                  FOR PUBLICATION
  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT

THE NEW YORK CITY EMPLOYEES’            
RETIREMENT SYSTEM,
                Plaintiff-Appellant,
               and
MARTIN VOGEL; KENNETH
MAHONEY,
                          Plaintiffs,
                v.                            No. 08-16488
STEVEN P. JOBS; FRED ANDERSON;
WILLIAM V. CAMPBELL; MILLARD S.
                                                D.C. No.
                                            5:06-CV-05208-JF
DREXLER; ARTHUR D. LEVINSON;                    OPINION
JEROME P. YORK; APPLE COMPUTER,
INC.; GARETH C.C. CHANG; PETER
O. CRISP; LAWRENCE J. ELLISON; B.
JURGEN HINTZ; KATHERINE M.
HUDSON; DELANO E. LEWIS, JR.; A.
C. MARKKULA, JR.; EDGAR S.
WOLLARD, JR.,
             Defendants-Appellees.
                                        
        Appeal from the United States District Court
           for the Northern District of California
         Jeremy D. Fogel, District Judge, Presiding

                  Argued and Submitted
        October 7, 2009—San Francisco, California

                   Filed January 28, 2010




                             1725
1726      NEW YORK CITY EMPLOYEES’ RETIREMENT v. JOBS
       Before: David R. Thompson and Sidney R. Thomas,
        Circuit Judges, and Ann Aldrich,* District Judge.

                  Opinion by Judge Thompson




   *The Honorable Ann Aldrich, Senior United States District Judge for
the Northern District of Ohio, sitting by designation.
1728    NEW YORK CITY EMPLOYEES’ RETIREMENT v. JOBS




                         COUNSEL

Michael J. Barry, Grant & Eisenhoffer P.A., Wilmington,
Delaware, for the plaintiff-appellant.

George A. Riley, O’Melveny & Myers, LLP., San Francisco,
California, for the defendants.


                          OPINION

THOMPSON: Senior Circuit Judge:

   This litigation arises out of the issuance of an allegedly
false and misleading proxy solicitation for a stock option plan.
Plaintiff-appellant New York City Employees’ Retirement
System (“NYCERS”) alleged that the false solicitation denied
it its right to an informed shareholder vote and caused it to
suffer economic loss through share dilution. The district court
dismissed NYCERS’ consolidated complaint. The court deter-
mined that: (1) NYCERS’ claim was derivative, not direct,
and (2) stock dilution, alone, did not establish economic loss.

   We have jurisdiction under 28 U.S.C. § 1291, and we
affirm the district court’s dismissal of NYCERS’ consolidated
complaint. NYCERS pled a direct injury, but failed to assert
any cognizable economic loss.

  NYCERS also appeals the district court’s denial of leave to
amend its consolidated complaint to reallege a claim that was
asserted in the initial complaint, but which it omitted from the
consolidated complaint. The district court, applying Federal
Rule of Civil Procedure 15(a), concluded that no factors
          NEW YORK CITY EMPLOYEES’ RETIREMENT v. JOBS                  1729
weighed against further amendment, but nonetheless deter-
mined that by not realleging the claim in the consolidated
complaint, NYCERS had “waived” it. We conclude that the
district court erred in applying a “waiver” rule to the omitted
claim, and, because the district court determined that leave to
amend should otherwise be granted, a ruling not challenged
in this appeal, we grant NYCERS leave to amend to reallege
the omitted claim.

                           BACKGROUND

  NYCERS is a public pension fund that manages retirement
assets for over 200,000 current and former employees of the
City of New York. Apple Inc. is a California corporation
based in Cupertino, California.

   Plaintiffs Vogel and Mahoney, individual Apple sharehold-
ers, filed the original complaint in this action, alleging claims
under §§ 10(b), 14(a), and 20(a) of the Securities Exchange
Act (“SEA”). NYCERS was appointed lead plaintiff pursuant
to the Private Securities Litigation Reform Act of 1995
(“PSLRA”) and filed a consolidated class action complaint
against Apple and fourteen of its officers and directors. The
consolidated complaint alleges: (1) direct class claims under
§§ 14(a) and 20(a) of the SEA for a misleading 2005 proxy
solicitation; and (2) a state law claim for breach of the fidu-
ciary duty of candor for various proxy solicitations, Form 10-
K annual reports, and registration statements. NYCERS bases
its allegations on the backdating of stock options by Apple.1
   1
     Apple compensates some employees by awarding stock options.
“Backdating” of stock options involves granting an awardee a stock option
that is dated on a date earlier than it is actually issued, usually at a date
when the stock price was lower. This may benefit awardees, as the value
of the option is the difference between the low option price and the current
higher market price. See United States v. Ruehle, 583 F.3d 600, 602 n.1
(9th Cir. 2009).
   Shortly before the complaint was filed, Apple initiated an investigation
into past option practices. The results disclosed that 6,428 backdated
options had been granted on forty-two days between 1997 and 2002. As
a consequence, Apple restated its financial statements to reflect a pre-tax
expense of $105 million.
1730    NEW YORK CITY EMPLOYEES’ RETIREMENT v. JOBS
   According to NYCERS, Apple shareholders suffered injury
through impairment of their right to a fully informed vote and
substantial dilution of their shares. NYCERS asserts that,
from 1996 to 2005, shareholders “unwittingly” authorized
issuance of a total of 205 million shares, or 20% of Apple’s
stock. The consolidated complaint prays for rescission of the
votes, compensatory damages for share dilution, an order for
an accounting, a declaration of defendants’ liability, and attor-
ney fees and costs.

   For the § 14(a) claim, NYCERS alleges three falsities in
Apple’s 2005 proxy solicitation. First, the solicitation states
that Apple’s compensation practices “align[ed]” the interests
of employees and stockholders, because stock options would
“have value . . . only if the Company’s stock price increases.”
NYCERS alleges falsity because backdated options can have
value even if Apple’s stock price does not increase, thereby
decoupling employee and shareholder interests. Second, the
solicitation states that granted options “did not make up for
the below market . . . cash compensation . . . paid to executive
officers.” NYCERS alleges misrepresentation because back-
dating can surreptitiously increase compensation. Third, the
solicitation states that in March 2003, Steve Jobs, Apple’s
current Chairman and CEO, cancelled his outstanding options
in exchange for ten million (split adjusted) shares of restricted
stock. NYCERS alleges misrepresentation because some of
the cancelled options were backdated, improperly providing
Jobs with 630,000 extra shares valued at over $50 million. For
its state law claim, NYCERS identifies a longer list of falsi-
ties in the various documents, notably, affirmations that
options were priced at fair market value on the date of the
grant.

   On November 14, 2007, the district court dismissed the
consolidated complaint with leave to amend solely to assert
derivative claims. Vogel v. Jobs, No. C 06-5208 JF, 2007 WL
3461163, at *5 (N.D. Cal. Nov. 14, 2007). In rejecting the
§ 14(a) claim, the court stated that the consolidated complaint
         NEW YORK CITY EMPLOYEES’ RETIREMENT v. JOBS          1731
failed to allege facts giving rise to a direct claim and, alterna-
tively, failed to plead loss causation under the PSLRA. Id. at
*2-5. Without a primary violation under § 14(a), NYCERS’
§ 20(a) control person claim failed. Id. at *5. Furthermore, the
state law claims presumably failed because the § 14(a) analy-
sis was based on an interpretation of state law. Id. at *2-5.

   NYCERS sought leave to amend to assert, in part, a direct
claim under § 10(b). The district court denied NYCERS leave
to file such an amended complaint on the ground that
NYCERS waived the § 10(b) claim by not alleging that claim
in its consolidated complaint. Vogel v. Jobs, No. C 06-5208
JF, 2008 WL 2073935, at *2-4 (N.D. Cal. May 14, 2008).
This appeal followed.

                         DISCUSSION

I.   Disclosure Claims Under § 14(a) of the SEA and SEC
     Rule 14a-9

   To state a claim under § 14(a) and Rule 14a-9, a plaintiff
must establish that “(1) a proxy statement contained a mate-
rial misrepresentation or omission which (2) caused the plain-
tiff injury and (3) that the proxy solicitation itself, rather than
the particular defect in the solicitation materials, was an
essential link in the accomplishment of the transaction.” Tra-
cinda Corp. v. DaimlerChrysler AG, 502 F.3d 212, 228 (3d
Cir. 2007) (quotation marks omitted); see also Desaigoudar
v. Meyercord, 223 F.3d 1020, 1022 (9th Cir. 2000) (stating
that such a plaintiff must also “demonstrate that the misstate-
ment or omission was made with the requisite level of culpa-
bility and that it was an essential link in the accomplishment
of the proposed transaction”). In addition, private plaintiffs
must meet the heightened pleading standards of the PSLRA,
as well as its loss causation requirement. Stoneridge Inv. Part-
ners, LLC v. Scientific-Atlanta, 552 U.S. 148, 165 (2008). On
appeal, the parties dispute whether NYCERS states a claim
1732     NEW YORK CITY EMPLOYEES’ RETIREMENT v. JOBS
under § 14(a) that is both direct and adequately alleges loss
causation.

  We review de novo the district court’s decision to grant a
motion to dismiss. Manzarek v. St. Paul Fire & Marine Ins.
Co., 519 F.3d 1025, 1030 (9th Cir. 2008).

A.     Nature of NYCERS’ Claim

   [1] A claim asserted under § 14(a) of the SEA may be
brought either as a direct or a derivative claim. J.I. Case Co.
v. Borak, 377 U.S. 426, 431 (1964). The characterization of
a claim as direct or derivative is governed by the law of the
state of incorporation. Lapidus v. Hecht, 232 F.3d 679, 682
(9th Cir. 2000). In the present case, California law applies, but
there appears to be no difference between Delaware and Cali-
fornia law on this issue.

   In 2004, the Delaware Supreme Court stated that an analy-
sis of whether a claim is direct or derivative “must be based
solely on the following questions: Who suffered the alleged
harm—the corporation or the suing stockholder individually
—and who would receive the benefit of the recovery or other
remedy?” Tooley v. Donaldson, Lufkin & Jenrette, Inc., 845
A.2d 1031, 1035 (Del. 2004). A plaintiff’s classification of
the suit is not binding. Id. To establish a direct action, “[t]he
stockholder’s claimed direct injury must be independent of
any alleged injury to the corporation. The stockholder must
demonstrate that the duty breached was owed to the stock-
holder and that he or she can prevail without showing an
injury to the corporation.” Id. at 1039.

   [2] In the pleadings, NYCERS alleges that Apple share-
holders were deprived of the right to a fully informed vote.
This claimed injury is independent of any injury to the corpo-
ration and implicates a duty of disclosure owed to sharehold-
ers. See In re Tyson Foods, Inc., 919 A.2d 563, 601 (Del. Ch.
2007) (“Where a shareholder has been denied one of the most
          NEW YORK CITY EMPLOYEES’ RETIREMENT v. JOBS                   1733
critical rights he or she possesses—the right to a fully
informed vote—the harm suffered is almost always an indi-
vidual, not corporate, harm.”); Dieterich v. Harrer, 857 A.2d
1017, 1029 (Del. Ch. 2004) (“Dieterich’s disclosure allega-
tions are direct claims, as they are based in rights secured to
stockholders by various statutes.”). Thus, under state law,
NYCERS’ claim for injury to its right to a fully informed vote
is a direct claim. See also In re J.P. Morgan Chase & Co.
S’holder Litig., 906 A.2d 766, 772 (Del. 2006) (“[W]here it
is claimed that a duty of disclosure violation impaired the
stockholders’ right to cast an informed vote, that claim is
direct.” (citing In re Tri-Star Pictures, Inc., Litig., 634 A.2d
319, 330 n.12, 332 (Del. 1993))).2 Because NYCERS’ § 14(a)
claim is direct, the district court erred in dismissing the con-
solidated complaint on the ground the claim was derivative
and had to be pleaded as such.

B.    Economic Loss

   [3] Treating the claim as a direct claim under § 14(a) of the
SEA and SEC Rule 14a-9, the private plaintiffs had to allege
loss causation. See Stoneridge, 552 U.S. at 165 (discussing a
claim under § 10(b) of the SEA, but explaining that the
PSLRA “imposed . . . a loss causation requirement upon ‘any
private action’ arising from the [SEA]” (quoting 15 U.S.C.
§ 78u-4(b))); Grace v. Rosenstock, 228 F.3d 40, 47 (2d Cir.
2000) (“[L]oss causation . . . must be proven in the context
of a private action under § 14(a) of the 1934 Act and SEC
Rule 14a-9 promulgated thereunder.”) As codified, loss cau-
sation requires a showing that the defendant “caused the loss
for which the plaintiff seeks to recover damages.” 15 U.S.C.
§ 78u-4(b)(4). To show loss causation, a plaintiff must prove
  2
    The consolidated complaint might also be read to allege direct injury
through dilution of Apple stock’s economic value and voting power. How-
ever, because NYCERS states a direct claim based on the alleged injury
to its right to a fully informed vote, we need not address this alternate the-
ory of injury.
1734      NEW YORK CITY EMPLOYEES’ RETIREMENT v. JOBS
both economic loss and proximate causation. Dura Pharm.,
Inc. v. Broudo, 544 U.S. 336, 346 (2005). In well-pleaded
§ 14(a) claims, loss causation connects the proxy misstate-
ments with an actual economic harm. Grace, 228 F.3d at 46.

   NYCERS seeks to plead economic loss in the form of “di-
lution to the Section 14(a) Class’s shareholder interests.” In
dismissing the claim, the district court noted that “dilution is
not necessarily accompanied by economic loss.” The court
concluded that Dura Pharmaceuticals “bars any suit brought
solely on the basis that a misrepresentation caused an inflated
share price, and [NYCERS] alleges no more here.” Vogel v.
Jobs, 2007 WL 3461163, at *4.

   In Dura Pharmaceuticals, the Supreme Court considered
whether shareholders successfully pleaded economic loss by
alleging they “paid artificially inflated prices for Dura[‘s]
securities.” 544 U.S. at 347 (alteration in original). The Court
found the complaint “legally insufficient,” because an “ ‘arti-
ficially inflated purchase price’ is not itself a relevant eco-
nomic loss.” Id. at 347-48 (noting the complaint’s failure to
allege a subsequent drop in Dura’s share price). The Court
faulted the complaint for failing to “provide[ ] the defendants
with notice of what the relevant economic loss might be or of
what the causal connection might be between that loss and the
misrepresentation.” Id. at 347.

   [4] Here, NYCERS alleges economic loss only in the form
of dilution, and, as such, does not seek to rely directly on Dura.3
Instead, NYCERS characterizes its claim as “rescissory in
nature” and argues that Mills v. Electric Auto-Lite Co., 396
U.S. 375 (1970), grants courts broad authority to fashion equi-
table remedies for § 14(a) claims. However, NYCERS cannot
  3
    Even if NYCERS were to allege a drop in Apple stock’s price due to
a disclosure of backdating, it is unclear whether NYCERS could success-
fully establish a causal connection between such a drop and any misrepre-
sentation in a proxy solicitation.
        NEW YORK CITY EMPLOYEES’ RETIREMENT v. JOBS         1735
use Mills to avoid pleading economic loss. The PSLRA does
not differentiate between plaintiffs seeking legal and equitable
remedies, and thus, without an allegation of economic loss, no
remedy, equitable or otherwise, is available.

   NYCERS next asserts that, even if Dura applies, Dura does
not purport to establish a single method of proving loss causa-
tion. Indeed, in Dura, the Supreme Court noted that it “need
not, and d[id] not, consider other proximate cause or loss-
related questions.” 544 U.S. at 346. Accordingly, courts have
recognized other showings of loss causation. See, e.g., In re
Cigna Corp. Sec. Litig., 459 F. Supp. 2d 338, 350-54, 357
(E.D. Pa. 2006) (holding that Dura allows the “transaction-
based methodology” for calculating economic loss which per-
mits claims for losses without offsetting for profitable transac-
tions). Nonetheless, Dura requires that the pleadings provide
notice of what the relevant economic loss might be. Here,
NYCERS states that dilution “reduces a shareholder’s per-
centage of ownership.” NYCERS elaborates, “This 20%
transfer clearly has a highly significant economic conse-
quence even though the Company’s share price may not have
moved in response to the transfer.”

   [5] NYCERS’ dilution theory of economic loss is unsup-
ported in caselaw, and as the district court recognized, eco-
nomic loss does not necessarily accompany dilution, so such
conclusory assertions of loss are insufficient. Thus, NYCERS
fails to adequately plead economic loss, and the district
court’s dismissal on this ground was proper.

II.   Leave to Amend

   Although we review a denial of leave to amend for abuse
of discretion, see Abagninin v. AMVAC Chem. Corp., 545
F.3d 733, 737 (9th Cir. 2008), a district court may abuse its
discretion by erroneous application of the law, see United
States v. Sprague, 135 F.3d 1301, 1304 (9th Cir. 1998).
1736     NEW YORK CITY EMPLOYEES’ RETIREMENT v. JOBS
   In this case, the original complaint contained a § 10(b)
claim, but NYCERS did not include that claim in the consoli-
dated complaint. After dismissal of the consolidated com-
plaint, but before entry of judgment, NYCERS sought leave
to amend the consolidated complaint to reallege the § 10(b)
claim. The district court, applying Federal Rule of Civil Pro-
cedure 15(a), concluded that no factors weighed against
amendment. Vogel v. Jobs, 2008 WL 2073935, at *2-4 (con-
sidering undue delay, bad faith, undue prejudice, futility and
previous amendments). Nonetheless, the district court denied
leave to amend on the ground that NYCERS “waived” the
§ 10(b) claim by failing to include it in the consolidated com-
plaint. Id. at *4.

   The district court erred by relying on London v. Coopers &
Lybrand, 644 F.2d 811, 814 (9th Cir. 1981), for the assertion
that “a party’s failure to reassert a claim may be deemed a
waiver of that claim.” In London, the plaintiff alleged a Title
VII claim in her first amended complaint, but not in her sec-
ond amended complaint. 644 F.2d at 814. After dismissal of
the second amended complaint, the plaintiff appealed, seek-
ing, in part, to challenge the dismissal of her Title VII claim.
Id. This court stated, “It has long been the rule in this circuit
that a plaintiff waives all causes of action alleged in the origi-
nal complaint which are not alleged in the amended com-
plaint.” Id.

   [6] On appeal, NYCERS correctly asserts that London actu-
ally stands for the proposition that the scope of appellate
review is limited to the allegations in the most recently filed
complaint. We have held that, “[i]f a plaintiff fails to include
dismissed claims in an amended complaint, the plaintiff is
deemed to have waived any error in the ruling dismissing the
prior complaint.” Forsyth v. Humana, Inc., 114 F.3d 1467,
1474 (9th Cir. 1997); see also King v. Atiyeh, 814 F.2d 565,
567 (9th Cir. 1987). We have never held, however, that a
plaintiff who omits previously dismissed claims from an
amended complaint waives his right to reallege these claims
          NEW YORK CITY EMPLOYEES’ RETIREMENT v. JOBS                 1737
in further amendments at the district court level. The district
court’s application of a waiver rule to the § 10(b) claim was
an erroneous application of the law and, thus, an abuse of dis-
cretion.

   Apple’s arguments to the contrary do not alter this result.
First, Apple’s policy argument, advocating the efficient
administration of justice, is not well-grounded, considering
that “[t]he court should freely give leave when justice so
requires.” Fed. R. Civ. P. 15(a). Second, Apple incorrectly
asserts that, in King, we approved a waiver rule at the district
court level. In King, the plaintiffs elected not to reallege cer-
tain claims in their amended complaint. 814 F.2d at 567. The
district court dismissed the amended complaint and ruled that
the amended complaint “superseded” the original, precluding
review of the omitted claims. Id. On appeal, no error was
shown. Id. King is distinguishable from the present case
because the King plaintiffs did not seek to amend, but merely
sought to have the omitted claims considered by the district
court.4

                           CONCLUSION

   [7] NYCERS fails to allege economic loss as required to
state a direct claim under § 14(a). Thus, we affirm the district
court’s dismissal of that claim on this ground. However, the
district court abused its discretion by relying on London in
applying a waiver rule to NYCERS’ omitted § 10(b) claim,
and thus, NYCERS is granted leave to amend its consolidated
complaint to reallege the omitted claim.
  4
   Citing Allen v. City of Beverly Hills, 911 F.2d 367, 374 (9th Cir. 1990),
Apple contends that denial of leave to amend is appropriate on the alter-
nate ground that the plaintiffs offered no proper explanation for the omis-
sion. We decline to consider this new contention Apple raises for the first
time on appeal. See Turnacliff v. Westly, 546 F.3d 1113, 1120 (9th Cir.
2008).
1738    NEW YORK CITY EMPLOYEES’ RETIREMENT v. JOBS
 AFFIRMED in part, REVERSED in part, and
REMANDED for proceedings consistent with this opinion.

  The parties shall bear their own costs for this appeal.
