Teradyne, Inc. v. Mostek Corp.
United States Court of Appeals for the First Circuit
797 F.2d 43 (1986)

- Written by Caitlinn Raimo, JD
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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