Beckman Coulter manufactures medical instruments used by hospitals, clinics and research centers throughout the world. One of these instruments is the LX20 Blood Analyzer. An integral part of the LX20 are 37 separate circuit boards. Since Beckman Coulter's core competency is not in the manufacture of circuit boards it sought to outsource the manufacture of the circuit boards to an electrical component manufacturer. After a one-year selection process, Beckman Coulter chose Dovatron Manufacturing, Inc., the tenth largest electrical component manufacturing company in the world.

Beckman Coulter and Dovatron entered a partially written, partially oral contract in 1998 for Dovatron to manufacture its circuit boards. After a ten month FDA validation process Dovatron received an FDA certification so that the boards manufactured by Dovatron could be used in the medical instruments sold by Beckman Coulter. This occurred approximately on August 24, 1998. On August 31, 1998 Dovatron insisted that Beckman Coulter pay an additional $300,000 that was not otherwise required to be paid by Beckman under the terms of their contract. All of the witnesses testified that Beckman Coulter had a fixed price for the circuit boards and there was no contractual justification for this additional charge.

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