                     FOR PUBLICATION
  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT

STRATEGIC DIVERSITY, INC., a               
Massachusetts corporation and
KENNETH P. WEISS, an unmarried
man,
              Plaintiffs-Appellants,              Nos. 10-15256
                v.                                     10-16404
ALCHEMIX CORPORATION, an                            D.C. No.
Arizona corporation; ROBERT R.                 2:07-cv-00929-GMS
HORTON, husband; CHERYL HALOTA                      OPINION
HORTON, wife; MEDICI ASSOCIATES,
LLC, a Delaware limited liability
company,
            Defendants-Appellees.
                                           
         Appeal from the United States District Court
                  for the District of Arizona
          G. Murray Snow, District Judge, Presiding

                     Argued and Submitted
           July 20, 2011—San Francisco, California

                     Filed December 2, 2011

     Before: Procter Hug, Jr. and Johnnie B. Rawlinson,
  Circuit Judges, and Jed S. Rakoff, Senior District Judge.*

                    Opinion by Judge Hug;
                Concurrence by Judge Rawlinson

   *The Honorable Jed S. Rakoff, Senior District Judge for the U.S. Dis-
trict Court for Southern New York, sitting by designation.

                                20613
            STRATEGIC DIVERSITY v. ALCHEMIX CORP.          20617


                            COUNSEL

James O. Ehinger, Jennings, Strouss & Salmon, P.L.C., Phoe-
nix, Arizona, for the appellants.

Stephen W. Tully, Gordon & Rees LLP, Phoenix, Arizona,
for the appellees.


                            OPINION

HUG, Senior Circuit Judge:

   This appeal concerns the maintenance of a suit for rescis-
sion under section 10(b) of the Securities and Exchange Act
of 1934 by plaintiffs-appellants Kenneth Weiss and his
wholly-owned corporation Strategic Diversity, Inc. The dis-
trict court granted summary judgment to defendants-appellees
Robert Horton, Alchemix Corporation, and Medici Associates
on all claims and awarded the defendants attorneys’ fees. We
affirm in part, reverse in part, vacate the attorneys’ fee award,
and remand.

                       I.   Background

A.   The Initial Investment

  In April 2001, Kenneth P. Weiss met Robert Horton. Weiss
expressed interest in investing in Horton’s alternative fuels
20618        STRATEGIC DIVERSITY v. ALCHEMIX CORP.
start-up company, Alchemix Corporation. At the direction of
his accountant, Weiss set up Strategic Diversity, Inc.,
(“Strategic”) to handle his investments. In Strategic’s first
venture, Weiss sought to invest $500,000 in Alchemix and
requested certain collateral to secure his investment. Approxi-
mately two weeks later, the parties arrived at an agreement.

   In a seven-page agreement signed on July 2, 2001, Strate-
gic agreed to invest $500,000 in Alchemix. The agreement
incorporated the following: (1) a convertible promissory note
(“Note”) in the amount of $500,000.00; (2) security interests
in Alchemix’s patents and intellectual property rights; and (3)
a warrant which included a provision that ensured capitaliza-
tion of the company could not exceed 40 million shares
(“Warrant”).

   The Note was to be paid after five years at an interest rate
of ten percent per year compounded monthly. Under the terms
of the Note, Weiss had the option of converting the Note to
250,000 shares of stock at a price of $2 or such price as
offered to other investors. Alchemix had the ability to prepay
the Note after one year if three conditions were met: (1)
Alchemix had to give Strategic 30 days advance written
notice; (2) Alchemix had to pay a prepayment penalty of
$10,000; and (3) during the 30 day notice period, Alchemix
had to give Strategic the option to convert the Note into
250,000 shares of Alchemix stock at $2 per share or any
lower price offered to other investors.

   While the agreement did not guarantee Weiss a seat on the
Board, it stated that Alchemix “shall immediately undertake
its best efforts . . . to elect Weiss . . . and retain [him] in such
Board position at least until such time as the [Note] . . . [has]
been satisfied or converted pursuant to the terms delineated
therein.” Weiss obtained his seat on the Board shortly after
his investment was made.
            STRATEGIC DIVERSITY v. ALCHEMIX CORP.         20619
   As part of the loan, Weiss also obtained secured interests
in Alchemix’s property in certain patents and protection in the
form of anti-dilution provisions.

B.   Alchemix Needs Further Investment

  In May 2002, Alchemix needed money. To that end,
Alchemix entered into negotiations with the Alchemix Fund-
ing Group (“AFG”). AFG was an investment group indepen-
dent of Alchemix, but the group included members of
Alchemix’s Board. Horton claims that Weiss was a member
of AFG, but Weiss denies this assertion.

   Throughout the month, AFG and Alchemix negotiated the
terms of an agreement. AFG would loan Alchemix approxi-
mately $3 million, but it required certain terms on its loan.
Those terms, however, conflicted with Strategic’s then-held
rights. To get the loan from AFG, Alchemix (and AFG)
would need Strategic to make concessions. Weiss testified
that his goal was to see that Alchemix succeed, and he
believed that securing this line of funding would help
Alchemix. Weiss agreed to make certain concessions; how-
ever, not surprisingly, he sought to be compensated for them.
He negotiated with Alchemix and AFG to find an acceptable
outcome for all.

   The negotiations culminated in a June 5, 2002 letter from
Strategic to Alchemix. In that letter, Weiss, on behalf of Stra-
tegic, wrote that he understood Alchemix was seeking fund-
ing from AFG in the amount of three million dollars. He
indicated that he intended to be an investor in AFG and that
his agreement to waive Strategic’s rights was “contingent
upon my investment in [AFG].” Weiss then noted that he
would agree to waive Strategic’s rights on certain terms. Spe-
cifically, he stood ready to waive anti-dilution provisions,
increase the amount of capitalized shares, and release his
security interests in Alchemix patents in exchange for a
20620       STRATEGIC DIVERSITY v. ALCHEMIX CORP.
$250,000 investment in Alchemix (500,000 shares at $0.50
per share).

   As part of the proposed AFG loan agreement, AFG was to
initially supply $1.5 million to Alchemix. A portion of that
money, $560,000, was to be paid to Strategic in order to
remove Strategic’s security interests in Alchemix property.
Once collateral requirements were in order, AFG would sup-
ply another $1.8 million, bringing its total investment in
Alchemix to $3.3 million.

C.   Western Oil Sands

   However, the AFG-Alchemix transaction never took place
because in the midst of those negotiations, Horton received
welcome news for Alchemix. On June 17, 2002, a Canadian
company, Western Oil Sands (“Western”), indicated its inter-
est in a potentially larger investment in Alchemix than AFG
was willing to offer. Western sent a “Memorandum of Under-
standing” (“Western Memo”) to Horton. According to the
Western Memo, Western was to make an initial investment of
$3 million and had the option to continue investment if certain
conditions were met. The potential investment was up to $36
million.

   The next day, on June 18, 2002, Horton canceled the nego-
tiations with AFG. He faxed a copy of the Western Memo to
members of the Alchemix Board, including Weiss who
received the document.

   Sometime after the Western proposal and the circulated
Western Memo, Weiss asserts that Horton misrepresented the
nature of the Western investment. Weiss testified that he and
Horton were “on the phone fairly often” and that “Bob Horton
told me that they [Western] were investing $30 million and
that the various concessions that I made were, from my per-
sonal point of view, contingent on and related directly to that
kind of investment.” Weiss also claims that he inquired as to
             STRATEGIC DIVERSITY v. ALCHEMIX CORP.          20621
whether there were “any adverse facts or circumstances” that
would affect his decision and that Horton did not offer any
comments.

   Because Weiss was busy with other matters, including
travel outside the country, Arthur Hagopian, executive assis-
tant to Weiss and a corporate officer of Strategic, handled the
“day-to-day discussions with Alchemix’ and Horton’s repre-
sentative.” Hagopian had one conversation with Horton
regarding Weiss’s resignation from the Board, but all other
discussions were with Richard Armstrong, Alchemix’s CFO.
Horton stated that Armstrong would be the person “shifting
the paper” on any such transaction.

   Hagopian describes his discussions with Armstrong as a
“single transaction” that would involve the “replacement” of
Strategic’s loan with an equity holding. Armstrong, however,
testified in his deposition that he did not recall the transaction.
Hagopian stated that Armstrong had opened discussions by
claiming that a number of concessions were needed to “clear
the way” for a “new investor.” The new concessions for the
Western investment included the following: prepayment of
the Note; relinquishment of Weiss’s Board seat; waiver of
Strategic’s non-dilution rights; and waiver of Strategic’s right
to make further loans to Alchemix. Hagopian stated that Arm-
strong proposed that an equivalent investment in Alchemix
stock would be provided at a discounted price in exchange for
these concessions. Hagopian and Armstrong negotiated the
price of the stock, ultimately arriving at a “discount” price of
$1 per share. Armstrong told Hagopian that the 250,000
shares would not originate from Alchemix but rather from
Horton’s family’s holdings in Medici Associates.

   In the midst of the Weiss and Horton negotiations, Western
made its first $3 million investment in Alchemix, pursuant to
the terms in the Western Memo.

  On June 27, 2002, Strategic accepted prepayment of the
Note with interest and penalties totaling $560,531. In consid-
20622       STRATEGIC DIVERSITY v. ALCHEMIX CORP.
eration of the prepayment, Strategic (1) waived the thirty day
notice, (2) waived Strategic’s right to loan an additional
$500,000 to Alchemix, and (3) modified the Warrant to allow
capitalization of up to 45 million shares. Although the docu-
ment accepting prepayment of the Note itself makes no refer-
ence to the right to purchase Alchemix shares at $1 per share,
Weiss produced a sheet with wiring instructions for the pay-
ment that also includes the following statement: “Please do
not transfer this payment until you send a note stating, ‘Strate-
gic Diversity and/or Kenneth P. Weiss shall have the right to
purchase up to 500,000 shares of Alchemix Corp. at $1 a
share directly from Robert Horton.’ ” Hagopian also wrote to
Armstrong that if there were issues with the arrangement, then
the loan repayment should not be made because “the docu-
ments were conceived and created as one package.”

   On July 2, 2002, Alchemix sent a check to Strategic in the
amount of $560,832.00. Concurrent with the payment of the
Note, Horton sent a letter to Weiss in which he agreed to sell
“up to 390,000 shares of Alchemix common stock on or
before July 10, 2002, that is owned by Medici or me for a
sales price per share of $1.00.” The next week, on July 8,
2002, Weiss sent a check to Medici in the amount of
$250,000 to purchase 250,000 shares of Alchemix common
stock. On July 11, 2002, Weiss, as part of the transaction, ten-
dered his resignation as a member of the Alchemix Board.

   Horton views the facts differently. Although Horton and
Armstrong both testified that they cannot recall the details of
the transaction, they contend that it was two separate transac-
tions: (1) the repayment of the Note to Strategic; and (2)
Weiss’s subsequent purchase of stock from Medici. In Hor-
ton’s view, the repayment of the Note was made, and any sub-
sequent offer of shares was strictly because Weiss was part of
AFG negotiations, a point that Weiss disputes.

 By the end of July 2002, Western, pursuant to the Western
Memo, had the option to invest another $5 million in
            STRATEGIC DIVERSITY v. ALCHEMIX CORP.         20623
Alchemix. However, it never did so. Due to a fire at its facili-
ties, the company was “strapped for cash” and decided not to
continue its investment in Alchemix. Horton testified that the
news of Western forgoing its Alchemix investment was a
“game changer.” He notified members of the Alchemix
Board, but he did not notify Weiss.

  On August 5, 2002, Weiss released the security interests in
certain Alchemix patents.

   Weiss contends that since he left the Alchemix Board, he
had not received “any updates, legally required annual
reports, or any communication regarding the status of
Alchemix’ technology, finances and development.” It was
only in December 2005 that Weiss learned for the first time
that Western had never made an investment of $30 million
and that the Alchemix Board had resigned.

D.   Glenn Litigation

   In the summer of 2002, Horton was an individual defendant
in Glenn v. Horton, a securities fraud action in Maricopa
County Superior Court. The litigation involved securities
fraud in connection with another project of Horton’s called
“Genesis Coals.” Weiss claims that Horton failed to inform
him of this information and that this was material to his 2002
decision to invest in Alchemix.

E.   District Court Proceedings

   Weiss filed his original complaint in federal district court
on May 7, 2007, seeking rescission of the transaction. He
amended his complaint on August 29, 2008, again seeking
rescission and asserting causes of action for federal securities
fraud (count 1), state securities fraud (count 2), common law
fraud (count 3), and negligent misrepresentation (count 5). He
also brought claims for mutual mistake (count 6), failure of a
20624       STRATEGIC DIVERSITY v. ALCHEMIX CORP.
condition precedent (count 7), and unjust enrichment (count
8).

  On January 5, 2010, the district court granted summary
judgment to defendants on all claims. The court held that
Weiss’s federal and state securities law claims were time
barred. In the alternative, the court held that Weiss’s federal
and state securities claims, common law fraud, and negligent
misrepresentation claims failed for a lack of showing of dam-
ages. The district court also granted summary judgment to the
defendants on all remaining state law claims. The district
court also awarded attorneys’ fees to Horton in the approxi-
mate amount of $318,000. Weiss filed appeals on the sum-
mary judgment ruling as well as the attorneys’ fee award.

                        II.    Jurisdiction

   We have jurisdiction pursuant to 28 U.S.C. § 1291 because
this case arrives to us on a grant of motion for summary judg-
ment.

                 III.   Standards of Review

   We review de novo the district court’s grant of summary
judgment. Oak Harbor Freight Lines, Inc. v. Sears Roebuck
& Co., 513 F.3d 949, 954 (9th Cir. 2008). “Viewing the evi-
dence in the light most favorable to the nonmoving party, we
must determine whether there are genuine issues of material
fact and whether the district court correctly applied the rele-
vant substantive law.” Id. We review de novo the district
court’s dismissal on statute of limitations grounds. Johnson v.
Lucent Techs. Inc., 653 F.3d 1000, 1005 (9th Cir. 2011).

                         IV.     Analysis

A.   Limitations Period on Securities Claims

   [1] Federal securities fraud claims “may be brought not
later than the earlier of (1) 2 years after the discovery of the
             STRATEGIC DIVERSITY v. ALCHEMIX CORP.         20625
facts constituting the violation; or (2) 5 years after such viola-
tion.” 28 U.S.C. § 1658. With regard to the state claims, the
relevant provision of Arizona law provides that “no civil
action shall be brought . . . unless brought within two years
after discovery of the fraudulent practice on which the liabil-
ity is based, or after the discovery should have been made by
the exercise of reasonable diligence.” Ariz. Rev. Stat. § 44-
2004(B).

   [2] The transaction that forms the basis of the complaint
occurred on July 8, 2002. Weiss claims that he did not actu-
ally discover the facts underlying his cause of action until
December 2005, when he spoke with Horton, who told him
that the Alchemix Board had quit and that the sizable Western
investment never materialized. With respect to the alleged
omission regarding the Glenn litigation, Weiss claims that it
was not until “years after” his tenure on the Alchemix Board
that he learned that Horton was a defendant in a state fraud
suit. Weiss filed his complaint on May 7, 2007. The parties
agree that the suit was filed within the five-year limitation.
However, they disagree as to whether Weiss should have
known of the claims more than two years prior to filing his
complaint. If the facts conclusively demonstrate that Weiss
should have discovered the facts of his claim prior to May 7,
2005, the claims are time-barred.

   [3] In Merck & Co., Inc. v. Reynolds, the Court held that
“ ‘discovery’ as used in [28 U.S.C. § 1658] encompasses not
only those facts the plaintiff actually knew, but also those
facts a reasonably diligent plaintiff would have known.” 130
S.Ct. 1784, 1796 (2010). However, the “ ‘discovery’ of facts
that put a plaintiff on ‘inquiry notice’ does not automatically
begin the running of the limitations period.” Id. at 1798.
“[T]erms such as ‘inquiry notice’ and ‘storm warnings’ may
be useful to the extent that they identify a time when the facts
would have prompted a reasonably diligent plaintiff to begin
investigating.” Id. (emphasis added). The Court rejected
Merck’s argument that the limitations period should run when
20626       STRATEGIC DIVERSITY v. ALCHEMIX CORP.
the plaintiff fails to exercise diligence and undertake an inves-
tigation once on inquiry notice. Id. at 1797-98. The Court held
that the ultimate burden is on the defendant to demonstrate
that a reasonably diligent plaintiff would have discovered the
facts constituting the violation. See id. at 1799.

   Here, operating without the benefit of the Supreme Court’s
ruling in Merck & Co., the district court found that the West-
ern Memo put Weiss on “inquiry notice,” and it marked the
time of the commencement of the statute of limitations at the
time of inquiry notice, i.e., June 2002. Accordingly, the dis-
trict court found Weiss’s federal and state securities claims
time-barred.

   [4] However, under Merck & Co., Horton has not met his
burden of showing that the claims are time barred. Even
assuming that Weiss was on inquiry notice in 2002, Horton
does not demonstrate how a reasonably diligent plaintiff from
that point forward would have discovered the violations. The
limitations period does not begin to run until discovery, “irre-
spective of whether the actual plaintiff undertook a reasonably
diligent investigation.” Id. at 1798.

   [5] Because the district court did not have the benefit of
recent Supreme Court authority, we vacate the ruling on these
grounds and remand. See Betz v. Trainer Wortham & Co.,
Inc., 610 F.3d 1169, 1171 (9th Cir. 2010) (noting the pru-
dence of remand in light of recent Supreme Court authority).

B.   Federal Securities Fraud Claim

   [6] To state a claim under § 10(b), a plaintiff must allege:
(1) a material misrepresentation (or omission); (2) scienter;
(3) a connection with the purchase or sale of a security; (4)
reliance; (5) economic loss; and (6) loss causation. Dura
Pharms., Inc. v. Broudo, 544 U.S. 336, 341-42 (2005).

  [7] As a preliminary matter, we are not convinced that
Horton’s omission concerning his involvement in the Glenn
             STRATEGIC DIVERSITY v. ALCHEMIX CORP.         20627
litigation was material to Weiss’s investment decision. “An
omitted fact is material if there is a substantial likelihood that
the disclosure of the omitted fact would have been viewed by
the reasonable investor as having significantly altered the total
mix of information made available.” S.E.C. v. Platforms
Wireless Int’l Corp., 617 F.3d 1072, 1092 (9th Cir. 2010).
The standard of materiality is an objective one. TSC Indus.,
Inc. v. Northway, Inc., 426 U.S. 438, 445 (1976). An incom-
plete statement is not sufficient if the misrepresentation is not
significant. See Basic Inc. v. Levinson, 485 U.S. 224, 238
(1988). Other than a conclusory allegation that Horton’s
omission was material, there is no reason to conclude that this
affected the “total mix” of information available or that any
reasonable investor would consider this material. Horton was
the civil defendant in another securities fraud case involving
a completely different company. The company was in no way
related to Alchemix (except by Horton’s association), and it
was not connected to the instant transaction. To the extent that
any federal securities claim relies on this omission, summary
judgment was proper.

  The central issue here is whether the district court erred
when it granted summary judgment on Weiss’s § 10(b) claim
on the ground that he failed to produce evidence of damages.
Weiss argues that he need not have shown economic loss
because he sought rescission and not damages.

   [8] Contrary to Weiss’s argument, we are not convinced
that a suit under section 10(b) obviates the need for proving
economic loss and loss causation. Under section 10(b), the
Supreme Court has held that whether rescission or a rescis-
sionary measure of damages is available is “an unsettled one.”
Randall v. Loftsgaarden, 478 U.S. 647, 661 (1986). The statu-
tory framework surrounding § 10(b)’s requirements is hard to
square with Weiss’s argument that one seeking rescission
need not demonstrate loss causation. See 15 U.S.C. § 78u-
4(b)(4) (requiring loss causation); 15 U.S.C. § 78bb(a) (pro-
hibiting a plaintiff ’s recovery “in excess of his actual dam-
20628        STRATEGIC DIVERSITY v. ALCHEMIX CORP.
ages on account of the act complained of”); see also Ryan v.
Foster & Marshall, Inc., 556 F.2d 460, 464 (9th Cir. 1977)
(“Actual damages mean some form of economic loss.”). At a
minimum, these statutory requirements demonstrate that a
§ 10(b) plaintiff must present a showing of economic loss to
warrant rescission. Even in Holdsworth v. Strong, the one
case cited by Weiss on this point, the court held that it was
“not engaging in the process merely to vindicate a principle”
and that “the plaintiff must establish his injury” and “show
that he is injured and aggrieved in order to move the court to
grant rescission.” 545 F.2d 687, 697 (10th Cir. 1976). Thus,
rescission does not alleviate the burden of producing evidence
of economic loss.

   [9] Prior to addressing Weiss’s evidence of economic loss,
we must determine whether rescission is warranted. Although
rescission is a flexible remedy in equity, true rescission in this
case is not entirely feasible. “Rescission reverses the fraudu-
lent transaction and returns the parties to the position they
occupied prior to the fraud.” Ambassador Hotel Co., Ltd. v.
Wei-Chuan Inv., 189 F.3d 1017, 1031 (9th Cir. 1999). “Under
true rescission, the plaintiff returns to the defendant the sub-
ject of the transaction, plus any other benefit received under
the contract, and the defendant returns to the plaintiff the con-
sideration furnished plus interest.” Id. Although Weiss stands
ready to tender the 250,000 shares of Alchemix for the con-
sideration he offered ($250,000), the passage of time has ren-
dered the complete restoration of the parties to the status quo
ante difficult if not impossible. The Note has long since
expired, coming due in July 2006. We doubt that Weiss’s
demand for his seat on the Alchemix Board is even possible
when there does not appear at present to be an existing board.
In addition, true rescission would also involve the unfurling
of security interests that are currently held as collateral on
other debts. Thus, we conclude that true rescission is neither
feasible nor practical.

   [10] Yet even though true rescission is not warranted, the
district court had the discretion to consider an approach under
             STRATEGIC DIVERSITY v. ALCHEMIX CORP.         20629
a rescissionary measure of damages. “If true rescission is no
longer possible . . . , the court may order its monetary equiva-
lent.” Id. It is within the discretion of a district judge in “ap-
propriate circumstances” to apply a rescissionary measure of
damages. Blackie v. Barrack, 524 F.2d 891, 909 (9th Cir.
1975). “This remedy entitles the plaintiff to the return of the
consideration paid less any value received on the investment.”
Ambassador Hotel Co., 189 F.3d at 1031. “There are two
standard measures of damages in securities law.” Jordan v.
Duff & Phelps Inc., 815 F.2d 429, 441 (7th Cir. 1987) (citing
Randall, and Affiliated Ute Citizens v. United States, 406 U.S.
128, 154-55 (1972)). The generally employed “out-of-pocket”
or “market” measure is the difference between the fair value
of what was received and the fair value of what one would
have received had there been no fraudulent conduct. Affiliated
Ute Citizens, 406 U.S. at 155. By contrast, rescissionary dam-
ages are to be measured so as to result in the substantial
equivalent of rescission. Loftsgaarden, 478 U.S. at 656. One
court effectively distinguished the two measures of damages
in the following manner:

    When comparing out-of-pocket and rescissory dam-
    ages, the fundamental distinctions are these: (1) out-
    of-pocket damages accept the transaction as com-
    pleted, whereas rescissory damages attempt to undo
    it; and (2) out-of-pocket damages are measured by
    reference to the value of the property on the date of
    the transaction, while rescissory damages, in order
    to approximate the undoing of the transaction, take
    account of the value of the property, and any income
    produced by it, after the date of the transaction.

Standard Chtd. PLC v. Price Waterhouse, 190 Ariz. 6, 35 (Ct.
App. 1996) (emphasis in original); see also Jordan, 815 F.2d
at 442 (noting the rescissionary measure “often value[s] the
transaction as it turned out”). For the victim of fraudulent
inducement, the economic loss in a rescissionary approach
exists in the present retention of a depressed investment
20630          STRATEGIC DIVERSITY v. ALCHEMIX CORP.
minus any benefits received in the retention of the investment,
e.g., dividends, rents, profits. Here, the district court did not
consider whether the rescissionary measure of damages was
appropriate. Applying an out-of-pocket measure, it found no
evidence of damages and rejected Weiss’s claim.

   The specific question with respect to rescissionary damages
will be what monetary equivalent is necessary to return Weiss
to the status quo ante. Unlike true rescission, Weiss need not
tender his shares; however, any rescissionary damage award
should be offset by the value of the stock as well as any other
benefits incurred after the transaction.1 Also, to place Weiss
in the true status quo ante, Weiss’s damage award should be
offset by the received benefit of the interest and prepayment
penalty paid by Alchemix.

   In addition, we note that Weiss’s rescissionary approach
does not relieve him of demonstrating loss causation. See 15
U.S.C. § 78bb (limiting recovery to damages “on account of
the act complained of”). The misrepresentation here is that
Horton claimed that a decision to invest $36 million had been
made. To establish causation, Weiss must demonstrate that
had he known of the truth, Weiss would not have taken the
action he did i.e., relinquishing the Note to purchase
Alchemix stock. This is a question of fact. The finder of fact
will determine whether Weiss would have acted or not. Weiss
faces challenges in light of the evidence that he stood ready
to make the same concessions and purchase the same if not
more Alchemix stock on the basis of an AFG investment of
only $3 million. On the other hand, Horton testified that the
loss of the substantial investment from Western was a “game
  1
   We decline to assess the value of the stock at present. If necessary, the
value should be assessed on the date of judgment. See Nelson v. Serwold,
576 F.2d 1332, 1339 (9th Cir. 1978) (“To adhere to the model of rescis-
sion the monetary equivalent should be determined as of the date the pur-
chaser was under a present duty to return the stock, viz. the day of
judgment.” (quoting Green v. Occidental Petroleum Corp., 541 F.2d 1335,
1342 (9th Cir. 1976) (Sneed, J., concurring))).
               STRATEGIC DIVERSITY v. ALCHEMIX CORP.                 20631
changer,” suggesting that a reasonable person might have
behaved differently had he known that only a $3 million
investment was being made. In any event, Weiss must carry
his burden on causation.

   [11] Thus, we remand for consideration of the claim under
a rescissionary measure of damages and loss causation.

C.    State Securities Fraud

   As in his federal securities claim, Weiss argues that the dis-
trict court erred in dismissing his securities fraud claim under
Ariz. Rev. Stat. § 44-1991 because Arizona securities law
does not require a showing of damages in a rescission suit.
Unlike federal law, rescission under Arizona securities law
does not require the existence of damages.

   [12] Under section 44-1991(A)(2) of the Arizona Revised
Statutes, a plaintiff need not demonstrate the existence of
damages. See Aaron v. Fromkin, 196 Ariz. 224, 228 (Ct. App.
2000). “[E]stablishing statutory securities fraud requires only
that a misrepresentation of material fact was made in the sale
of securities.” Id. (citing State v. Superior Court of Maricopa
Cnty., 123 Ariz. 324, 331 (1979)). Thus, because the district
court erroneously dismissed Weiss’s securities fraud claim for
lack of damages, we remand this claim to the district court.2

D.    Common Law Fraud & Negligent Misrepresentation

  Weiss claims that the district court also erred in granting
summary judgment on his common law fraud claim for lack
of damages. Citing Lehnhardt v. City of Phoenix, 105 Ariz.
  2
    With respect to loss causation in a suit for rescissionary damages, Ari-
zona law directs the court to consider “equitable considerations” to deter-
mine whether loss causation is required. See Grand v. Nacchio, 214 Ariz.
9, 28 (Ct. App. 2006). We leave that determination to the district court on
remand.
20632          STRATEGIC DIVERSITY v. ALCHEMIX CORP.
142, 144 (1969), Weiss argues that his claims for common
law fraud and negligent misrepresentation do not require a
showing of damages. We disagree and thus affirm the district
court’s ruling.

   [13] Weiss reads Lehnhardt too broadly. Lehnhardt dealt
with innocent misrepresentation, not fraud. It held that “a
transaction induced by the material though innocent misrepre-
sentation of a party is voidable against that party.” Id. In other
words, one may seek to rescind on the basis of an innocent
misrepresentation, and proof of all the “nine elements of
actionable fraud” is not essential.3 Assuming arguendo that
Weiss’s claim was for innocent misrepresentation, it does not
necessarily follow that damages are not required. As other
courts have recognized, the element required in a common
law fraud action that is not required in an innocent misrepre-
sentation claim is the speaker’s knowledge of the falsity. See,
e.g., Lundy v. Airtouch Communs., Inc., 81 F. Supp. 2d 962,
968 (D. Ariz. 1999). In contrast, “if the party seeking [rescis-
sion] asserts only fraudulent misrepresentation . . . then proof
of all nine of the elements of actionable fraud appears to be
required . . . .” Id. Given that common law fraud pertains to
fraudulent conduct, we conclude that damages are a required
element of the claim.

   In addition, Weiss claims that the district court erred in dis-
missing his negligent misrepresentation claim for a lack of
damages. His argument is without merit. “[A] cause of action
for negligent misrepresentation includes damage as an ele-
ment.” Fromkin, 196 Ariz. at 229.
   3
     The elements of common law fraud under Arizona law are: “(1) A rep-
resentation; (2) its falsity; (3) its materiality; (4) the speaker’s knowledge
of its falsity or ignorance of its truth; (5) his intent that it should be acted
upon by the person and in the manner reasonably contemplated; (6) the
hearer’s ignorance of its falsity; (7) his reliance on its truth; (8) his right
to rely thereon; (9) his consequent and proximate injury.” Staheli v. Kauff-
man, 122 Ariz. 380, 383 (1979) (internal quotations omitted).
            STRATEGIC DIVERSITY v. ALCHEMIX CORP.          20633
   [14] Not only do the above claims require a showing of
damages, Arizona law requires an out-of-pocket, not rescis-
sionary, measure of damages with respect to these claims. See
Standard Chartered PLC, 190 Ariz. at 35 (trial court did not
err in granting partial summary judgment limiting damages to
an out-of-pocket measure). As Weiss failed to present evi-
dence of out-of-pocket damages, summary judgment on these
claims was proper.

E.   Mutual Mistake

   Under Arizona law, “[m]utual mistake of fact is an
accepted basis for rescission.” Renner v. Kehl, 150 Ariz. 94,
96 (1986). “[A] contract may be rescinded when there is a
mutual mistake of material fact which constitutes ‘an essential
part and condition of the contract.’ ” Id. at 97. “However, the
mistake must not be one on which the party seeking relief
bears the risk under the rules stated in § 154(b) of the Restate-
ment.” Nelson v. Rice, 198 Ariz. 563, 566 (Ct. App. 2000).
“The most obvious case of allocation of the risk of a mistake
is one in which the parties themselves provide for it by their
agreement.” Restatement (Second) of Contracts, § 154, cmt.
b.

   [15] Here, Weiss argues that an essential part of the agree-
ment to surrender the Note for an equity investment was a
mutual understanding that Western’s decision to invest a total
of $36 million in Alchemix had been made. Looking to his
2001 and 2002 agreements that accompanied the investment
in Alchemix and purchase of stock, both agreements appear
to allocate the risk of mistake on Weiss. Thus, summary judg-
ment on Weiss’s claim of mutual mistake was proper because
Weiss bore the risk of any mistake.

F.   Failure of a Condition Precedent

  [16] The district court held that failure of a condition pre-
cedent was not a recognized cause of action. The district court
20634        STRATEGIC DIVERSITY v. ALCHEMIX CORP.
did not err in its conclusion in that Arizona law employs the
failure of a condition precedent as a defense to contract for-
mation. See, e.g., Watts v. Hogan, 111 Ariz. 536, 538 (1975).
Weiss fails to show how Arizona law considers this an inde-
pendent ground for relief. Accordingly, we affirm the district
court’s grant of summary judgment on this claim.

G.   Equitable Restitution/Unjust Enrichment

   [17] Weiss claims that the district court erroneously dis-
missed his equitable restitution and unjust enrichment claims.
Here as well, Weiss fails to cite any relevant Arizona law on
this point. Furthermore, he fails to adequately brief the point
in his opening brief. See United States v. Ullah, 976 F.2d 509,
514 (9th Cir. 1992) (matters on appeal that are not specifically
and distinctly argued in appellant’s opening brief are not con-
sidered). Accordingly, we conclude the district court did not
err in dismissing these claims.

H.   Attorneys’ Fees

   Because we find that remand is appropriate on some of the
claims above, we vacate the award of attorneys’ fees and dis-
miss the appeal of this award as moot.

                        V.   Conclusion

   We hold that a plaintiff suing under section 10(b) seeking
rescission must demonstrate economic loss. The plaintiff must
also demonstrate that the misrepresentation or fraudulent con-
duct caused the loss. In the instant case, we find that the
record reveals that rescission is not feasible. Yet employing
a rescissionary measure of damages, Weiss may be able to
convince the finder of fact that he is entitled to relief. On that
basis, we reverse the district court’s grant of summary judg-
ment on Weiss’s federal and state securities claims (counts
one and two) and remand for consideration under a rescission-
ary measure of damages. With respect to the statute of limita-
            STRATEGIC DIVERSITY v. ALCHEMIX CORP.         20635
tions issue, we remand for consideration in light of Merck &
Co., 130 S. Ct. 1784. We affirm the district court’s judgment
on Weiss’s state law claims of common law fraud (count
three), negligent misrepresentation (count five), mutual mis-
take (count six), failure of a condition precedent (count
seven), and unjust enrichment (count eight). We vacate the
district court’s attorneys’ fee award and dismiss the appeal of
this award as moot.

  Each party shall bear their own costs.

 AFFIRMED IN PART, REVERSED IN PART,
VACATED IN PART, DISMISSED IN PART AND
REMANDED.



RAWLINSON, Circuit Judge, concurring in part:

   I join the majority opinion’s conclusion that this case
should be remanded to allow the district court to apply Merck
& Co. v. Reynolds, 130 S. Ct. 1784 (2010) to the statute of
limitations determination. I also agree that the remand
requires vacatur of the attorneys’ fee award. Finally, I concur
in the affirmance of the distirct court’s rulings on Kenneth
Weiss’s and Strategic Diversity’s state law claims of common
law fraud, negligent misrepresentation, mutual mistake, fail-
ure of a condition precedent and unjust enrichment.

  However, I expressly decline to join the majority’s analysis
concluding in its holding that “a rescissionary measure of
damages is available to Weiss.” Majority Opinion, pp. 20628-
31. Weiss and Strategic Diversity never sought rescissionary
damages. In fact, they expressly represented that they “were
not seeking recovery of damages based on a decline in the
value, or misrepresentation regarding the value, of the stock
purchased. . . .” Opening Brief of Plaintiffs-Appellants, p. 38.
“[T]he only remedy sought by [Strategic Diversity and Weiss]
20636       STRATEGIC DIVERSITY v. ALCHEMIX CORP.
was rescission of the stock purchase . . .” Id. See also Plain-
tiffs’ Response to Defendants’ Motion for Summary Judg-
ment And/Or Partial Summary Judgment In The Alternative,
p. 12 (Dist. Ct. Docket #135) (“The only remedy that Weiss
seeks in this action is rescission of the stock purchase and
reinstatement of the Note. . . .” (emphasis added).

   We are not in the business of raising arguments on behalf
of the parties, nor should we be. See Comite De Jornaleros
De Redondo Beach v. City of Redondo Beach, 657 F.3d 936,
948 n.6 (9th Cir. 2011) (“We will not manufacture arguments
for an appellant, and a bare assertion does not preserve a
claim.”) (citation and internal quotation marks omitted). Such
issues are waived. See Seven Words LLC v. Network Solu-
tions, 260 F.3d 1089, 1097 (9th Cir. 2001). In sum, I would
decline to raise and decide this issue that was waived in the
district court.

   For the same reason, I do not join the majority’s discussion
of Weiss’s and Strategic Diversity’s claim for securities fraud
under Arizona law. Regardless of whether Arizona law
requires a showing of damages in a rescission action, the fact
remains that Weiss and Strategic Diversity never sought “a
measure of rescissionary damages.” As with the federal secur-
ities claim, they sought rescission only. See Opening Brief, p.
38. Moreover, Weiss and Strategic Diversity mischaracterize
the district court’s holding. The district court focused on the
distinction between damages and injury. See District Court
Order, p. 13. The district court acknowledged that under Ari-
zona law, a plaintiff may rescind a securities transaction
despite the absence of money damages. See id. The district
court went to explain that the plaintiff must nevertheless
“demonstrate a cognizable injury” before rescission is war-
ranted. Id.; see also Grand v. Nacchio, 217 P.3d 1203, 1205
(Ariz. Ct. App. 2009) (noting that a purchaser who is “in-
jured” by a securities violation may seek rescission). The dis-
trict court’s ruling was entirely consistent with Arizona law.
            STRATEGIC DIVERSITY v. ALCHEMIX CORP.       20637
   Because I would remand solely for the district court to
apply the Supreme Court’s ruling in Merck, I concur in the
remand only for that purpose and to reconsider the award of
attorneys’ fees. I would otherwise affirm the district court’s
ruling in its entirety.
