Grupo Modelo Loses Jury Trial Over Constellation Brands Seltzers

A Manhattan federal jury found that Constellation Brands (CBI) had not violated a US distribution agreement with Grupo Modelo (GM) by selling hard seltzers branded with the Modelo and Corona names.

The American company started selling the hard seltzer fruit-flavored beverages back in 2020. It was not until 2021 that GM filed a lawsuit for allegedly violating their 2013 license agreement by selling this product branded with the Mexican company names. At first, CBI tried to dismiss the case by arguing that the agreement's definition of beer also covered other seltzer beverages, even though GM denied this. However, Lewis Kaplan, the US District Judge who ruled on the case, decided to reject Constellation's motion and further advance with the legal procedure. In 2022, GM added Modelo Ranch Water to the lawsuit after CBI launched the alcoholic sparkling water drink in March of that year.

In December 2022, Reuters reported that Judge Kaplan had denied Modelo a pre-trial win against the US distributor of its Corona beer. He also denied CBI's bid to end the case early that month. This decision set up a jury trial on the company’s definition of the word beer inside the trademark licensing agreement. While Constellation remained firm that the agreement's definition of beer also covered hard seltzer, GM pointed out that “a malt-free, no-hops-flavor drink emulating a vodka and soda is not a beer, nor is it some version of a beer,” and added that no reasonable jury could find that it encompasses hard seltzer. 

Meanwhile, Kaplan stated that even though GM's argument was stronger, the agreement's definition of beer was still too ambiguous to determine before trial. According to The Washington Post, the actual definition of beer in the original agreement reads: “beer is defined as ale, porter, stout, malt beverages and any other versions or combinations of the foregoing, including nonalcoholic versions.” 

"Modelo has more dictionaries on its side of this debate over the meaning of beer, but the fact remains that dictionaries, however important, do not resolve this case," the judge added. 

The final verdict arrived on March 15, 2023, when the jury sided with CBI by determining that the company had not violated the agreement with GM by selling Corona Hard Seltzer and Modelo Ranch Water. A spokesperson from GM said the company was disappointed with the verdict and that they would continue to evaluate all options. Meanwhile, its counterpart at CBI noted the company was pleased with the verdict and remained committed to continue to operate in accordance with the terms of the sublicense agreement.

In August 2021, GM filed a different lawsuit against Constellation over its tequila and bourbon-barrel-aged Modelo Reserva beers. This time, Modelo argued that the tequila-barrel beers broke US and Mexican laws governing the use of the word tequila. Moreover, the beverage company said that the bourbon-barrel beers violate CBI’s agreement to exclusively sell Mexican-style beers under the Modelo name because bourbon "has nothing to do with Mexico." This case is currently in mediation.