Theme Promotions, Inc. v. News America Marketing FSI

FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

THEME PROMOTIONS, INC., a 

California corporation, dba Theme

Co-op Promotions,

Plaintiff-counter-defendant- No. 06-16230

Appellee,

v.  D.C. No.

CV-97-04617-VRW

NEWS AMERICA MARKETING FSI, a

Delaware corporation,

Defendant-counter-claimant-

Appellant.



THEME PROMOTIONS, INC., a 

California corporation, dba Theme

Co-op Promotions,

Plaintiff-counter-defendant- No. 06-16341

Appellant,

v.  D.C. No.

CV-97-04617-VRW

NEWS AMERICA MARKETING FSI, a OPINION

Delaware corporation,

Defendant-counter-claimant-

Appellee.



Appeal from the United States District Court

for the Northern District of California

Vaughn R. Walker, District Judge, Presiding

Argued and Submitted

April 14, 2008—San Francisco, California

Filed August 20, 2008

11057

11058 THEME PROMOTIONS v. NEWS AMERICA

Before: Stephen S. Trott, Sidney R. Thomas, and

Richard A. Paez, Circuit Judges.1

Opinion by Judge Thomas

1

Judge Paez was drawn to replace Judge Ferguson pursuant to General

Order 3.2 (g).

11062 THEME PROMOTIONS v. NEWS AMERICA

COUNSEL

Nancy L. Tompkins, Townsend And Townsend And Crew

LLP, San Francisco, California; Theodore T. Herhold, Town-

send and Townsend and Crew LLP, Palo Alto, California, for

the plaintiff/appellee/cross-appellant.

Gary J. Malone, Constantine Cannon, New York, New York,

for the defendant/appellant.

OPINION

THOMAS, Circuit Judge:

This appeal presents the question of whether right of first

refusal agreements between a publisher of advertising tools

and packaged goods companies violate California antitrust

and tort law. We conclude that the jury verdict in favor of

Plaintiff was supported by substantial evidence in the record,

and we affirm.

I

News America Marketing FSI, Inc. (“News”) is one of two

publishers of an advertising tool called a free-standing insert

(“insert”). An insert is a multi-colored advertising booklet

inserted into a Sunday newspaper that contains coupons pro-

moting products—like cereal and soft drinks—sold by pack-

aged goods companies. Although packaged goods companies

advertise and promote their products with a variety of adver-

tising tools, inserts are the primary tool that packaged goods

companies use to distribute coupons nationally. The other

major company that sells, publishes, and distributes inserts is

Valassis Communications (“Valassis”).

It is common for a packaged goods company to enter into

a right of first refusal agreement with either News or Valassis

THEME PROMOTIONS v. NEWS AMERICA 11063

to meet its insert needs. In an right of first refusal agreement

with News, a packaged goods company agrees to first offer all

(if the agreement is a “100% right of first refusal agreement”)

or a set percentage (if the agreement is a “share right of first

refusal agreement”) of its insert business to News. Under the

agreement, News must accept this business unless it cannot

accommodate the date requested by the packaged goods com-

pany. In return for the greater volume of sales promised by

the right of first refusal agreement, News discounts the insert

prices.

Theme Promotions, Inc. (“Theme”) is an advertising com-

pany that offers promotional programs to packaged goods

companies. Theme specializes in related-item merchandising,

or “tie-ins”, that involve the joint promotion of complemen-

tary products from two different packaged goods companies

(for example, a particular brand of popcorn with a particular

brand of cola). Theme often uses inserts in its related-item

promotions. Because Theme is contractually bound to two or

more packaged goods companies for each related-item pro-

motion, and because Theme is responsible for the execution

of the promotions, Theme—and not the packaged goods

companies—often purchases the inserts from either News or

Valassis.

Theme itself has entered into right of first refusal agree-

ments with News (before 1996) and Valassis (since 1996) to

get lower insert prices. In June 1995, Theme entered into a

right of first refusal agreement with News for its insert busi-

ness. When a dispute arose between the parties, the agreement

was voided, and Theme entered into a right of first refusal

agreement with Valassis. News subsequently sued Theme and

Valassis for intentional interference with contractual relations.

The lawsuit settled in 1997. Since 1996, Theme’s preferred

supplier of inserts has been Valassis, in part because Valassis

offers Theme “extras” like better page position for its cou-

pons, and rebates for promotional programs brought to Valas-

sis.

11064 THEME PROMOTIONS v. NEWS AMERICA

During the course of the litigation with Theme and Valas-

sis, News took the position that any right of first refusal

agreements applied not only to inserts purchased directly by

packaged goods companies for their own single product pro-

motions, but also to inserts purchased indirectly by third-party

suppliers of promotional services such as Theme. News com-

municated this position to packaged goods companies

(Benevia and Van de Kamp, in particular) that had been told

by Theme that they were free to place their orders with Valas-

sis as long as the orders were placed through Theme. News

advised these packaged goods companies that placing an

order with Valassis would be a breach of contract and could

embroil the packaged goods company in the lawsuit between

News and Theme. Theme characterizes this as News’ “ag-

gressive [right of first refusal] enforcement strategy.”

In 1997, News formalized its position that its right of first

refusal agreements with packaged goods companies applied to

inserts purchased by third-party suppliers such as Theme.

News added language to its right of first refusal contracts pro-

viding that the packaged goods company “agrees that it will

abide by terms and pay the rates set forth in this agreement

for all [inserts] placed with News America irrespective of

whether client places such advertisements directly through an

advertising agent or another third-party compiler.”

Between 1997 and 1999, Theme’s preference to purchase

inserts from Valassis, and News’ right of first refusal agree-

ments with packaged goods companies, clashed in at least 9

instances. In 1997, Theme put together an insert tie-in pro-

gram between Benevia’s sugar substitute Equal and Maxwell

House Coffee. Benevia had a 100% right of first refusal

agreement with News. Although Theme preferred to purchase

the inserts from Valassis, News told Benevia that under the

right of first refusal agreement, the inserts had to be pur-

chased from News. The insert program was ultimately placed

with News. Benevia did not participate in additional Theme

programs. Similar issues arose in tie-in programs with Van de

THEME PROMOTIONS v. NEWS AMERICA 11065

Kamp, Nabisco, Smuckers, Campbells, Hormel, and Interna-

tional Home Foods. In some cases, the insert order was ulti-

mately placed with News; in others, it was placed with

Valassis. In most cases, the packaged goods company did no

further business with Theme after the contested promotion.

On December 18, 1997, Theme brought an action against

News in the district court for the Northern District of Califor-

nia, for violations of, inter alia, federal antitrust laws, the

Cartwright Act, Cal. Bus. & Prof. Code § 16720, and the

Unfair Competition Act, Cal. Bus. & Prof. Code § 17200, and

for tortious interference with prospective economic advan-

tage. The district court dismissed Theme’s federal and state

antitrust claims with prejudice, and eventually granted sum-

mary judgment in favor of News. Theme appealed to this

Court, and we reversed the dismissal of the federal and state

antitrust and unfair competition claims, and the state law tor-

tious interference claim. See Theme Promotions, Inc. v. News

America FSI, 35 Fed. Appx. 463 (9th Cir. 2002).

On remand, Theme filed a motion for leave to amend, seek-

ing to substitute a declaratory judgment claim for its antitrust

claims. The district court denied the motion. Theme eventu-

ally withdrew all of its federal antitrust claims with prejudice.

The case went to trial in August, 2005 on claims of restraint

of trade and monopolization in violation of the Cartwright

Act, unlawful and unfair business practices in violation of the

Unfair Competition Act, negligent interference with prospec-

tive economic advantage, and intentional interference with

prospective economic advantage. During the trial, Theme

attempted to assert a boycott claim, but the district court

granted News’ motion for judgment as a matter of law

(“JMOL”) with respect to that claim.

After a three-week trial, the jury returned a verdict in favor

of Theme, finding that: (1) two provisions of News’ right of

first refusal agreements unreasonably restrained trade in vio-

lation of the Cartwright Act, and that Theme was entitled to

11066 THEME PROMOTIONS v. NEWS AMERICA

$1,000,000 in damages (before trebling); (2) News had

engaged in unlawful and unfair business practices in violation

of the Unfair Competition Act; (3) News had negligently

interfered with Theme’s prospective economic advantage

regarding relationships with Benevia, Van de Kamp, and

Campbells, and that Theme was entitled to damages in the

amounts of $154,111, $1, and $496,023; (4) News had inten-

tionally interfered with Theme’s prospective economic advan-

tage regarding relationships with Benevia and Van de Kamp,

and that Theme was entitled to damages in the amounts of

$132,992 and $800,353. The jury also assessed punitive dam-

ages totaling $2,500,000 against News for threats of litigation

against Van de Kamp and Benevia. The jury returned a ver-

dict against Theme on its combination to monopolize claim as

well as its intentional and negligent interference claims with

respect to Nabisco, Smuckers, Hormel, and International

Home Foods, and its intentional interference claims with

respect to Campbells.

Following trial, News renewed its motion for JMOL, or in

the alternative, for a new trial. Theme moved for a permanent

injunction prohibiting News’ further enforcement of its right

of first refusal agreements and for an award of restitution

under the Unfair Competition Act. The district court set aside

the jury verdict on the intentional interference claims and the

related punitive damages award, holding the alleged threats of

litigation were privileged. It also set aside the negligent inter-

ference claim relating to Benevia. The court denied JMOL on

the Cartwright Act claim and otherwise affirmed the jury ver-

dict. The court denied Theme’s post-trial motions.

The parties subsequently submitted a joint proposed form

of judgment, but disagreed about whether the remaining jury

award for negligent interference regarding Theme’s relation-

ship with Campbells was duplicative of the award for the

Cartwright Act violation. In an order dated May 25, 2006, the

district court ruled that the awards were not duplicative.

THEME PROMOTIONS v. NEWS AMERICA 11067

On June 1, 2006, final judgment was entered, awarding

Theme a total of $3,496,024 in damages. News appealed,

challenging the district court’s order denying in part News’

motion for JMOL or new trial and the order resolving the

issue of duplicative recovery. Theme cross-appealed, chal-

lenging the order granting in part News’ motion for JMOL,

the trial ruling granting News’ motion for JMOL on Theme’s

boycott claim, the order denying Theme’s motion for leave to

amend its complaint, and the order denying injunctive relief

and restitution. These issues are before us now.

II

We review the district court’s grant or denial of a renewed

motion for JMOL de novo. See Josephs v. Pac. Bell, 443 F.3d

1050, 1062 (9th Cir. 2006); Johnson v. Paradise Valley Uni-

fied Sch. Dist., 251 F.3d 1222, 1226 (9th Cir. 2001). We must

decide whether the evidence, construed in the light most

favorable to the nonmoving party, permits only one reason-

able conclusion, and that conclusion is contrary to the jury’s

verdict. See Pavao v. Pagay, 307 F.3d 915, 918 (9th Cir.

2002). Antitrust standing is a question of law we review de

novo. Glen Holly Entm’t Inc. v. Tektronix Inc., 343 F.3d

1000, 1005 (9th Cir. 2003).

We review the district court’s denial of a motion to amend

a complaint, evidentiary rulings, award of damages, and rul-

ing on a motion for new trial for abuse of discretion. See

Chappel v. Lab. Corp., 232 F.3d 719, 725 (9th Cir. 2000)

(motion to amend); Obrey v. Johnson, 400 F.3d 691, 694 (9th

Cir. 2005) (evidentiary rulings); McLean v. Runyon, 222 F.3d

1150, 1155 (9th Cir. 2000) (award of damages); Dorn v. Bur-

lington N. Santa Fe R.R. Co., 397 F.3d 1183, 1189 (9th Cir.

2005) (injunctive relief).

Likewise, we review the district court’s choice of remedies,

decision to deny equitable relief, and decision to deny perma-

nent injunctive relief for abuse of discretion. See United

11068 THEME PROMOTIONS v. NEWS AMERICA

States v. Alisal Water Corp., 431 F.3d 643, 654 (9th Cir.

2005) (choice of remedies); Rabkin v. Oregon Health Scis.

Univ., 350 F.3d 967, 977 (9th Cir. 2003) (equitable relief);

Cummings v. Connell, 316 F.3d 886, 897 (9th Cir. 2003).

III

The district court did not err in declining to grant JMOL in

favor of News on Theme’s Cartwright Act restraint of trade

claim, or on Theme’s negligent interference with prospective

economic advantage claim. The district court also did not err

in refusing to grant News’ alternative motion for a new trial.

Nor did the district court err in holding that the jury’s awards

of antitrust and tort damages were not duplicative.

A

The district court did not err in denying News’ motion for

JMOL on Theme’s Cartwright Act restraint of trade claim. In

reviewing the district court’s denial of the motion, our role is

to evaluate whether the evidence of a Cartwright Act viola-

tion, construed in the light most favorable to Theme, permits

only one reasonable conclusion: that News did not violate the

Cartwright Act. See Pavao, 307 F.3d at 918. In order to bene-

fit from the favorable inferences available to the nonmoving

party under a motion for JMOL, Theme must have presented

“substantial evidence”—defined as “such relevant evidence as

a reasonable mind might accept as adequate to support a

conclusion”—that News violated the Cartwright Act. See

Syufy Enter. v. Am. Multicinema, Inc., 793 F.2d 990, 992 (9th

Cir. 1986).

[1] The Cartwright Act makes unlawful a “trust,” defined

as a combination of capital, skill, or acts by two or more per-

sons or businesses to restrict trade, limit production, increase

or fix prices, or prevent competition. Cal. Bus. & Prof. Code

§§ 16702, 16720 et seq. The California Supreme Court has

stated that the purpose of the Cartwright Act is to prevent any

THEME PROMOTIONS v. NEWS AMERICA 11069

action which “has as its Purpose or Effect an unreasonable

restraint of trade.” Corwin v. Los Angeles Newspaper Serv.

Bureau, Inc., 583 P.2d 777, 784 (Cal. 1978).

California courts have determined that vertical restraints of

trade, including exclusive dealing contracts, are not per se

unreasonable but instead are subject to a “rule of reason” analy-

sis.2 See Fisherman’s Wharf Bay Cruise Corp. v. Superior Ct.,

7 Cal. Rptr. 3d 628, 649 (Cal. Ct. App. 2004). The rule of rea-

son analysis “measures whether the anticompetitive aspect of

a vertical restraint outweighs its procompetitive effects.”

Exxon Corp. v. Superior Ct., 60 Cal. Rptr. 2d 195, 200 (Cal.

Ct. App. 1997). This approach recognizes that exclusive deal-

ing contracts may harm competition, but may also have the

effect of enhancing competition. See Omega Envtl., Inc. v.

Gilbarco, Inc., 127 F.3d 1157, 1162 (9th Cir. 1997).3 Under

the rule of reason analysis, an exclusive dealing contract is

“proscribed when it is probable that performance of the con-

tract will foreclose competition in a substantial share of the

affected line of commerce.” Fisherman’s Wharf, 7 Cal. Rptr.

3d at 649.

A rule of reason analysis requires a threshold inquiry into

the defendant’s market power. Roth, 30 Cal. Rptr. at 712. Evi-

dence of restricted output and supracompetitive prices is

direct evidence of market power. Forsyth v. Humana, Inc.,

114 F.3d 1467, 1475 (9th Cir. 1997). To establish circumstan-

2

Theme argues that even if News’ actions were legal under a rule of rea-

son analysis, they were illegal per se as a secondary boycott under section

16721.5 of the Cartwright Act. Because there is no evidence in the record

that News required packaged goods companies to refuse to do business

with Theme if Theme purchased Inserts from Valassis, the district court

was correct in concluding that this argument fails. See Cal. Bus. & Prof.

Code § 16721.5.

3

Because California’s Cartwright Act is patterned after federal antitrust

acts like the Sherman Antitrust Act, California courts often cite federal

antitrust cases when interpreting the Cartwright Act. See Roth v. Rhodes,

30 Cal. Rptr. 2d 706, 712 (Cal. Ct. App. 1994).

11070 THEME PROMOTIONS v. NEWS AMERICA

tial evidence of market power, a plaintiff must first define the

relevant market and then show that the defendant plays

enough of a role in the market to impair competition signifi-

cantly. Exxon, 60 Cal. Rptr. 2d at 201.

The district court instructed the jury that for Theme to pre-

vail on its Cartwright Act restraint of trade claim, it would

have to prove by a preponderance of the evidence that: (1)

News agreed to provisions constituting an unreasonable

restraint of trade;4 (2) the purpose and effect of these provi-

sions was to restrain competition; (3) the anticompetitive

effect of the provisions outweighed any beneficial effect on

competition; (4) Theme was harmed; and (5) News’ conduct

was a substantial factor in causing Theme’s harm. The court

instructed the jury on how it should identify the relevant mar-

ket and how it should determine whether News’ right of first

refusal agreements foreclosed competition in a substantial

share of that market.

News now argues that Theme failed to provide sufficient

evidence to support the jury’s relevant market definition and

the jury’s conclusion that News foreclosed competition in a

substantial share of that market. News also argues that there

is insufficient evidence in the record of an antitrust injury, a

standing requirement, and of causation. Because antitrust

injury and proximate cause are closely related concepts, we

address both issues together. The record includes sufficient

evidence that News foreclosed competition in the relevant

4

The specific contractual provisions identified by the district court were:

(1) “News America FSI, Inc (‘News’) and Client agree that in

consideration for News’ offering the rates set forth below Client

shall give News a right of first refusal to contract all free standing

insert programs (Co-op or Solo) of Client for [time period]” and

(2) “Client agrees that it will abide by the terms and pay the rates

set forth in this Agreement for all free standing insert advertise-

ments placed with News, irrespective of whether Client places

such advertisements directly, through an advertising agent or

another third party compiler.”

THEME PROMOTIONS v. NEWS AMERICA 11071

market, and that Theme suffered an antitrust injury as the

result of News’ anticompetitive actions.

1

[2] The district court instructed the jury that for Theme to

succeed on its Cartwright Act claim, it had to prove by a pre-

ponderance of the evidence that the relevant market is the sale

of inserts to packaged goods companies. The definition of the

relevant market is a question of fact for the jury. Forsyth, 114

F.3d at 1476. A relevant market is identified by considering

“commodities reasonably interchangeable by consumers for

the same purposes.” Exxon, 60 Cal. Rptr. 2d at 201 (quoting

United States v. E.I. duPont de Nemours & Co., 351 U.S. 377,

395 (1956)). Put another way, the relevant market includes all

sellers or producers who have actual or potential ability to

deprive each other of significant levels of business. Forsyth,

114 F.3d at 1476 (citing Thurman Indus., Inc. v. Pay ‘N Pak

Stores, Inc., 875 F.2d 1369, 1374 (9th Cir. 1989)).

[3] Determining the relevant market can involve a compli-

cated economic analysis, including concepts like cross-

elasticity of demand, and “small but significant nontransitory

increase in price” (“SSNIP”) analysis. See United States v.

Oracle Corp., 331 F. Supp. 2d 1098 (N.D. Cal. 2004)

(Walker, C.J.). Cross-elasticity of demand measures the per-

centage change in quantity that consumers will demand of one

product in response to a percentage change in the price of

another. Forsyth, 114 F.3d at 1483 (Wallace, J., concurring).

When demand for the commodity of one producer shows no

relation to the price for the commodity of another producer,

it supports the claim that the two commodities are not in the

same relevant market. Forsyth, 114 F.3d at 1477.

Similarly, a SSNIP analysis asks whether a monopolist in

the proposed market could profitably impose a small but sig-

nificant and nontransitory price increase. Oracle, 331 F. Supp.

2d at 1112. If a significant number of customers would

11072 THEME PROMOTIONS v. NEWS AMERICA

respond to a SSNIP by purchasing substitute products, the

SSNIP would not be profitable for the hypothetical monopo-

list. Id. If a monopolist could not profitably impose a SSNIP,

the market definition should be expanded to include those

substitute products that constrain the monopolist’s pricing. Id.

[4] The evidence of the relevant market for Theme’s Cart-

wright Act claim is substantial enough that we cannot hold

that the jury reached an unreasonable conclusion. To support

the jury’s finding, Theme highlights record testimony that

inserts are the single most important promotional vehicle used

to distribute coupons, and that inserts have unique benefits

including reaching a large national audience. Theme also

emphasizes that in 1994, when the price of inserts rose from

approximately $4.00 per thousand to around $7.00 per thou-

sand, the percentage of inserts in the coupon market also rose.

This evidence—when viewed in the light most favorable to

Theme—supports the jury’s finding. We conclude that a rea-

sonable jury could infer that the relevant market is the sale of

inserts to packaged goods companies.

2

[5] The district court also instructed the jury that for Theme

to succeed on its Cartwright Act claim, it had to prove by a

preponderance of the evidence that News’ right of first refusal

agreements “foreclose competition in a substantial share of

that relevant market.” California courts have instructed that “a

market share of 16 percent fails ‘conspicuously to pass the

threshold test establishing the defendant’s market power.’ ”

Roth, 30 Cal. Rptr. 2d at 713 (quoting Redwood Theatres, Inc.

v. Festival Enter., Inc., 248 Cal. Rptr. 189, 199 (Cal. Ct. App.

1988)). We have determined that a 45-70% market share may

be enough to establish a substantial share of the relevant mar-

ket where it is accompanied by other factors like fragmenta-

tion of competition and high entry barriers. Syufy, 793 F.2d at

995. Whether an exclusive dealing arrangement substantially

forecloses competition cannot be determined by a rigid math-

THEME PROMOTIONS v. NEWS AMERICA 11073

ematical analysis alone; the analysis must take into account

other factors. Fisherman’s Wharf, 7 Cal. Rptr. 3d at 650-51.

[6] The best evidence supporting the jury’s conclusion that

News foreclosed competition in a substantial share of the

market is testimony by expert witnesses, News executives,

and Theme’s president, that News held 40-60% of the

national insert publishing market between the late 1990s and

2004. Theme also points to evidence—primarily the testi-

mony of its own president about Theme’s decision not to

enter the insert publishing business—that there were signifi-

cant barriers to entrance into the insert market. This testimony

suggests that the large capital investments and high econo-

mies of scale necessary to reach an efficient level of output,

coupled with the existence of current right of first refusal con-

tracts, would prohibit new entrants into the market. Theme

also submitted evidence that when a third insert supplier

briefly entered the market in the 1990s, it was marginalized

by News and Valassis and eventually purchased by News.

[7] News did not effectively counter this evidence. There-

fore, we conclude that a reasonable jury could determine that

News’ actions affected a substantial share of the relevant mar-

ket.

3

News argues that Theme failed to produce substantial evi-

dence of antitrust injury and causation, which are closely

related concepts. See Kolling v. Dow Jones & Co., 187 Cal.

Rptr. 797, 807 (Cal. Ct. App. 1982); Morales-Villalobos v.

Garcia-Llorens, 316 F.3d 51, 55 (1st Cir. 2003). Several fac-

tors are relevant in considering whether a plaintiff has estab-

lished antitrust standing. The most important is whether the

plaintiff has established an antitrust injury. Amarel v. Connell,

102 F.3d 1494, 1507 (9th Cir. 1997).

“Antitrust injury is defined not merely as injury caused by

an antitrust violation, but more restrictively as injury of the

11074 THEME PROMOTIONS v. NEWS AMERICA

type the antitrust laws were intended to prevent and that flows

from that which makes defendants’ acts unlawful.” Glen

Holly, 343 F.3d at 1007-08 (internal quotation marks omit-

ted). In order to find that an antitrust injury exists, we must

examine both the nature of the injury and whether the injury

is causally related to the antitrust violation. Datagate, Inc. v.

Hewlett-Packard Co., 941 F.2d 864, 867 (9th Cir. 1991).

[8] An injury will not qualify as an antitrust injury unless

it is attributable to an anti-competitive aspect of the practice

under scrutiny, “since it is inimical to [the antitrust laws] to

award damages for losses stemming from continued competi-

tion.” Amarel, 102 F.3d at 1508 (quoting Atl. Richfield Co. v.

USA Petroleum Co., 495 U.S. 328, 334 (1990)). If the injury

flows from aspects of a defendant’s conduct that are benefi-

cial or neutral to competition, there is no antitrust injury, even

if the defendant’s conduct is illegal. Glen Holly, 343 F.3d at

1008. Coercive activity that prevents choice between market

alternatives, including agreements to restrain trade, is one

form of antitrust injury. Id., 343 at 1011; Amarel, 102 F.3d at

1509.

[9] To support its claim that it suffered an antitrust injury,

Theme points to evidence that News’ right of first refusal

agreements forced Theme to purchase inserts from News

instead of from Valassis (to which it would have paid lower

prices). Theme argues that this restriction of choice between

market alternatives resulted in financial harm. Theme also

argues that it was harmed by a general increase in insert

prices caused by the reduction of Theme’s own competitive

presence in the market. Specifically, Theme points to testi-

mony that its programs increased insert output while reducing

insert costs, and that News’ conduct resulted in fewer pack-

aged goods companies running programs with Theme. News

argues that the evidence actually shows that the reduction in

Theme’s business was caused by Theme’s own poor business

practices, and that Theme was harmed by News’ procompeti-

tive actions. Although both parties are able to point to evi-

THEME PROMOTIONS v. NEWS AMERICA 11075

dence supporting their positions, the evidence of restricted

choice between market alternatives is sufficient to establish

that the injury suffered by Theme was the type the antitrust

laws were intended to prevent.

[10] For an injury to be an antitrust injury, it must also be

causally related to the antitrust violation. The harm may not

be “derivative and indirect” or “secondary, consequential, or

remote.” Amarel, 102 F.3d at 1511-12; Kolling, 187 Cal. Rptr.

at 808 (internal quotation marks omitted). Here, the evidence

establishes that Theme would have placed all of its insert

orders with Valassis were it not for News’ right of first refusal

agreements with the packaged goods companies. The antitrust

injury suffered by Theme—the reduction in choice of market

alternatives causing reduced output of inserts and higher

prices—was the direct result of News’ antitrust violation.5 As

a result, we affirm the district court’s denial of JMOL in favor

of News on Theme’s Cartwright Act claim.

B

[11] The district court did not err in denying News’ motion

for JMOL on Theme’s negligent interference with prospective

economic advantage claim. The district court instructed the

jury that to establish negligent interference with prospective

economic advantage, Theme would have to prove by a pre-

ponderance of the evidence that: (1) Theme and a particular

packaged goods company were in an economic relationship

that probably would have resulted in an economic benefit to

Theme; (2) News knew of the relationship; (3) News knew or

should have known that the relationship would be disrupted

if it failed to act with reasonable care; (4) News failed to act

with reasonable care; (5) News engaged in independent

wrongful conduct apart from the interference itself; (6) the

relationship was actually disrupted; (7) Theme was harmed;

5

Theme presents alternative causation theories, which we need not

address.

11076 THEME PROMOTIONS v. NEWS AMERICA

and (8) News’ wrongful conduct was a substantial factor in

causing Theme’s harm. See Korea Supply Co. v. Lockheed

Martin Corp., 63 P.3d 937, 950 (Cal. 2003) (identifying ele-

ments of the tort of intentional interference with prospective

economic advantage). News argues that there is insufficient

evidence in the record to establish that News engaged in inde-

pendent wrongful conduct.

[12] A plaintiff seeking to recover damages for interference

with prospective economic advantage must plead and prove

that the defendant’s conduct was “wrongful by some legal

measure other than the fact of interference itself.” Id. at 950

(quoting Della Penna v. Toyota Motor Sales, U.S.A., Inc., 45

Cal. Rptr. 2d 436, 438, 442 (Cal. Ct. App. 1995)). The district

court instructed the jury that conduct is wrongful “if it is pro-

scribed by some constitutional, statutory, regulatory, common

law, or other determinable legal standard.” Because the jury’s

verdict on Theme’s Cartwright Act claim was supported by

substantial evidence in the record, this element is satisfied.6

C

News argues that regardless of whether the jury’s verdict

was supported by substantial evidence in the record, a new

trial is required because its substantial rights were affected by

an evidentiary error. Specifically, News argues that the testi-

mony of Theme’s president as to the internal decisions of

packaged goods companies regarding whether to do repeat

business with Theme lacked foundation and was speculative.

In addition, News argues that the testimony of Theme’s presi-

dent was the only evidence Theme supplied on the element of

6

Because the independent wrongful conduct element is satisfied by the

Cartwright Act violation, we need not address Theme’s argument that

News made an actionable misrepresentation to the packaged goods com-

panies, and that the actionable misrepresentation is independent wrongful

conduct. We therefore do not address News’ argument that Theme was not

harmed by any misrepresentation.

THEME PROMOTIONS v. NEWS AMERICA 11077

causation, and that therefore its admission could not have

been harmless error.

To succeed on this issue, News must establish that the dis-

trict court abused its discretion by allowing the contested tes-

timony. Obrey, 400 F.3d at 693. This it cannot do. While

Theme’s president testified repeatedly that he was under the

impression that Theme had a good relationship with the pack-

aged goods companies, and that he could think of no reason

the packaged goods companies would not continue to do busi-

ness with Theme, he did not actually comment on the internal

decisions of packaged goods companies or their executives.

This testimony was neither lacking in foundation nor specula-

tive.

[13] Had the district court’s decision to admit the testimony

of Theme’s president been error, a new trial would have been

appropriate only if the verdict was more probably than not

tainted by the error. Id. at 699-700. While Theme did rely

heavily on its president’s testimony to establish the causation

element of its antitrust claim, other evidence—including the

“before and after” picture of Theme’s business provided by

Theme’s damages expert—also helped to establish causation.

News has not shown that any error more probably than not

tainted the jury’s verdict. As a result, we affirm the district

court’s denial of the motion for a new trial.

D

Finally, News argues that the district court erred by ruling

that the jury’s awards of antitrust damages and tort damages

were not duplicative. The jury awarded Theme $1,000,000 in

compensatory damages under the Cartwright Act, and

$496,023 in compensatory damages on its negligent interfer-

ence with prospective economic advantage claim regarding

Campbells. News argues that these awards were impermiss-

ibly duplicative because both were based on the loss of future

profits with respect to the relationship with Campbells.

11078 THEME PROMOTIONS v. NEWS AMERICA

The general rule of compensatory damages bars double

recovery for the same wrong. Krusi v. Bear, Stearns, & Co.,

192 Cal. Rptr. 793, 798 (Cal. Ct. App. 1983). The California

Supreme Court has held that a plaintiff is not entitled to more

than a single recovery for each distinct item of compensable

damage supported by the evidence. Tavaglione v. Billings,

847 P.2d 574, 580 (Cal. 1993). We have held that one act by

a defendant may create two legal harms; where the statutes

forbidding the act were enacted for different purposes, and

where they prescribe different types of damages, there is no

double recovery. Nintendo of Am., Inc. v. Dragon Pac. Int’l,

40 F.3d 1007, 1011 (9th Cir. 1994).

The $1,000,000 damages figure and the $496,023 damages

figure are for separate legal harms: an antitrust violation and

a tort. The two injuries did not arise from the same act: one

was the result of anticompetitive right of first refusal agree-

ments; the other was the result of intentional misrepresenta-

tions. The laws proscribing these acts serve different

purposes. News argues, however, that both awards were

intended to compensate for the same economic harm: loss of

future profits from the interruption of business relationships.

The record, however, does not establish that the two awards

were intended to compensate for the same economic harm. To

reach that conclusion would require speculation about the jury

verdict.

[14] Theme’s damages expert provided the court with one

analysis of the profits Theme would have earned from its rela-

tionships with Nabisco, Benevia, Van de Kamp, Smuckers,

Campbells, Hormel, and International Home Foods, “but for

the conduct complained of:” $2,797,600. The particular num-

ber attributed to the relationship with Campbells was

$496,000. The jury returned a verdict of $496,023 specifically

relating to the tort of interference with the Campbells relation-

ship, and a verdict of $1,000,000 for the harm arising from

anticompetitive behavior. Given these separate awards, the

THEME PROMOTIONS v. NEWS AMERICA 11079

district court did not commit reversible error in denying

News’ motion.

IV

We next address the issues raised in Theme’s cross-appeal.

Theme argues that the district court erred in vacating the

jury’s verdict on Theme’s intentional interference with pro-

spective economic advantage claims on privilege grounds.

Theme also argues that the district court erred in denying

Theme’s motion for restitution and its motion for an injunc-

tion. Finally, Theme argues that the district court erred in

denying Theme’s motion to amend its complaint to add an

action for declaratory relief, and in terminating the related

motion for summary judgment. We affirm the district court on

each issue.

A

The jury rendered a verdict in favor of Theme on its inten-

tional interference with prospective economic advantage

claims with respect to its relationships with Benevia and Van

de Kamp, and awarded damages of $700,353 and $132,992

respectively, as well as punitive damages of $1,250,000 on

each claim. The district court dismissed these claims and

damage awards on the grounds that News’ conduct—

threatening litigation against Benevia and Van de Kamp—

was privileged under the Noerr-Pennington doctrine. Theme

argues that the district court erred in applying the Noerr-

Pennington doctrine instead of California privilege law.

Theme also argues that News’ conduct was not privileged

under either doctrine. We disagree.

[15] The essence of the Noerr-Pennington doctrine is that

those who petition any department of the government for

redress are immune from statutory liability for their petition-

ing conduct. Sosa v. DIRECTV, Inc., 437 F.3d 923, 929 (9th

Cir. 2006). The doctrine derives from two Supreme Court

11080 THEME PROMOTIONS v. NEWS AMERICA

cases holding that the First Amendment Petition Clause

immunizes acts of petitioning the legislature from antitrust

liability. Id. (citing Eastern R.R. Presidents Conference v.

Noerr Motor Freight, Inc., 365 U.S. 127 (1961) and United

Mine Workers v. Pennington, 381 U.S. 657 (1965)). The doc-

trine has since been applied to actions petitioning each of the

three branches of government, and has been expanded beyond

its original antitrust context. Id. at 930; Amarel, 102 F.3d at

1518.

[16] We have previously declined to reach the question of

whether the Noerr-Pennington doctrine applies to state law

tort claims. Lexicon, Inc. v. Milberg Weiss Bershad Hynes &

Lerach, 102 F.3d 1524, 1538 n.15 (9th Cir. 1996) (“The time

may come when this circuit must speak directly on the ques-

tion.”). Other circuits, however, have been more decisive. See,

e.g., Video Int’l Prod., Inc. v. Warner-Amex Cable Commc’ns,

Inc., 858 F.2d 1075, 1084 (5th Cir. 1988). In explaining its

decision to extend Noerr-Pennington to tortious interference

with contracts, the Fifth Circuit stated, “There is simply no

reason that a common-law tort doctrine can any more permis-

sibly abridge or chill the constitutional right of petition than

can a statutory claim such as antitrust.” Id. at 1084. We agree,

and we hold that the Noerr-Pennington doctrine applies to

Theme’s state law tortious interference with prospective eco-

nomic advantage claims.

[17] Theme argues that Noerr-Pennington cannot appropri-

ately be applied here because choice of law principles set

forth in Federal Rule of Evidence 501 establish that state priv-

ilege law must be applied in a diversity action where sate law

provides the rule of decision. See Star Editorial, Inc. v. U.S.

Dist. Ct., 7 F.3d 856, 859 (9th Cir. 1993) (stating that in a

civil action in which state law provides the rule of decision,

the privilege of a witness shall be determined in accordance

with state law). Although Theme is correct, it misses the

point. The Noerr-Pennington doctrine has been articulated as

a principle of statutory construction rather than as a privilege.

THEME PROMOTIONS v. NEWS AMERICA 11081

See Sosa, 437 F.3d at 930-32. More importantly, because

Noerr-Pennington protects federal constitutional rights, it

applies in all contexts, even where a state law doctrine

advances a similar goal. See Video Int’l, 858 F.2d at 1084.

There is no reason that Noerr-Pennington and California priv-

ilege law cannot both apply to Theme’s intentional interfer-

ence claims, and we hold that the district court properly

considered both doctrines.

[18] Conduct incidental to a lawsuit, including a pre-suit

demand letter, falls within the protection of the Noerr-

Pennington doctrine. Sosa, 437 F.3d at 936-38. Pre-suit letters

threatening legal action may nevertheless be restricted by law

where they include representations so baseless that the threat-

ened litigation would fall into the “sham litigation” exception.

Id. at 940-41. The Supreme Court has endorsed a two-part test

for sham litigation. First, the lawsuit must be objectively

baseless in the sense that no reasonable litigant could reason-

ably expect success on the merits. Liberty Lake Invs., Inc. v.

Magnuson, 12 F.3d 155, 157 (9th Cir. 1993) (citing Prof’l

Real Estate Investors, Inc. v. Columbia Pictures Indus., Inc.,

508 U.S. 49 (1993)). Only if the challenged litigation is objec-

tively baseless may we consider the litigant’s subjective moti-

vation. Id. The question then is “whether the baseless lawsuit

conceals an attempt to interfere directly with the business

relationships of a competitor, through the use of the govern-

mental process—as opposed to the outcome of that process—

as an anticompetitive weapon.” Id.

In rendering its verdict for Theme on the intentional inter-

ference claims, the jury based its determination solely on a

finding that News had threatened litigation against Benevia

and Van de Kamp. The only evidence in the record supporting

this aspect of the jury’s verdict is the letters from News to the

packaged goods companies indicating that if the packaged

goods companies failed to place their insert orders with News,

they could become embroiled in then-ongoing litigation

11082 THEME PROMOTIONS v. NEWS AMERICA

between News and Theme. The question then is whether these

pre-suit letters threatened “sham litigation.”

[19] We begin by analyzing whether the underlying litiga-

tion was objectively baseless. The letters from News to the

packaged goods companies can be understood as threatening

litigation in two ways. First, the letters can be interpreted as

threats to include the packaged goods companies in the ongo-

ing litigation between News and Theme. The fact that this

ongoing litigation settled suggests that the original suit was

not objectively baseless. Second, the letters can be interpreted

as threats of some contemplated future lawsuit against the

packaged goods companies for breach of contract. We agree

with the district court that a suit by News to enforce its right

of first refusal agreements was potentially meritorious.

Because the threatened litigation was not objectively baseless,

we do not analyze News’ subjective motivation. See id. at

157. As a result, we affirm the district court’s conclusion that

Noerr-Pennington bars Theme’s intentional interference

claims.7

B

In rendering its verdict for Theme, the jury found that

News had engaged in an unfair competitive practice under

California’s Unfair Competition Law (“UCL”).8 Cal. Bus. &

Prof. Code § 17200 et seq. Theme subsequently moved for an

award of “restitution” under section 17203 of the UCL. The

district court denied the motion for restitution, finding that the

requested amount—News’ insert profits from nine transac-

7

California Civil Code section 47(b), which creates an absolute privi-

lege for statements made in a judicial proceeding regardless of malice,

might also apply here. See Laffer v. Levinson, Miller, Jacobs, & Phillips,

40 Cal. Rptr. 2d 233, 237 (Cal. Ct. App. 1995). Because we hold that the

Noerr-Pennington doctrine bars Theme’s intentional interference claim,

we need not address this question.

8

News does not challenge this verdict.

THEME PROMOTIONS v. NEWS AMERICA 11083

tions in which Theme was forced to purchase inserts from

News as a result of News’ right of first refusal agreements

with packaged goods companies—was not “restitutionary in

nature.” We agree.

[20] The UCL prohibits unlawful and unfair business prac-

tices. Cal. Bus. & Prof. Code § 17200 et seq. Section 17200

“borrows” violations of other laws and makes them indepen-

dently actionable as unfair competitive practices. Korea Sup-

ply Co., 63 P.3d at 943. In addition, a practice may be

proscribed under section 17200 as “unfair” even if it is not

specifically proscribed by some other law. Id. While the scope

of conduct covered by the UCL is broad, the remedies are

limited. Id. Section 17203, in part, allows courts to make

orders or judgments “to restore to any person in interest any

money or property, real or personal, which may have been

acquired by means of such unfair competition.” The Califor-

nia Supreme Court has determined that this phrase allows

awards of restitution, but not awards of non-restitutionary dis-

gorgement. Id. at 949.

The California Supreme Court has explained that restitution

orders are “orders compelling a UCL defendant to return

money obtained through an unfair business practice to those

persons in interest from whom the property was taken, that is,

to persons who had an ownership interest in the property or

those claiming through that person.” Kraus v. Trinity Mgmt.

Servs., Inc., 999 P.2d 718, 725 (Cal. 2000). While disgorge-

ment orders may include a restitutionary component, they

may be impermissibly broad because they require the “surren-

der of all profits earned as a result of an unfair business prac-

tice regardless of whether those profits represent money taken

directly from persons who were victims of the unfair prac-

tice.” Id. The California Supreme Court has held that nonres-

titutionary disgorgement is akin to a damages remedy: relief

that is not allowed under the UCL. Korea Supply Co., 63 P.3d

at 948.

11084 THEME PROMOTIONS v. NEWS AMERICA

Theme requested “restitution” in the amount of $929,187:

the amount by which its damages expert determined that

News had profited on nine insert orders that Theme placed

with News because of News’ right of first refusal agreements

with packaged goods companies. The district court deter-

mined that an award of this amount would not be restitution-

ary in nature because had Theme not purchased the inserts

from News, it would have had to purchase them from Valas-

sis, and Valassis presumably would have profited from the

sales as well. Because the profits would have gone to either

News or Valassis, the district court concluded that Theme

could not claim an ownership interest in the profits.

[21] We agree with the district court, to an extent. We

agree that the “restitution” amount identified by Theme is not

entirely restitutionary in nature. However, the more salient

question is whether News’ profits were property taken from

Theme, or—as News argues—property taken from the pack-

aged goods companies. Evidence in the record suggests that,

on some occasions, the packaged goods companies paid News

directly; on other occasions, Theme paid News for the pack-

aged goods companies. The evidence is insufficient to support

a finding that Theme had a property interest in all of News’

profits from the nine disputed insert orders. For this reason,

we hold that the district court did not abuse its discretion in

denying Theme’s motion for restitution.

C

Following trial, Theme moved for a permanent injunction

against News based on both its Cartwright Act and UCL

claims. Theme’s requested injunction would have prevented

News from enforcing its right of first refusal agreements. The

district court denied the motion. Theme again moved for an

injunction pending appeal; the district court again denied the

injunction.

[22] California law provides for injunctive relief under both

the Cartwright Act and the UCL. The United States Supreme

THEME PROMOTIONS v. NEWS AMERICA 11085

Court has stated that courts faced with an antitrust violation

are required to take action to restore competition in the mar-

ket. See, e.g., United States v. E.I. du Pont de Nemours & Co.,

366 U.S. 316, 326 (1961). The Supreme Court has also recog-

nized that the purpose of antitrust laws “is not to protect busi-

nesses from the working of the market; it is to protect the

public from the failure of the market.” Spectrum Sports, Inc.

v. McQuillan, 506 U.S. 447, 458 (1993). Thus, we have rec-

ognized that a district court might appropriately deny a

motion for injunctive relief where the injunction would hin-

der, rather that promote, competition in the market. Pac.

Coast Agric. Export Ass’n v. Sunkist Growers, Inc., 526 F.2d

1196, 1209 (9th Cir. 1975).

[23] In denying Theme’s motions, the district court noted

that the record “was sufficiently ambiguous with respect to

the market definition [and] sufficiently ambiguous with

respect to the antitrust injury, that it would not reasonably

support an injunction going forward.” The court was not con-

vinced that allowing News to enforce its right of first refusal

agreements in the future would injure competition, or that an

injunction would protect competition. The record supports the

district court’s conclusions. News supplied evidence that right

of first refusal agreements result from competition between

News and Valassis, and that an injunction would only serve

to put News at a competitive disadvantage. The district court

therefore did not abuse its discretion in denying Theme’s

motions for permanent injunction.

D

After we reversed the initial dismissal of Theme’s claims

and remanded to the district court, Theme filed a motion for

leave to amend its complaint (for the second time) to replace

its antitrust claims with a cause of action for declaratory

relief, seeking a judicial statement that Theme is not bound by

News’ right of first refusal agreements with packaged goods

companies. Simultaneously, Theme filed a motion for sum-

11086 THEME PROMOTIONS v. NEWS AMERICA

mary judgment, arguing that the issue was a pure question of

contract law. The district court denied the motion for leave to

amend, holding that the amendment would be futile, and ter-

minated the related motion for summary judgment as moot.

[24] A party may amend its complaint with the court’s

leave, and leave shall be freely given where “justice so

requires.” Fed. R. Civ. P. 15. We apply this policy liberally,

but leave to amend will not be granted where an amendment

would be futile. DCD Programs, Ltd. v. Leighton, 833 F.2d

183, 186 (9th Cir. 1987). A court may only grant a declaratory

judgment where there is an “actual controversy within its

jurisdiction.” 28 U.S.C. § 2201(a). In addition, the Supreme

Court has stated that a declaratory judgment is only appropri-

ate where it would completely resolve the concrete contro-

versy. Calderon v. Ashmus, 523 U.S. 740, 749 (1998).

[25] Theme’s motion for leave to amend made plain that

there was no actual case or controversy. As the district court

noted, Theme admitted that there was no controversy over

whether Theme was contractually bound by right of first

refusal agreements to which it was not a party. Moreover, a

declaration that Theme was not contractually bound by any of

News’ right of first refusal agreements with the packaged

goods companies would not have completely resolved the

controversy between News and Theme. Because declaratory

relief was not available, Theme’s amendment would have

been futile. As a result, the district court did not abuse its dis-

cretion in denying the motion for leave to amend or in termi-

nating the related motion for summary judgment.

V

We affirm the judgment of the district court in its entirety.

The district court appropriately rejected News’ motions for

JMOL, new trial, and damage reduction. The district court

correctly set aside the jury verdict in favor of Theme on its

claim of intentional interference with prospective economic

THEME PROMOTIONS v. NEWS AMERICA 11087

advantage because that claim was barred by the Noerr-

Pennington doctrine. The district court properly denied

Theme’s request for restitution and injunctive relief. It appro-

priately denied as futile Theme’s motion to amend its com-

plaint to include a claim for declaratory relief.

AFFIRMED.