FOR PUBLICATION
  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT

In re: CLAUDE G. COSSU,                   
                                Debtor,

                                                 No. 04-16699
CLAUDE G. COSSU,
                             Appellant,           D.C. No.
                                               CV-04-00502-MCE
                   v.
                                                   OPINION
JEFFERSON PILOT    SECURITIES
CORPORATION,
                              Appellee.
                                          
        Appeal from the United States District Court
            for the Eastern District of California
        Morrison C. England, District Judge, Presiding

                    Argued and Submitted
          April 13, 2005—San Francisco, California

                        Filed June 3, 2005

        Before: Donald P. Lay,* Betty B. Fletcher, and
           Michael Daly Hawkins, Circuit Judges.

                   Opinion by Judge Hawkins




   *The Honorable Donald P. Lay, Senior United States Circuit Judge for
the Eighth Circuit, sitting by designation.

                                6255
6258                         IN RE: COSSU




                             COUNSEL

Timothy J. Walsh, Fairfield, California, for the appellant.

Gilbert Khachadourian, Jr., Watson, Khachadourian & Iams,
Sacramento, California, for the appellee.


                              OPINION

HAWKINS, Circuit Judge:

   Debtor Claude Cossu appeals the district court’s order
affirming the bankruptcy court’s determination that Jefferson
Pilot Securities (“Jefferson Pilot”) had a valid bankruptcy
claim against Cossu of approximately $1.1 million and that
such debt was nondischargeable pursuant to 11 U.S.C.
§ 523(a)(2)(A). We affirm in part, reverse in part, and remand
for further proceedings.

         FACTS AND PROCEDURAL HISTORY

   Cossu began working in the insurance business in 1971. In
connection with this work, Cossu was a National Association
of Securities Dealers (“NASD”) registered broker. As a
NASD broker/dealer, Cossu knew he had an ongoing obliga-
tion to report outside business activities to the company with
whom he was licensed (referred to in the industry as “selling
away”).

   In 1995, he became a registered representative for Jefferson
Pilot.1 In response to a questionnaire completed at the begin-
  1
    In 1997, Jefferson Pilot merged with Chubb Securities Corp., which
later changed its name back to Jefferson Pilot. This opinion will consis-
                              IN RE: COSSU                            6259
ning of his employment, he specifically denied being engaged
in any such outside activities. Cossu was also aware that
under NASD guidelines, he was not permitted to engage in
private securities transactions without prior notice and
approval from Jefferson Pilot.

   In May 1997, Cossu received a fax from SafeRate Financial
Services (“SafeRate”) advertising an investment that prom-
ised clients a ten percent annual percentage rate with a nine-
month term. In response to an inquiry by Cossu, SafeRate sent
another fax, stating that the product was “an insured guaran-
teed cash contract/corporate promissory note.” The fax
claimed the notes were “not a security,” but an “exempt
security” that still had to “be in compliance with the laws
governing exempt securities.”

   Cossu then signed an agreement with SafeRate, agreeing to
act as an agent and market its products. Cossu and SafeRate
also entered into a separate commission agreement. Cossu did
not notify Jefferson Pilot that he had entered into the agree-
ment with SafeRate, claiming he did not think SafeRate’s
products were securities.

   In mid-October 1997, Cossu signed another representative
agreement with Jefferson Pilot, agreeing to abide by the rules
and regulations of the company and the industry and not to
engage in outside business activity without approval from the
company. The compliance manual listed private securities
transactions as prohibited acts.

   In 1998, Cossu received a brochure describing the promis-
sory notes offered by SafeRate. The brochure stated that
although the notes were exempt from registration with the
SEC, they were subject to securities law and the anti-fraud
provision of the 1933 Securities Act. Throughout 1998 and

tently refer to the appellee as Jefferson Pilot to avoid confusion.
6260                      IN RE: COSSU
into 1999, Cossu sold various investments to clients through
SafeRate, earning nearly $500,000 in commissions. During
the same period, Cossu was apparently gambling frequently
with large sums of money as the result of what the bankruptcy
court described as a “serious gambling habit.”

   In August 1999, the SEC closed down one of the compa-
nies from which Cossu’s clients had purchased the SafeRate
notes. The SEC also brought a complaint against Cossu, alleg-
ing he had (1) made material misrepresentations and omis-
sions in connection with the offer and sale of unregistered
securities, (2) acted as an unregistered broker/dealer in those
notes, and (3) received ill-gotten gains in the form of commis-
sion payments from his sale of those securities. Cossu settled
the SEC lawsuit in 2000.

   Cossu’s clients, however, filed claims against Jefferson
Pilot for individual losses suffered from investments made
through Cossu, Jefferson Pilot’s registered representative. Jef-
ferson Pilot settled many of these claims shortly before they
were to go to trial.

   Meanwhile, Cossu filed a Chapter 7 bankruptcy petition.
Jefferson Pilot then brought an adversary proceeding against
Cossu, alleging that the amounts it paid to defend and settle
the claims by Cossu’s clients should be nondischargeable debt
pursuant to 11 U.S.C. §§ 523(a)(2)(A), 523(a)(4), and
523(a)(6). Following a trial, the bankruptcy judge found that
Cossu knew the notes were securities, and held the debt to be
nondischargeable, apparently relying on § 523(a)(4) (fraud in
a fiduciary capacity), and ruled the amount of debt to be
approximately $1.9 million.

   On appeal, the district court reversed and remanded. It
found that the bankruptcy court had made insufficient find-
ings with respect to the validity or amount of Jefferson Pilot’s
claim, and that the statutes relied on by Jefferson Pilot to
establish a fiduciary duty were legally insufficient under
                               IN RE: COSSU                             6261
§ 523(a)(4). It also noted that the factual findings by the bank-
ruptcy court were insufficient to support non-dischargeability
under the other two sections.

   On remand, the bankruptcy court focused on the two
remaining claims under § 523(a)(2)(A) and (a)(6). The bank-
ruptcy court held the debt nondischargeable under § 523(a)
(2)(A), making more detailed findings as to each necessary ele-
ment.2 The bankruptcy court also addressed in more detail the
amount and validity of Jefferson Pilot’s claim. The court held
that Jefferson Pilot had a valid claim against Cossu based on
an indemnity provision in its registered representative agree-
ment, in which Cossu agreed to indemnify Jefferson Pilot for
any losses (including attorneys’ fees) arising out of any unau-
thorized, illegal or improper acts by Cossu.

  The court revised the amount of the claim downward, how-
ever, concluding that Jefferson Pilot should not recover for
pending claims. It awarded a total of $1,197,109.30, which
consisted of $1,135,746.98 in out-of-pocket settlement costs
plus $61,362.32 in defense costs on pending cases.

   Cossu appealed again, but this time the district court
affirmed. The district court held that the bankruptcy court’s
findings regarding Cossu’s fraudulent intent were not clearly
erroneous, and affirmed the non-dischargeability under
§ 523(a)(2)(A). The district court also refused to disturb the
bankruptcy court’s findings that the settlement amounts were
reasonable and flowed from Cossu’s conduct. Cossu then
appealed to this court.
  2
    The bankruptcy court also found the debt to be non-dischargeable pur-
suant to § 523(a)(6), but the district court did not sustain this finding, due
to a technical failure of the bankruptcy court to separately address the will-
ful and malicious prongs. This issue is not before us on appeal.
6262                      IN RE: COSSU
                 STANDARD OF REVIEW

  We independently review the bankruptcy court’s decision
without giving deference to the district court. In re Saxman,

, 1172 (9th Cir. 2003). We review the bank-
ruptcy court’s conclusions of law de novo and its factual find-
ings for clear error. In re Jastrem, 

, 441 (9th Cir.
2001).

                        DISCUSSION

I.   Validity of Jefferson Pilot’s Claim

   [1] Cossu argues that the bankruptcy court clearly erred by
determining that Jefferson Pilot had a “claim” within the
meaning of the Bankruptcy Code. The term “claim” is defined
in 11 U.S.C. § 101(5), and includes a “right to payment,
whether or not such right is reduced to judgment, liquidated,
unliquidated, fixed, contingent, matured, unmatured, disputed,
undisputed, legal, equitable, secured, or unsecured . . . .” The
validity of a creditor’s claim is determined by the rules of
state law, including all nonbankruptcy law that creates sub-
stantive claims “such as federal securities law or other federal
antifraud laws.” Grogan v. Garner, 

, 283-84 &
n.9 (1991).

   The bankruptcy court found Jefferson Pilot had a contrac-
tual right to payment pursuant to an indemnity provision that
was part of Jefferson Pilot’s Registered Representative Agree-
ment. In the agreement, Cossu agreed to:

     indemnify and hold the Company harmless against
     any claims, demands, suits, expenses (including rea-
     sonable attorney fees and expenses), losses or other
     forms of liability that arise out of or by reason of any
     act or failure to act by the Registered Representative
     which is unauthorized, illegal, dishonest, improper,
                              IN RE: COSSU                           6263
      or in breach of this agreement or the current compli-
      ance and supervisor manuals in effect.

   The bankruptcy court found that Cossu’s “selling away”
activities were unauthorized, dishonest, improper and in vio-
lation of his agreement with Jefferson Pilot, and that the dam-
ages incurred by Jefferson Pilot — defense costs and
settlement amounts — were caused by those actions, thus sat-
isfying the requirements for indemnity pursuant to the agree-
ment.

   [2] The bankruptcy court correctly determined that Jeffer-
son Pilot had a bankruptcy claim against Cossu, pursuant to
the above-quoted contractual indemnity provision. The court
erred, however, in the amount it awarded to Jefferson Pilot on
that claim based on the record before it.

   [3] As the party seeking indemnity, without a judgment
ordering it to pay, Jefferson Pilot had the burden of demon-
strating that it was actually or at least potentially liable on the
underlying claim and that the settlement amount was reason-
able. See 41 Am Jur. 2d Indemnity § 46. A party cannot make
a voluntary payment to settle an action and then hold another
responsible for that payment through indemnity. See S. Cal.
Gas Co. v. Venture Pipe Line Const. Co., 

, 852
(Cal. Ct. App. 1957) (holding a voluntary payment made by
the indemnitee, without regard to its liability, is not recover-
able); Morrissette v. Sears, Roebuck & Co., 

, 9
(N.H. 1974) (same).3

   [4] Although Jefferson Pilot introduced information regard-
  3
    At argument, the parties did not agree as to which state law applies to
the indemnity claim. Although Cossu assumed California law applies, Jef-
ferson Pilot properly noted that the registered representative agreement
containing the indemnity provision indicates that New Hampshire law
governs. In any event, the law on this point is the same in both jurisdic-
tions.
6264                      IN RE: COSSU
ing the amounts it paid to settle the claims, it provided no evi-
dence about the specific causes of action the claimants
brought against Jefferson Pilot or what state or federal law
applied to those actions. On this scant record, we cannot say
that Jefferson Pilot demonstrated its actual or potential liabil-
ity so as to sustain the indemnity claim with respect to the set-
tlement amounts. See Carpetland of Northwest Ark., Inc. v.
Howard, 

, 514 (Ark. 1991) (upholding denial
of indemnity claim where indemnitee made no showing that
the settlement was made under legal compulsion, and noting
that as a consequence “Carpetland’s exposure to a judgment,
the advisability of reaching a settlement, or the reasonable-
ness of the amount are not matters of record.”).

   [5] Nonetheless, Jefferson Pilot did introduce evidence that
Cossu’s customers sued Jefferson Pilot because of Cossu’s
actions and that it had to incur attorneys’ fees and costs to
defend those actions. Under the indemnity provision, it
appears these fees and costs could be recovered irrespective
of liability in the underlying lawsuit. Moreover, Jefferson
Pilot had alternatively asserted a claim against Cossu that was
based on the assignment of claims it received from Cossu’s
customers in some of the settlement agreements. This alterna-
tive right to payment was never addressed by the bankruptcy
court because it sustained the indemnity cause of action. On
remand, we leave it to the bankruptcy court to address these
issues in the first instance.

II.    Non-Dischargeability of the Debt

   [6] Section 523(a)(2)(A) of the Bankruptcy Code provides
that a debt for “money, property, services, or an extension,
renewal, or refinancing of credit, to the extent obtained, by
false pretenses, a false representation, or actual fraud, other
than a statement respecting the debtor’s or an insider’s finan-
cial condition” is not dischargeable. The creditor seeking to
prove nondischargeability under this section must establish:
(1) a misrepresentation of fact by the debtor, (2) that the
                         IN RE: COSSU                          6265
debtor knew at the time to be false, (3) that the debtor made
with the intention of deceiving the creditor, (4) upon which
the creditor relied, and (5) that was the proximate cause of
damage to the creditor. In re Britton, 

, 604 (9th
Cir. 1991). In this appeal, Cossu contests the bankruptcy
court’s findings regarding proximate cause.

   On remand following the first appeal to the district court,
the bankruptcy court made the following findings:

       Cossu knew that he was required to report outside
    business activities to Jefferson Pilot, and Cossu
    knew that this requirement was an important and
    ongoing obligation. Cossu knew the failure to report
    these outside activities was expressly prohibited by
    Jefferson Pilot and NASD regulations. Despite his
    knowledge in this regard, Cossu expressly stated in
    his 1995 U-4 Application (which Cossu failed to
    update as required), and, more importantly, in his
    1998 Registered Representative Compliance Ques-
    tionnaires with Jefferson Pilot, that he was not sell-
    ing unapproved securities and was not engaged in
    any outside business activities. These were material
    misrepresentations of fact by Cossu that he knew
    were false.

       It is also clear to this Court that Cossu’s misrepre-
    sentations to Jefferson Pilot in this regard were made
    with the intention of deceiving Jefferson Pilot. Cossu
    had a serious gambling habit and needed the com-
    mission money from the sales of the improper secur-
    ities to support that gambling habit. His sales of
    these securities coincided with his gambling habit.
    This Court believes that Cossu wanted to hide his
    conduct from Jefferson Pilot so Jefferson Pilot
    would not stop him from selling the improper securi-
    ties. Jefferson Pilot reasonably relied on Cossu’s
    misrepresentations to its detriment.
6266                           IN RE: COSSU
   [7] To the extent Jefferson Pilot has a valid claim against
Cossu, the bankruptcy court did not err by finding it to be
nondischargeable. The fraud with respect to Jefferson Pilot
consisted of Cossu’s misrepresentations about his outside
sales activities. As the bankruptcy court found, Cossu pur-
posefully hid these dealings from Jefferson Pilot, which
would have required him to stop the outside sales (or termi-
nated his representative status). Unaware of Cossu’s actions,
Jefferson Pilot remained in the contractual relationship with
Cossu and thus remained subject to lawsuits by and (possibly)
liability to Cossu’s customers. Cossu’s fraud was therefore
the proximate cause of Jefferson Pilot’s losses.4

  Because the bankruptcy court erred in calculating the
amount of the indemnity award on the record before it, we
remand to the district court with instructions to remand to the
bankruptcy court for further proceedings, which may include
entertaining Jefferson Pilot’s alternative theories of recovery.

  AFFIRMED IN PART, REVERSED IN PART, and
REMANDED. Each party to bear its own costs on appeal.




   4
     To the extent Cossu argues that the bankruptcy court did not determine
how Jefferson Pilot would have acted differently to prevent or limit its
losses, our case law does not require the bankruptcy court to “divine what
might have happened” if the fraud had not occurred, so long as the creditor
had options available that it did not exercise as a result of the fraud. In re
Siriani, 

, 306 (9th Cir. 1992).