

 The district court granted summary judgment to Catlin on Mr. Templeton’s breach 

of duty to defend claim. It noted the parties’ briefing addressed three phases in the 

underlying proceeding potentially implicating Catlin’s duty: “the lead-up to and during 

the FINRA arbitration, the time when an appeal could have been taken, and during 

settlement negotiations with the Cordaros.” App. at 640. The court concluded Catlin did 

not breach its duty to defend in any of these phases. Mr. Templeton argues the court 

erred in granting summary judgment to Catlin and should have granted summary 

judgment to him. We conclude Catlin breached its duty to defend during the first phase, 

but did not breach its duty to defend during the second and third phases. 

1. Standard of Review and Summary Judgment Law 

 We review the district court’s grant of summary judgment de novo and apply the 

same standard stated in Section II.B.1, supra. 

2. Analysis 

 Like the indemnification claim, Mr. Templeton’s duty to defend claim is based on 

the Catlin policy, and New York law therefore also applies. Although the district court 

and now this court have determined that Catlin did not owe Mr. Templeton 

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indemnification under the Policy, Catlin nonetheless owed Mr. Templeton a duty to 

defend him against the Cordaros’ claim. “Where an insurance policy includes the 

insurer’s promise to defend the insured against specified claims as well as to indemnify 

for actual liability, the insurer’s duty to furnish a defense is broader than its obligation to 

indemnify.” Seaboard Sur. Co. v. Gillette Co., 476 N.E.2d 272, 274-75 (N.Y. 1984). 

“[A]n insurer’s duty to defend its insured is exceedingly broad and an insurer will be 

called upon to provide a defense whenever the allegations of the complaint suggest a 

reasonable possibility of coverage.” BP Air Conditioning Corp. v. One Beacon Ins. Grp., 

871 N.E.2d 1128, 1131 (N.Y. 2007) (quotations and alterations omitted). 

When, as here, an insurer undertakes to provide a defense under a reservation of 

rights, the insurer’s duty to defend continues until a court determines the insured’s claim 

is excluded from coverage under the policy. Burroughs Wellcome Co. v. Commercial 

Union Ins. Co., 632 F. Supp. 1213, 1220 (S.D.N.Y. 1986). Catlin does not contest it 

owed Mr. Templeton a duty to defend. It undertook such a duty in the reservation of 

rights letter and therefore was obligated to provide him a defense under the Policy until a 

court determined that Mr. Templeton was not entitled to indemnification. Catlin argues 

only it did not breach that duty. 

The Policy provided that Catlin had a “duty to defend any civil litigations or 

arbitrations against the Insureds that are covered by th[e] Policy.” App. at 876 (Policy 

§ I.B) (emphasis omitted). It further provided that Catlin had a duty to “appoint counsel 

of its selection to defend the Insureds and pay associated Defense Expenses.” Id. 

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“When an insured has been sued, the insurer does not satisfy its duty to defend merely by 

designating independent counsel to defend the litigation.” Feliberty v. Damon, 527 

N.E.2d 261, 263 (N.Y. 1988). In addition, an insurer’s duty to defend includes the hiring 

of unconflicted counsel and competent counsel. Cornwell v. Safeco Ins. Co. of Am., 346 

N.Y.S.2d 59, 69 (App. Div. 1973); see also Feliberty, 527 N.E.2d at 263. 

a. Lead-up to and during the FINRA arbitration 

 Mr. Templeton argues Catlin breached its duty to defend in the lead-up to and 

during the FINRA arbitration. The district court concluded Catlin did not breach its duty 

during this period because it justifiably believed FF&S had been handling the Cordaro 

matter on behalf of both CapWest and Mr. Templeton, and that FF&S had settled the 

matter before the hearing date. Mr. Templeton argues Catlin violated its duty because (1) 

it never retained replacement counsel for him, as a separate insured under the Policy, 

after Markun Zusman withdrew, and (2) even if Catlin did retain FF&S to replace 

Markun Zusman, FF&S could not represent both Mr. Templeton and CapWest because 

they had a conflict of interest. Catlin contends, because there was a conflict of interest 

between itself and its insureds, it satisfied its duty to defend under New York law by 

yielding to CapWest’s request to select FF&S as counsel for itself and Mr. Templeton. 

See Prashker v. U.S. Guar. Co., 136 N.E.2d 871, 876 (N.Y. 1956). We agree with Mr. 

Templeton and disagree with Catlin. 

 In Prashker, the New York Court of Appeals explained that when the insurer’s 

interests in defending a lawsuit conflict with the insured’s interests, the insurer loses the 

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right to control the defense. See id.; see also Pub. Serv. Mut. Ins. Co. v. Goldfarb, 425 

N.E.2d 810, 815 (N.Y. 1981). The insured then has the right to select an attorney of its 

choosing and the insurer is obligated to pay reasonable defense costs of the insured’s 

selected counsel. Prashker, 136 N.E. 2d at 876; see also 69th Street & 2nd Ave. Garage 

Assocs., L.P. v. Ticor Title Guar. Co., 622 N.Y.S.2d 13, 14 (App. Div. 1995) (“[T]he law 

is clear that where a conflict of interest is probable, selection of attorneys to represent the 

insured should be made by the insured rather than by the insurance company, which 

should remain liable for reasonable fees.”); Pub. Serv. Mut. Ins. Co., 425 N.E.2d at 815. 

 Catlin argues its interests conflicted with CapWest’s and Mr. Templeton’s because 

it was defending the FINRA proceeding subject to a reservation of rights, and its only 

obligation was to yield to CapWest’s choice to select FF&S as defense counsel for itself 

and Mr. Templeton and to pay reasonable defense costs.20 And Catlin contends Mr. Hall 

had authority to act on Mr. Templeton’s behalf under the Policy because the Policy 

provided that “the Broker/Dealer agrees to act on behalf of all of the Insureds for all 

purposes.” App. at 893 (Policy § IX.K). These arguments are unavailing. 

 First, even if Mr. Hall had such authority, the facts do not show Catlin ever 

yielded. When Mr. Hall requested that Catlin allow CapWest to retain FF&S, Mr. Rogers 

adamantly objected, explaining that Catlin did not believe FF&S would be appropriate 

 20 Catlin also conceded at oral argument that it never actually paid FF&S for its 

settlement negotiations with the Cordaros. Oral Arg. at 1:03:53-1:04:24; see also FF&S 

Supp. App. at 44. 

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“due to potential conflicts of interest.” App. at 945. Although Mr. Rogers authorized via 

email Mr. Hall’s request for $15,000 so that FF&S could attempt to settle the Cordaro 

matter, that email does not show that Catlin acceded to CapWest’s selection of FF&S as 

defense counsel. In that same email, Mr. Rogers stated that he and Mr. Hall still needed 

to find an “agreed-to defense counsel.” Id. at 939. Mr. Hall and Mr. Rogers’s 

communications also show that Catlin relented only in part to pay fees related to FF&S’s 

handling of the global settlement, but even then Catlin continued to object to FF&S’s 

further involvement. 

 Second, Mr. Hall and Mr. Rogers’ communications at most can be read to show 

Catlin agreed to retain FF&S to represent the insureds only for settlement negotiations 

with the Cordaros. Nothing indicates Catlin agreed to FF&S’s assuming the defense of 

CapWest and Mr. Templeton for the entire arbitration proceeding. Even if Catlin 

reasonably believed that FF&S had settled the Cordaro matter when it was notified on 

March 28, 2011, it still had not retained defense counsel for the arbitration proceeding 

scheduled to start the next day and therefore did not fulfill its duty to defend Mr. 

Templeton. No evidence shows that Catlin had counsel in place for CapWest or Mr. 

Templeton had the arbitration actually proceeded, which it did for Mr. Templeton. If 

Catlin had fulfilled its obligation to hire counsel to represent Mr. Templeton, Mr. 

Templeton’s counsel would have been aware that the matter had not settled against him, 

and Mr. Templeton would have been represented in the arbitration. 

 Third, even if Catlin had yielded to CapWest’s authority to select counsel of its 

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own choosing, Catlin still failed to appoint nonconflicted counsel for Mr. Templeton, 

who was separately insured under the Policy. See Cornwell, 346 N.Y.S.2d at 69. Catlin 

believed FF&S could not represent Mr. Templeton and CapWest because of a potential 

conflict of interest. At oral argument, Catlin’s attorney acknowledged that when Markun 

Zusman served as counsel for both CapWest and Mr. Templeton, the parties waived the 

conflict of interest. Oral Arg. at 37:06-37:43. Catlin never received a waiver from any of 

the parties for FF&S’s possible joint representation of them. Without such a waiver, 

Catlin could not satisfy its duty to defend Mr. Templeton.

 Catlin did not fulfill its duty to defend Mr. Templeton in the lead-up to and during 

the FINRA arbitration proceedings and was not entitled to summary judgment as to this 

period of time. 

b. Post-arbitration period 

 Mr. Templeton argues the district court erred in granting summary judgment to 

Catlin regarding alleged breach of its duty to retain counsel to appeal the arbitration 

award. The district court rejected this claim because Mr. Templeton could not show there 

was a reasonable probability that an appeal would have been successful. We affirm. 

 Although the duty to defend extends through the time appeals have been 

exhausted, the duty to prosecute an appeal exists only if “there are reasonable grounds for 

appeal.” See Kaste v. Hartford Accident & Indem. Co., 170 N.Y.S.2d 614, 616 (App. 

Div. 1958) (quotations omitted). Mr. Templeton does not point to any reasonable basis to 

appeal the arbitration award. He argues only that if the award had been appealed, he may 

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have been more favorably positioned to negotiate a settlement with the Cordaros. But the 

duty to defend does not include bringing a groundless appeal. Catlin therefore did not 

breach its duty in failing to appeal the arbitration award. 

c. Post-judgment duty to negotiate a settlement with the Cordaros 

 Mr. Templeton attempts to appeal the district court’s grant of summary judgment 

to Catlin regarding alleged breach of its duty to defend in post-judgment settlement 

negotiations with the Cordaros. The district court concluded Catlin did not breach any 

post-judgment duty to settle with the Cordaros because Mr. Templeton failed to “discuss 

this aspect of his duty-to-defend claim in his [opposition to summary judgment], and 

[did] not offer any evidence showing that the Cordaros would have accepted the 

remaining limits of the Catlin Policy to settle their claims.” App. at 644. Mr. Templeton 

does not address this aspect of the district court’s order in his opening brief. We 

therefore decline to consider it here. See Bronson v. Swensen, 500 F.3d 1099, 1104 (10th 

Cir. 2007). 

* * * * 

 Accordingly, we reverse the district court’s grant of summary judgment to Catlin 

on Mr. Templeton’s duty-to-defend claim as it relates to the lead-up to and during the 

FINRA arbitration proceeding. We otherwise affirm the district court’s rulings on this 

issue. 

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D. District Court’s Grant of Summary Judgment to the Attorney-Defendants 

 Mr. Templeton argues the district court erred in granting summary judgment to the 

attorney-defendants on his legal malpractice and breach of fiduciary duties claims 

because (1) an attorney-client relationship existed between him and the attorneydefendants, or, alternatively (2) the attorney-defendants owed him a duty of care in the 

absence of an attorney-client relationship. We conclude (1) no attorney-client 

relationship existed between Mr. Templeton and the attorney-defendants, and (2) the 

attorney-defendants did not otherwise owe Mr. Templeton, as a non-client, a duty of care. 

Accordingly, we affirm the district court’s grant of summary judgment to the attorneydefendants. 

1. Standard of Review and Summary Judgment Law 

 We review the district court’s grant of summary judgment de novo and apply the 

same standard stated in Section II.B.1, supra. 

2. Analysis 

 The parties agree that California law governs Mr. Templeton’s claims against the 

attorney-defendants.21 Under California law, an essential element of a claim for legal 

 21 Under Colorado’s “most significant relationship” test, California law applies 

because Mr. Fehn, Mr. Sherwin, and Ms. Davidi are all California-licensed attorneys and 

California has the most significant interest in governing the conduct of its licensed 

attorneys. See, e.g., Hoiles v. Alioto, 461 F.3d 1224, 1234 (10th Cir. 2006) (concluding 

that under Colorado choice-of-law rules, California had the “most significant 

relationship” in an action involving a California attorney’s representation of a Colorado 

resident). 

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malpractice and for breach of an attorney’s fiduciary duties is an attorney-client 

relationship or some other duty. Slovensky v. Friedman, 49 Cal. Rptr. 3d 60, 67 (Ct. App. 

2006) (legal malpractice); Fox v. Pollack, 226 Cal. Rptr. 532, 534-35 (Ct. App. 1986) 

(breach of fiduciary duties). 

a. Attorney-client relationship 

 An attorney-client relationship may be created by an express or implied contract. 

Responsible Citizens v. Superior Court, 20 Cal. Rptr. 2d 756, 765 (Ct. App. 1993). “No 

formal contract or arrangement or attorney fee is necessary to create the relationship of 

attorney and client. It is the fact of the relationship which is important.” Lister v. State 

Bar, 800 P.2d 1232, 1237 (Cal. 1990) (quotations omitted). In determining the existence 

of an attorney-client relationship, we must consider the “totality of the circumstances.” 

Koo v. Rubio’s Rests., Inc., 135 Cal Rptr. 2d 415, 425 (Ct. App. 2003) (quotations 

omitted). One party’s subjective belief that an attorney-client relationship was formed is 

not sufficient. Zenith Ins. Co. v. Cozen O’Connor, 55 Cal. Rptr. 3d 911, 920 (Ct. App. 

2007). “Instead, it is the intent and conduct of the parties that controls the question as to 

whether an attorney-client relationship has been created.” Id. 

 “The question of whether an attorney-client relationship exists is one of law.” 

Responsible Citizens, 20 Cal. Rptr. 2d at 766. “However, when the evidence is 

conflicting, the factual basis for the determination must be determined before the legal 

question is addressed.” Id. Mr. Templeton does not contend there are factual disputes 

precluding summary judgment on this issue. We must therefore determine whether an 

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attorney-client relationship existed as a matter of law. 

i. Express contract 

 There was no express agreement for FF&S to represent Mr. Templeton in the 

Cordaro arbitration. Mr. Templeton acknowledges he never communicated directly with 

anyone at FF&S or received any legal advice from any of the attorney-defendants 

regarding the Cordaro matter. Mr. Templeton attempts to rely on an agency theory to 

establish an express agreement for FF&S to represent him. He argues FF&S manifested 

consent to represent him to both Catlin and Hall, who were acting as his agents under the 

Policy. But no evidence shows that either Catlin or Mr. Hall specifically entered into an 

agreement with FF&S for FF&S to represent Mr. Templeton. 

 Mr. Templeton relies mostly on communications between Mr. Hall and Mr. 

Rogers. These communications do not show FF&S explicitly and affirmatively agreed to 

represent Mr. Templeton. In fact, they show Catlin continuously objected to FF&S 

representing CapWest or Mr. Templeton under the Policy. None show that Catlin or Mr. 

Hall formally engaged FF&S to represent Mr. Templeton in the Cordaro arbitration. 

 Mr. Templeton also relies on Mr. Hall’s communications with an FF&S legal 

assistant. Mr. Hall, in response to the assistant’s email that Mr. Fehn asked her to convey 

that FF&S was not representing Mr. Templeton in the Cordaro matter, emailed the 

assistant, “We should be representing Daryl. I mentioned that to Tom [Fehn]. If we 

alienate Daryl our goose could be cooked.” App. at 972-73. This exchange failed to 

establish that FF&S agreed to represent Mr. Templeton. Mr. Hall’s subjective belief that 

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FF&S should be representing Mr. Templeton did not create an express agreement by 

FF&S to do so. 

ii. Implied contract 

 The evidence also does not support an implied agreement for FF&S to represent 

Mr. Templeton. Mr. Templeton relies on (1) CapWest’s deduction of attorney fees from 

his paycheck beginning in February 2010; (2) FF&S’s attempt to negotiate a “global 

settlement” of CapWest’s liability in a number of claims asserted against it, including the 

Cordaro matter, in September 2010; (3) Mr. Hall’s representations to Mr. Templeton 

between February and March 2011 that FF&S was representing him; and (4) FF&S’s 

attempt to include Mr. Templeton in the settlement agreement with the Cordaros and 

acknowledgement that it needed to include him. None of the foregoing establish that 

FF&S intended to represent Mr. Templeton. Without evidence of FF&S’s intent to enter 

into an agreement, we cannot recognize an implied attorney-client relationship. See 

Zenith, 55 Cal. Rptr. 3d at 920 (explaining that “[a]n implied contract, in no less degree 

than an express contract, must be founded upon an ascertained agreement of the parties to 

perform it” (quotations and alterations omitted)). 

 First, CapWest’s deduction of attorney fees from Mr. Templeton’s paycheck does 

not establish an implied agreement for FF&S to represent Mr. Templeton. There is no 

indication CapWest used these fees to pay for FF&S’s services. When Mr. Templeton 

left CapWest in August 2010, he stopped paying his share of legal fees. At that time, 

Markun Zusman was still Mr. Templeton’s and CapWest’s retained counsel under the 

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Policy. Mr. Templeton did not pay any legal fees in 2011—the time he contends FF&S 

was retained as his attorney. Further, the fees Mr. Templeton paid were pursuant to a 

reimbursement provision in his independent contractor agreement with CapWest. In 

Zenith, the court rejected that fees paid through a reimbursement agreement with the law 

firm’s client created an implied attorney-client relationship. Id. at 921. As in Zenith, Mr. 

Templeton’s reimbursement agreement with CapWest does not show FF&S agreed to 

represent him. 

 Second, a timing problem prevents Mr. Templeton from establishing an implied 

agreement based on FF&S’s attempt to negotiate a global settlement that included the 

Cordaros’ claim. FF&S attempted to negotiate this global settlement in September 2010, 

when Markun Zusman was still representing him and CapWest under the Policy. There 

is no indication that Mr. Templeton, FF&S, CapWest, or Catlin believed FF&S was 

representing Mr. Templeton at that time. Rather, FF&S was serving as CapWest’s 

general counsel in attempting to settle the matters pending against it. 

 Third, neither Mr. Hall’s representations to Mr. Templeton nor Mr. Hall’s belief 

that FF&S was representing Mr. Templeton and CapWest are relevant because they do 

not establish that FF&S impliedly undertook to represent Mr. Templeton in the Cordaro 

matter. Mr. Hall worked for CapWest—not FF&S. His statements and beliefs do not 

show that FF&S agreed to represent Mr. Templeton. See id. at 920. 

 Fourth, FF&S’s attempt to include Mr. Templeton in the settlement agreement 

with the Cordaros and acknowledgement that it needed to include him do not establish an 

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implied attorney-client relationship. FF&S’s actions are consistent with its role as 

CapWest’s general counsel. Mr. Hall obtained $15,000 settlement authority for the 

Cordaro matter from Catlin. FF&S was aware that both Mr. Templeton and CapWest 

were insured under the Policy. Ms. Davidi’s attempt to include Mr. Templeton in the 

settlement agreement and Mr. Fehn’s statement that he knew Mr. Templeton “had to be 

part of the deal,” App. at 1014, merely show that FF&S knew it could not serve 

CapWest’s interests without negotiating a release for Mr. Templeton. They do not 

establish that FF&S agreed to represent Mr. Templeton as his attorney. 

* * * * 

 The undisputed facts do not establish an express or implied attorney-client 

relationship between Mr. Templeton and the attorney-defendants. Accordingly, the 

district court properly granted summary judgment to the attorney-defendants on this 

basis. 

b. Duty to a non-client 

Mr. Templeton argues the attorney-defendants owed him a legal duty even if he 

was not their client. He relies on Biakanja v. Irving, 320 P.2d 16 (Cal. 1958), and Lucas 

v. Hamm, 364 P.2d 685 (Cal. 1961). We conclude these and related California cases do 

not reach as far as Mr. Templeton contends. To recognize a duty from an attorney to a 

non-client, these cases require, among other things, that the attorney and his or her client 

mutually intend that the primary purpose of the attorney’s services is to benefit the nonclient. The undisputed facts here fall short of meeting this standard. 

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i. California case law 

“[A]n attorney will normally be held liable for malpractice only to the client with 

whom the attorney stands in privity of contract, and not to third parties.” Borissoff v. 

Taylor & Faust, 93 P.3d 337, 340 (Cal. 2004).22 In Biakanja, however, the California 

Supreme Court established that, in limited circumstances, a professional may owe a legal 

duty to a third party in the absence of privity of contract between them. 320 P.2d at 17-

19. In Lucas, the court recognized attorneys can have a duty to non-clients. 364 P.2d at 

688. The Biakanja court listed factors to consider in assessing whether to impose a duty. 

320 P.2d at 17-19. Under this balancing test, courts must consider: 

[T]he extent to which the transaction was intended to affect the plaintiff, the 

foreseeability of harm to him, the degree of certainty that the plaintiff 

suffered injury, the closeness of the connection between the defendant’s 

conduct and the injury suffered, the moral blame attached to the 

defendant’s conduct, and the policy of preventing future harm. 

Id. at 19. When the defendant is an attorney, the court must also consider whether 

recognition of liability “would impose an undue burden on the profession.” Lucas, 364 

P.2d at 688. 

 22 See also Schick v. Lerner, 238 Cal. Rptr. 902, 907 (Ct. App. 1987) (“An 

attorney generally will not be held liable to a third person not in privity of contract with 

him [or her] since he [or she] owes no duty to anyone other than his [or her] client.”); St. 

Paul Title Co. v. Meier, 226 Cal. Rptr. 538, 539 (Ct. App. 1986) (“An attorney’s liability 

for professional negligence does not ordinarily extend beyond the client except in limited 

circumstances.”); Fox, 226 Cal. Rptr. at 534 (“With certain exceptions, an attorney has no 

obligation to a non-client for the consequences of professional negligence . . . .”). 

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Under the Biakanja/Lucas test, “[t]he predominant inquiry . . . is whether the 

principal purpose of the attorney’s retention is to provide legal services for the benefit of 

the plaintiff.” Goldberg v. Frye, 266 Cal. Rptr. 483, 489 (Ct. App. 1990). To establish a 

duty, both the attorney and the client must have intended the third party to be the 

beneficiary of the attorney’s legal services. See Zenith, 55 Cal. Rptr. 3d at 919 

(explaining that “[t]he clear absence of this mutual intent requirement is critical, indeed 

dispositive,” because “[a]n attorney’s undertaking should be the result of a conscious 

decision, so that the consequences of a duty to a third person can be considered and the 

undertaking declined if the risk of conflicts or financial exposure is too great”); see also 

Bily v. Arthur Young & Co., 834 P.2d 745, 771 (Cal. 1992) (“California courts have 

consistently required some manifestation on the part of a professional . . . that he or she is 

acting to benefit a third party . . . in a specific and circumscribed transaction.”). “The 

existence of such a duty is a question of law dependent upon ‘a judicial weighing of the 

policy considerations for and against the imposition of liability under the 

circumstances.’” Fox, 226 Cal. Rptr. at 535 (quoting Goodman v. Kennedy, 556 P.2d 

737, 742 (Cal. 1976)).23 

 23 “Courts have generally disregarded the ‘moral blame’ factor [mentioned in 

Biakanja] in evaluating an attorney’s duty to a nonclient.” Chang v. Lederman, 90 Cal. 

Rptr. 3d 758, 771 n.7 (Ct. App. 2009); see also Osornio v. Weingarten, 21 Cal. Rptr. 3d 

246, 255 n.15 (Ct. App. 2004) (“Our conclusion from a review of the California cases 

addressing the issue of an attorney’s duty to third parties is that courts often recite this 

‘moral blame’ factor mentioned in Biakanja but rarely apply it as part of their analysis.”). 

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In Biakanja, a non-attorney notary prepared a will for the plaintiff’s brother, which 

left the testator’s entire estate to the plaintiff. 320 P.2d at 17-18. The will was declared 

invalid based on the notary’s negligence, and the testator’s estate went into intestate 

succession. Id. The plaintiff sued the notary for negligence. Id. The notary argued he 

was not liable to the plaintiff because there was privity of contract only between the 

notary and the testator. Id. The court rejected the notary’s argument, concluding the 

notary owed the plaintiff a duty of care, which he had clearly breached. Id. In so 

holding, the court was careful not to create a broad scope of liability for any person who 

may receive a benefit under a contract. Id. Instead, the court enumerated the factors 

listed above, and explained that the factors weighed in favor of imposing a duty against 

the notary. Id. at 19. The court emphasized that the “end and aim” of the testator’s 

transaction with the notary was to benefit the plaintiff and the plaintiff’s injury from the 

notary’s negligence was clearly foreseeable. Id. 

 In Lucas, the court faced a situation almost identical to Biakanja except the drafter 

of the will was an attorney. 364 P.2d at 686-87. The court followed Biakanja and 

concluded the imposition of a duty in the absence of privity was equally applicable 

against the attorney, whose negligent drafting of the will reduced the plaintiffs’ share of 

the testator’s estate. Id. at 688. The court also considered whether recognizing liability 

under the circumstances would impose an undue burden on the legal profession, but 

concluded it would not. Id. It concluded imposing a duty was proper in this case because 

“a contrary conclusion would cause the innocent beneficiary to bear the loss.” Id. 

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 Following Lucas, California courts have imposed a duty on attorneys to third 

parties in other circumstances, but only where the attorney and client intended the 

attorneys’ services to directly benefit the third party and it was reasonably foreseeable 

that attorney negligence would potentially harm the third party.24 California courts have 

declined to impose a duty to third parties on attorneys where the attorney and client did 

not intend for the attorney’s services to directly benefit the third party, harm to the third 

party was not foreseeable, or policy considerations weighed against imposing a duty.25 

 24 See, e.g., Osornio, 21 Cal. Rptr. 3d at 263-70 (recognizing the right of an 

intended beneficiary, a dependent adult who was under the care of the testator, to pursue 

a malpractice action against the attorney who drafted the testator’s will naming the 

plaintiff as the executor and sole beneficiary of the will because the attorney negligently 

failed to advise the testator that his intended beneficiary was a presumptively disqualified 

donee under the probate code); Meighan v. Shore, 40 Cal. Rptr. 2d 744, 755 (Ct. App. 

1995) (concluding that a personal injury attorney had a duty to notify his client’s wife of 

her potential loss of consortium claim where both spouses consulted the attorney with 

respect to a personal injury suffered by the husband and the attorney knew that the wife 

had a potential claim); Roberts v. Ball, Hunt, Hart, Brown & Baerwitz, 128 Cal. Rptr. 

901, 905-06 (Ct. App. 1976) (recognizing the right of a third party lender to bring a 

negligence action against an attorney who issued a written opinion containing incorrect 

information to a client, which the attorney knew would be transmitted to and relied upon 

by prospective lenders); Donald v. Garry, 97 Cal. Rptr. 191, 191 (Ct. App. 1971) 

(recognizing the right of a creditor, who assigned the collection of a debt owed to it to a 

collection agency, to bring a negligence action against the collection agency’s attorney 

who allowed a case based on the debt to be dismissed for lack of prosecution). 

25 See, e.g., Chang, 90 Cal. Rptr. 3d at 773-74 (concluding a testator’s attorney, 

who allegedly was directed to revise the testator’s will to increase his wife’s share of the 

estate, owed no duty to the testator’s wife to make the requested revisions); Burger v. 

Pond, 273 Cal. Rptr. 709, 714-16 (Ct. App. 1990) (concluding that a divorce attorney had 

no duty to his client’s prospective second wife for his alleged negligence in handling the 

client’s divorce from his first wife, even though the attorney was aware of their marriage 

plans); Fox, 226 Cal. Rptr. at 535-36 (concluding an attorney hired by one party in a real 

Continued . . . 

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 For example, in Goodman, the California Supreme Court declined to extend a duty 

to third parties who purchased a corporation’s stock from the defendant-attorney’s 

clients. 556 P.2d at 739-44. The attorney had allegedly negligently advised his clients 

that they could issue and sell stocks without jeopardizing the corporation’s exemptions 

from registration under securities laws. Id. The court found Biakanja and Lucas

inapplicable because the attorney had no relationship with the plaintiffs. Id. Also, there 

was no indication the advice was communicated to the plaintiffs or that they acted upon 

it, or that the attorney knew or should have known that it would be. Id. Moreover, unlike 

in the cases involving will beneficiaries, the clients did not intend to confer a benefit on 

the plaintiffs. Id. The court further explained that imposing a duty would be an undue 

burden on the legal profession because an attorney would become unduly preoccupied 

with “the possibility of claims based on mere negligence . . . by any with whom his client 

might deal,” which would “prevent him from devoting his entire energies to his client’s 

interests.” Id. at 743 (quotations omitted). 

These cases illustrate that attorneys owe a duty of care to non-clients in limited 

circumstances. California courts have primarily extended a duty to intended beneficiaries 

 

estate transaction has no duty to an unrepresented, adverse party to the transaction);

Mason v. Levy & Van Bourg, 143 Cal Rptr. 389, 393 (Ct. App. 1978) (concluding an 

attorney who had a contractual right to a percentage of a contingency fee under a referral 

agreement had no right to sue the successor attorney to whom he referred the case for 

negligence in failing to prosecute the lawsuit because the client’s intention in instituting 

the lawsuit and transferring it to the successor attorney was not to benefit the first 

attorney). 

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in the estate planning context, where the client cannot enforce his or her own rights after 

he or she dies. Beyond that context, in all of the cases where courts have extended a duty 

to non-clients, the client’s and third party’s interests are aligned. In fact, courts have 

declined to extend a duty where the interests of the client and third party are potentially 

adverse. See Zenith, 55 Cal. Rptr. 3d at 919 (“[The defendant] thus cannot be held to be 

under a duty to protect the interests of Zenith, a nonclient, where, as here, the nonclient’s 

interests were, at the very least, potentially adverse to those of the client.”).26 

 26 See also Hall v. Superior Court, 133 Cal. Rptr. 2d 806, 811-12 (Ct. App. 2003) 

(concluding an attorney, who represented a client in a wrongful death action against her 

estranged husband’s mother for the death of the client’s child, had no duty to his client’s 

husband based, in part, on a potential conflict of interest between the husband and wife); 

Skarbrevik v. Cohen, England & Whitfield, 282 Cal. Rptr. 627, 634-36 (Ct. App. 1991) 

(concluding an attorney representing a corporation had no duty to a minority shareholder 

because the minority shareholder’s interests were at least potentially adverse to the client 

the attorney was advising); Schick, 238 Cal. Rptr. at 908-09 (concluding an attorney 

retained by a psychologist to advise him regarding revealing confidential information 

about a patient in a legal action brought by the patient’s former partner seeking financial 

support from the patient, had no duty to the psychologist’s patient because the attorney 

was not retained to protect the patient’s rights, but rather to provide the psychologist legal 

advice that was potentially adverse to the patient); Fox, 226 Cal. Rptr. at 535 (“[A]n 

attorney has no duty to protect the interests of an adverse party for the obvious reasons 

that the adverse party is not the intended beneficiary of the attorney’s services, and that 

the attorney’s undivided loyalty belongs to the client.” (citations omitted)); St. Paul Title 

Co., 226 Cal. Rptr. at 540 (concluding an attorney for the purchaser in a real estate 

transaction owed no duty to the escrow agent for providing negligent advice to the 

purchaser concerning escrow instructions, in part, because the attorney owed a duty of 

undivided loyalty to his client and imposing a duty to third parties in the transaction 

would potentially interfere with that duty). 

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ii. Analysis 

This case falls outside the limited circumstances in which California courts have 

imposed a duty on attorneys to non-clients. We decline to stretch California precedent to 

recognize a duty under the circumstances here. See Meighan, 40 Cal. Rptr. 2d at 753 

(explaining that California courts routinely “refuse to find duty in fact settings clearly 

outside the Biakanja criteria”). 

 The Biakanja/Lucas factors do not favor imposing a duty on the attorneydefendants. Most importantly, the facts do not show that Mr. Templeton was an intended 

beneficiary of the attorney-defendants’ services. The attorney-defendants and CapWest’s 

primary purpose for engaging in settlement negotiations with the Cordaros was to benefit 

CapWest, not Mr. Templeton. Their intention was to negotiate an agreement to resolve 

CapWest’s liability in the Cordaro matter.27 The attorney-defendants attempted to 

include Mr. Templeton in the settlement to benefit CapWest. That Mr. Templeton also 

 27 That Mr. Hall stated that the attorney-defendants “should be representing” Mr. 

Templeton is entirely consistent with this conclusion. App. at 972-73. Mr. Hall was 

concerned that leaving Mr. Templeton out of the settlement would prevent settling the 

Cordaros’ claim against CapWest. Thus, CapWest’s “end and aim” of retaining the 

attorney-defendants was to resolve its liability in the Cordaro matter, not to benefit Mr. 

Templeton. Biakanja, 320 P.2d at 19. Further, even if CapWest intended in part for Mr. 

Templeton to benefit from the attorney-defendants’ services, there is no evidence the 

attorney-defendants intended to perform their services for the benefit of Mr. Templeton. 

See Zenith, 55 Cal. Rptr. 3d at 918-19. 

 

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might have stood to benefit from the attorney-defendants’ negotiations does not alone 

give rise to a duty.28 

Additionally, imposing a duty here would likely impose an undue burden on 

attorneys. As in Goodman, imposing such a duty might interfere with the attorney’s 

obligations to his or her own client. See Goodman, 556 P.2d at 743. Policy 

considerations against imposing a duty to a non-client are strongest where, as here, doing 

so creates a risk of detracting from the attorney’s representation of his or her client 

because of potentially conflicting interests between the client and third party. See, e.g.,

Moore v. Anderson Zeigler Disharoon Gallagher & Gray, P.C., 135 Cal. Rptr. 2d 888, 

898-99 (Ct. App. 2003); Zenith, 55 Cal. Rptr. 3d at 918-19; Fox, 226 Cal. Rptr. at 535-

36. A conflict of interest may arise whenever the interests of the client and third party are 

not entirely aligned. See Zenith, 55 Cal. Rptr. 3d at 919; Skarbrevik, 282 Cal. Rptr. at 

634-36. Here, as explained above, Mr. Templeton’s and CapWest’s interests were 

adverse because Mr. Templeton’s liability was potentially greater than that of CapWest. 

 28 At most, Mr. Templeton would have been an incidental beneficiary of the 

attorney-defendants’ settlement negotiations with the Cordaros, “and an incidental benefit 

does not suffice to impose a duty upon the attorney.” Goldberg, 266 Cal. Rptr. at 489 

(quotations and alterations omitted); see also id. (explaining that in numerous instances 

representation of a client will affect third parties, but that “[t]he fact that third parties are 

thus benefited, or damaged, by the attorney’s performance does not give rise to a duty by 

the attorney to such third parties”). 

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These policy concerns weigh against imposing a duty to a non-client under the facts of 

this case.29 

 Because the facts do not support imposing a duty on the attorney-defendants in the 

absence of an attorney-client relationship, the trial court properly granted summary 

judgment on this theory as well. 

* * * * 

 Accordingly, the district court properly granted summary judgment to the 

attorney-defendants on Mr. Templeton’s legal malpractice and breach of fiduciary duties 

claims.30 

III. CONCLUSION 

 Based on the foregoing, we affirm the district court with the exception of part of 

its grant of summary judgment to Catlin on Mr. Templeton’s duty-to-defend claim. On 

that claim, we reverse the district court’s grant of summary judgment to Catlin for the 

 29 Although we doubt the attorney-defendants could have foreseen the harm that 

ultimately befell Mr. Templeton, foreseeability alone is insufficient to impose liability. 

See Zenith, 55 Cal. Rptr. 3d at 918; Schick, 238 Cal. Rptr. at 909. By the same token, the 

degree of certainty Mr. Templeton would suffer the injury he sustained, the “closeness of 

the connection” between the attorney-defendants’ conduct and Mr. Templeton’s injury, 

and the deterrent to future harm in similar circumstances do not militate in favor of 

imposing a duty here because the fact Mr. Templeton was not an intended beneficiary of 

the attorney-defendants’ services and policy considerations strongly counsel against 

imposing a duty. 

30 The court also properly granted summary judgment to the attorney-defendants 

on Mr. Templeton’s claim for exemplary damages based on the absence of any 

underlying liability. 

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period of time leading up to and during the FINRA arbitration. We remand to the district 

court for further proceedings consistent with this opinion, including resolution of Mr. 

Hall’s request for costs and attorney fees for defending this appeal. 

ENTERED FOR THE COURT 

Scott M. Matheson, Jr. 

Circuit Judge 

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