* T h is disp o siti o n i s n ot app r opri a te for pub l icat i on and is no t p rece d ent

ex c ept as pr o vid e d b y 9th Ci r

. R

. 36-3. N O T F OR PU B LIC A TION

UN I TED ST A TES CO U RT OF APP E ALS

FOR TH E N INTH CI R CUIT

IL L INOIS U N ION INS U RAN CE

CO M PA N Y,

Pl a intif f

- Ap p elle e,

v.

BR O OKS T REET SE C URITI ES

C O RPO R ATIO N ; e t a l

.,

De f end a nts,

a nd

JU D ITH L

. C HIOS S O-GL A SS,

De f enda n t

- A ppel l ant. N o

. 10

- 550 60

D

. C

. No

. 8 :07- c v-01 0 95- C JC- R NB

M E MOR A NDUM *

A p peal from the Un i ted Stat e s Distr i ct Court
for th e C entra l D i strict of C a lifor n ia

C o r m a c J

. Car n ey , D istri c t J udg e , Pre s iding

A r gued a n d Submit t ed Jun e 9

, 20 11

Pa s aden a , Ca l iforn ia 

# F I L ED

J U L 20 20 11

M O L L Y C

. D W YE R

, C L E RK U

. S. C O U R T O F A PPEA LS** Th e H onor a ble Ru d i M

. Br e wste r , Se n ior Uni t ed Stat e s D istr i ct Judge

fo r t h e S outh e rn Dist r ict of Ca l ifor n ia

, s i ttin g b y d esig n atio n.

1 Th e d istric t c o urt hel d t h at colla t erali z ed m o rtga g e b onds fe l l w ithin

th e d e fini t ion of de r ivati v es

. A p pell a nt did no t a p peal th a t i ssue.



### - 2- Be f ore: B

. F LET C HER

, and N

. R

. S MIT H

, Cir c uit Judg e s , an d B REW S TER,
Se n ior Dis t rict Jud g e. **

W e a f firm t h e distr i ct cour t ’s orde r g r anti n g s um m a r y j udgmen t i n f a vor of

th e A ppel l ee/I n sure r , Ill i nois U n ion In s uran c e C ompan y.

Th e p rofes s iona l l i abili t y i nsur a nce pol i c y pr o vide s , in re l evan t p a rt

, t he

fo l lowi n g excl u sio n:

Th e I n sure r s h all no t b e l i able fo r L o ss on ac c oun t o f a n y Cl a im

made ag a ins t a n y In s ured :

. . . . W. B ased u p on , a risin g o ut of

, o r a ttrib u tabl e t o t he sale,

at t e m p ted sa l e , or se r vici n g o f:
1. C om m o d itie s , commodit y f utur e c o ntra c ts

, a n y type of

op t ion co n trac t o r d eriva t ive.

T h e p olic y c l earl y e x clud e d loss e s a risi n g o ut of inv e stments i n d e riva t ives

. T he

co l later a lize d mor t gage b o nds in Ap p ella n t’s po r tfoli o w ere der i vati v es. 1

A p pella n t argu e s t hat par t o f h er damage ari s es out of co n duc t t h at is sepa r ate

an d a part fr o m the sa l e of deri v ativ e s

. She c o nten d s that th e I n sure d

, Br o oks t reet

Se c urit i es Cor p orati o n , b r each e d its fid u ciary d u ty

, c o m mit t ed frau d

, made

misrep r esen t atio n s , omitt e d mat e rial fac t s , ac t ed neg l igen t ly

, a n d viol a ted sta t e a nd

fe d eral sec u ritie s l a ws be f ore buy i ng deri v ativ e s

. Ap p ella n t a rgue s t he insu r ance

### - 3-

po l icy co v ers thi s d isti n ct con d uct un d er a t heo r y o f c onc u rren t c a usa t ion or

eff i cien t p r oximate c a use ana l ysis

. Se e , e

. g

. , St a te F arm M u t

. A u to

. I

n s

. C o

. v.

Pa r trid ge , 5 14 P

. 2d 12 3

, 1 2 9–3 2 ( C al

. 197 3 ).

W e a r e n ot per s uad e d b y this ar g ument

. T h e excl u sion a t i s sue in th i s c ase

ap p lies ir r espe c tive of th e l e gal the o ry of re c over y a s sert e d agai n st the In s ured. S ee

Ce n tury T

r ansi t S y s

. , Inc

. v

. A m

. Em

p ire Sur p lus Li n es Ins

. C o. , 4 9 C al

. R ptr

. 2d

5 6 7

, 5 7 1 ( Ct

. A pp

. 199 6 )

. Th e p l ain terms of th e p olic y e xclu d e cove r age fo r a ny

lo s s a ttrib u tabl e t o a n i n vestme n t i n d eriva t ives

. T he fact th a t t he Ins u red all e gedly

made in t enti o nal misrep r esen t atio n s o f fact or br e ache d a fi d uci a ry duty s e ts up the

p u rcha s e o f coll a tera l ized mort g age bo n ds

. T h e me a sure of d a m a g es for ea c h and

ev e ry cla i m is lo s s b ase d u p on th e p u rch a se and sa l e o f deri v ativ e s; the r efor e , th e se

cl a i m s d i rect l y a rise fr o m a cat e gory of claims aris i ng from a l o ss spec i fical ly

ex c lud e d from c ove r age

. S e e C o nt ' l C as

. C o

. v

. City o f R i chm o nd

, 7 63 F

. 2d 10 7 6,

10 8 1–8 2 ( 9th Ci r

. 19 8 5); Ce n tury T r ansit

, 4 9 C al

. Rptr

. 2d at 57 1 –72 & n

. 6.

AF F IRME D.

### N

. R. S M I T H, C ir c u i t J u d ge , c o nc u rr i n g i n pa r t:

A pp e ll a n t a

r g u ed i n h e r R e p l y B ri e f t h a t s h e h a d a n ac t i on a b l e c l a i m a g a i n s t

B r o o k s tr e e t u n d e r C a li f

o r n i a ’s “ c o n cu r r e n t ca u s e d oc t ri n e , ” n o t w it h s t a nd i n g t h e

p o li c y e x c l u s i o n. S e e C

o n t ’ l C a s

. C o

. v

. C it

y o f R i c h m ond

, 7 6 3 F

. 2 d 10 7 6

, 1 0 8 1

( 9 t h C ir

. 1 9 8 5 ) ( “ [ U ] n d e r C a lif o r n i a i n s u r an c e l a w, w h e n t w o d i ff e r e n t ris k s

c o n c u r i n p r o x i m a t e l y c a u s i n g a l o s s , c o v e r a g e w i ll b e u p h e l d i f e i t h e r r i s k i s

c o ve r ed

, n o t w i t h s t a n d i n g t h e e x c l u s i o n o f t h e o t h e r

. ” ( c iti n g S t a t e F a rm M u t

. A u t o

.

I n s

. C o

. v

. P a r t r i d

ge , 5 1 4 P

. 2 d 1 2 3

, 1 29 ( C a l

. 1 97 3 ) ( e m p h a s i s a d d e d ) )

. A l t h o u g h

h e r co n c u rr e n t c a u s e c l a i m m a y h a v e m e r i t

, A p p e l l an t w a i ve d t h i s a r g u m e n t b y

f a ili n g t o r a i s e it ( 1 ) be f

o r e t h e d i s t ri c t c o u rt

, s e e H i l li s v

. H e i n e m an , 6 2 6 F

. 3 d

1 0 1 4

, 1 0 1 9 ( 9 t h C ir

. 2 0 10 )

, a n d ( 2 ) i n h e r O p e n i n g B ri e f

, s e e D i l l ey v

. G u nn , 6 4

F

. 3 d 1 3 6 5

, 1 36 7 ( 9 t h C i r

. 1 9 9 5 )

. W e m u s t t h e r e f o r e a ff i r m t h e d i s tr i c t c o u r t’ s

s u m m a r y j u d g m e n t o r d e r. 

# F I L ED

J U L 20 20 11

M O L L Y C

. D W YE R

, C L E RK U

. S. C O U R T O F A PPEA LS