The New York City Employees' Retirement System v. Jobs
Filed January 28, 2010
Cite as 08-16488

Omitted Claims May be Re-alleged in Amended Complaint

New York City Employees’ Retirement System (NYCERS) was a public pension tasked to manage the assets of employees of the City of New York. Apple Inc. (Apple).

Individual Apple shareholders Martin Vogel and Kenneth Mahoney filed a complaint under the Securities and Exchange Act (SEA). Pursuant to the Private Securities Litigation Reform Act of 1995 (PSLRA), NYCERS was appointed lead plaintiff.

Consequently, NYCERS filed a consolidated class action complaint against Apple and fourteen of its officers and directors alleging claims under SEA and state law claim for breach of fiduciary duty. The complaint was based on Apple’s backdating of stock options.

Further, NYCERS claimed that Apple shareholders suffered injury by impairing their right to a fully informed vote and diluting their shares. It also asserted that shareholders unwittingly authorized issuance of shares or 20% of Apple’s stock.

The district court dismissed the complaint stating that the consolidated complaint failed to allege facts giving rise to a direct claim.

When NYCERS sought leave to amend to assert a direct claim, the district court denied the motion for leave to file amended complaint.

On appeal, the United States Court of Appeals for Ninth Circuit made the following judgments:

1. The district court was correct in dismissing NYCERS’ consolidated complaint. While NYCERS pleaded direct injury, it failed to assert any cognizable economic loss.
   

   Under California state law, NYCERS’ claim that corporate shareholders were deprived of their right to a fully informed vote was a direct, not derivative, claim. This was because the claimed injury was independent of any injury to the corporation itself and implicated a duty of disclosure owed to shareholders.

   Moreover, PSLRA did not differentiate between plaintiffs seeking legal and equitable remedies. Unless economic loss was alleged, no remedy equitable or otherwise was available.
   

   The conclusory assertions of loss were insufficient as economic loss should not necessarily accompany dilution.



2. The district court erred when it denied leave to amend NYCERS’ consolidated complaint in order to re-allege a claim that was asserted in the original complaint but was omitted from a consolidated complaint.
   

   A plaintiff who omitted previously dismissed claims from an amended complaint did not waive his right to re-allege claims in further amendments at the district court level.