## Facts

- A Taiwanese manufacturer, CMC Magnetics Corp. (CMC), sold videotape housings in a course of dealing that involved intermediaries.
- Attorneys Trust (AT), as assignee for collection, sued Videotape Products, Inc. (VTP) to collect an alleged debt owed to CMC.
- VTP cross-complained against CMC for breach of warranty relating to certain housings.
- A central disputed factual question at trial was whether CMC and VTP were doing business with each other directly, despite using intermediaries.
- After trial, the district court found for VTP on the cross-complaint, entered judgment against AT and CMC, and awarded damages including lost profits.

## Issues

1. Whether the district court clearly erred in finding that CMC and VTP were doing business with each other even when transactions used intermediaries.
2. Whether an intermediary was a necessary and indispensable party under Federal Rule of Civil Procedure 19, requiring dismissal for lack of subject-matter jurisdiction.
3. Whether the district court abused its discretion by admitting VTP’s business records and summary exhibits under Federal Rules of Evidence 803(6) and 1006.
4. Whether California law permitted the damages awarded (including lost profits) between parties in CMC and VTP’s commercial relationship and whether the lost-profits proof was sufficient.

## Decision

- The Ninth Circuit affirmed the judgment in full.
- The district court’s finding that CMC and VTP dealt with each other directly (even through intermediaries) was not clearly erroneous.
- The intermediary was a “mere go-between” and was neither necessary nor indispensable under Rule 19; jurisdiction was not defeated.
- Admission of VTP’s business records and summaries was not an abuse of discretion; the records fit the business-records exception and the summaries met Rule 1006 conditions.
- California law allowed damages, including lost profits, on the facts found; the lost-profits award was supported by admissible summaries and trial testimony.

## Legal Principles

- Appellate review of bench-trial factfinding is for clear error, with heightened deference to credibility determinations.
- A nonparty intermediary is not required under Rule 19 when the factfinder determines it functioned only as a go-between and complete relief and fair adjudication can occur without joinder.
- Business records may be admitted under Federal Rule of Evidence 803(6) even if generated internally in the ordinary course of business.
- The best-evidence rule does not bar business records merely because a witness could testify from memory about the same events.
- Summaries of voluminous records are admissible under Federal Rule of Evidence 1006 when the underlying materials are voluminous and available for examination.
- Under California law, commercial parties in a buyer-seller warranty relationship may recover consequential damages, including lost profits, when supported by admissible evidence.

## Conclusion

The appellate court upheld the trial court’s findings that the buyer and manufacturer were direct counterparties despite intermediaries, rejected a Rule 19 jurisdiction attack based on an unjoined intermediary, approved admission of business records and Rule 1006 summaries, and sustained a California-law damages award that included lost profits.


Attorneys Trust v. Videotape Comput. Prods., Inc., 94 F.3d 650 (9th Cir. 1996)