A federal judge yesterday ruled that the lawsuit can continue, saying that Constellation Brands (NYSE: STZ) had failed to prove that it is entitled to sell hard seltzer in the US under the brand Corona.

Constellation stock was down 1.75% in midday trading, making it down approximately 3.4% in the past five days of trading on the New York Stock Exchange.

Anheuser-Busch InBev (NYSE: BUD) has sued Constellation, saying the agreement with its Grupo Modelo and Constellation did not include anything but beer under the name Corona. The case may result in long lasting definitions of the hard seltzer category.

Hard seltzer is a fermented carbonated beverage, similar to beer, but without hops in most cases. Even some hard seltzers, however, include hops, further blurring the lines. The base alcohol for hard seltzer is usually cane sugar or malt, the latter being the base used for beer.

“You have both not only poured an awful lot into these words, but you’ve raised quite a head on the glass.” – Judge Lewis Kaplan

Grupo Modelo claims to have tried to settle the matter out of court, but resorted to the lawsuit in February. The suit was filed in U.S. district court of the southern district of New York.

Bill Newlands, CEO of Constellation Brands, publicly said the case was “without merit” and a “blatant attempt to restrain a strong and well established competitor in a high growth segment of the U.S. beer market.”

“We have fully complied with the terms of our sub License Agreement, and we will vigorously defend our rights under our sub License Agreement and applicable law,” said Newlands.

Manhattan Judge Lewis Kaplan, however, has refused to dismiss the case, due to each side presenting “perfectly reasonable and strong arguments.”

There were arguments over the definition of a beer, after which Judge Kaplan quoted the late Felix Frankfurter, an Associate Justice of the Supreme Court of the United States from 1939-1962, saying words are sometimes nothing more than “empty vessels into which one can pour anything you will.”

“You’ve both proven the accuracy of Justice Frankfurter’s famous statement,” Judge Kaplan said. “You have both not only poured an awful lot into these words, but you’ve raised quite a head on the glass.”

Aiden Gentson
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