Teradyne, Inc. v. Mostek Corp.

797 F.2d 43 (1986)

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Teradyne, Inc. v. Mostek Corp.

United States Court of Appeals for the First Circuit
797 F.2d 43 (1986)

Facts

Mostek Corp. (defendant) produced computers and telecommunications equipment. Mostek purchased two necessary components from Teradyne, Inc. (plaintiff), with whom Mostek had a quantity purchase agreement (QPA), signed in 1984. Pursuant to the QPA, Mostek received a discount for ordering certain quantities and was responsible for cancelation charges if it canceled an order. In early 1985, after the 1984 QPA had expired, the parties had a dispute regarding cancelation charges Teradyne imposed. At the time, Mostek had not agreed to a 1985 QPA due to financial issues. Teradyne offered to waive the cancelation charges if Mostek placed a new order and signed a 1985 QPA. Mostek agreed. Subsequently, Mostek canceled that order and refused to pay the cancelation fees. In September 1985, Teradyne requested arbitration, seeking $3,500,000 in cancelation charges and goods and services rendered. In October 1985, Mostek announced that it would cease operations, and in November 1985, its assets were sold for approximately $71,000,000. Teradyne brought an action in the district court seeking an injunction that would require Mostek to set aside a sufficient portion of money to ensure that Teradyne could be made whole at the conclusion of arbitration. The district court granted the injunction, ordering Mostek to hold $4,000,000 in a separate bank account to satisfy any claims to Teradyne. Mostek appealed, arguing that the Federal Arbitration Act prohibited a court from granting preliminary injunctive relief in a pending arbitrable dispute.

Rule of Law

Issue

Holding and Reasoning (Bownes, J.)

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