A New York jury’s verdict that Constellation Brands was within its rights to sell Corona- and Modelo-branded hard seltzers in the US has been upheld on appeal.

Constellation has had an agreement with Anheuser-Busch InBev (AB InBev) to distribute beer under the Modelo and Corona brands in the US since 2013. The 2nd US Circuit Court of Appeals has upheld a jury’s decision last year that Constellation had not broken this agreement by also producing Corona and Modelo hard seltzers.

AB InBev and Mexican subsidiary Grupo Modelo sued Constellation over the launch of the seltzers, arguing the products violated the terms of the agreement. AB InBev had argued hard seltzer products do not come within the agreement and claimed Constellation was infringing on its Modelo’s Corona brands.

Last year, a Manhattan federal jury sided with Constellation ruling that hard seltzers fall under the ‘malt beverage’ category, meaning it was within its rights under its licence agreement with AB InBev to make the SKUs for the US market.

Appealing that decision, AB InBev challenged the jury instructions at the trial arguing the District Court failed to “instruct the jury that undefined words in a contract should be given their plain and ordinary meaning,” according to filings published this week (25 March). The appeals court rejected that argument.

Constellation argued Corona Hard Seltzer was covered in the sublicensing agreement that allowed for “versions” of beer and malt beverages. The appeals court found both parties’ reading of the scope of the term “versions” was plausible and due to the ambiguous nature of the contract language it upheld the jury’s decision.

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The appeals court also rejected AB InBev’s argument that evidence referring to correspondence with the US Department of Justice, in which that body found Corona Hard Seltzer was not beer, should have been allowed to be entered into the court.

The appeals court found that argument to not be relevant and risked “sowing more confusion” to the jury as it “might prompt the jury to defer to DOJ’s views rather than interpret the definition of ‘beer’” ‘ under the sublicense.”

In conclusion, the appeals court said; “We have considered Modelo’s remaining arguments and conclude that they are without merit.”

Constellation has an agreement with AB InBev to distribute beer under the Modelo and Corona brands in the US. Constellation argued and has now fully won its case that under that distribution deal.

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