The US Court of Appeals for the Second Circuit affirmed a district court’s summary judgment denial and determination that the definition of “beer” (which encompassed “other versions and combinations” of beer and malt beverages) in a trademark licensing agreement was ambiguous. Cerveceria Modelo de Mexico, S. de R.L. de C.V. v. CB Brand Strategies, LLC, Case No. 23-810 (2d Cir. Mar. 25, 2024) (Cabranes, Wesley, Lohier, JJ.) (nonprecedential).

In 2013, Modelo granted Constellation Brands a perpetual sublicense to use Modelo’s trademarks for Corona and Modelo to sell “beer” in the United States. The sublicense defines “beer” as “beer, ale, porter, stout, malt beverages, and any other versions or combinations of the foregoing, including non-alcoholic versions of any of the foregoing.” Several years later, Constellation launched Corona Hard Seltzer and Modelo Ranch Water, both of which are flavored seltzers with alcohol derived from fermented sugar.

Modelo sued Constellation in 2021, alleging that Constellation’s sales of the seltzers violated the sublicensing agreement because the license for use of the marks on “beer” did not encompass sugar-based hard seltzers. Modelo moved for summary judgment, which the district court denied after determining that the agreement’s definition of “beer” was ambiguous. At trial, the jury found that Modelo had failed to show that the seltzers were not “beer” under the sublicense. Modelo appealed.

Modelo asserted that the district court erred in denying summary judgment, arguing that the agreement’s definition of “beer” was unambiguous, and challenged the district court’s jury instructions and exclusion of certain evidence at trial. The Second Circuit first addressed the district court’s determination that the term “beer” as used in the agreement was ambiguous. The Court noted that a motion for summary judgment in a contract dispute generally may only be granted when the relevant language has a definite meaning and is unambiguous. Modelo argued that the sublicense plainly excluded the hard seltzers because they were not “beer,” “malt beverages,” or versions or combinations of either. Modelo contended that the term “versions” was limited to beverages with characteristics in common with “beer” and “malt beverages” and would not include “malt-free,” “hops-flavorless” hard seltzers.

The Second Circuit assumed for purposes of the opinion that the plain and ordinary meaning of “beer” and “malt beverages” excluded seltzers but reasoned that Corona Hard Seltzer and Modelo Ranch Water could plausibly be understood as a “version” of either. The Court found Modelo’s limited view of the term “versions” unpersuasive, given that the sublicense allowed for “nonalcoholic versions” of beer and malt beverages, even though dictionary definitions uniformly define “beer” as containing alcohol. Because each party’s reading of “versions” was at least plausible, the Court concluded that the relevant contract language was ambiguous and affirmed the district court’s summary judgment denial.

Modelo also argued that the district court failed to instruct the jury that undefined words should be given their plain and ordinary meaning and improperly instructed the jury to ignore dictionary definitions. The Second Circuit rejected this argument, noting that the instructions properly told the jury that it was entitled to interpret the contract by resorting to the natural and ordinary usage of its terms, extrinsic evidence and the purpose of the agreement.

Finally, the Second Circuit addressed the district court’s exclusion of evidence related to a 2013 judgment in which Modelo agreed to sell its US-based business to Constellation. Modelo argued that the district court erred in excluding 2020 correspondence between the US Department of Justice (DOJ) and Constellation in which the DOJ found that Corona Hard Seltzer was not “beer” under the terms of the 2013 judgment. The district court had excluded this evidence as irrelevant and further reasoned that its probative value would be substantially overweighed by the risk of confusion and delay. The Court found that the district court had acted within its discretion in excluding the evidence, emphasizing that the evidence might have encouraged the jury to defer to the DOJ’s interpretation of “beer.” Finding Modelo’s remaining arguments without merit, the Court affirmed the district court’s judgment.