Making the Case That Hard Seltzer is Beer—or At Least Not ‘Not Beer’
Partners Sandra Goldstein, Stefan Atkinson and Sierra Elizabeth were quoted in The Am Law Litigation Daily, which profiled their recent jury trial win for Constellation Brands against Anheuser-Busch and Modelo over whether Constellation’s Corona and Modelo hard seltzer products are “beer.”
How’s this for an opening statement show-stopper? Representing Grupo Modelo in a dispute centering on whether hard seltzer is beer, Sean O’Shea of Cadwalader Wickersham & Taft had one of his colleagues pour out three cans: One, a can of Corona Extra poured pale yellow and foamy. The next, a can of Modelo, poured slightly darker, also foamy. The third, a can of Corona Hard Seltzer, poured clear and fizzy.
O’Shea, according to the trial transcript, lingered for a moment on the hard seltzer product. “This, ladies and gentlemen, is not made with hops; it’s not made with malt. It’s sugar water. It’s alcoholic sugar water,” O’Shea said.
“Over the next two weeks or so, my adversaries over at this table are going to do everything they can, bend themselves into pretzels, to convince you that up is down, that black is white, and that this stuff here is beer,” said O’Shea with a gesture toward Constellation Brands’ counsel at Kirkland & Ellis and the clear hard seltzer.
Let’s pause here for a moment. If you would have asked me a couple of weeks ago if Corona Hard Seltzer and Modelo Ranch Water are beer, my answer would have been a firm and swift, “No.”
Maybe even: “Who are you trying to kid?”
And if I were in the shoes of the Kirkland & Ellis lawyers representing Constellation Brands, I would have been tempted at that moment to pack up my bankers boxes, get up, and walk right out the courtroom doors. Perhaps this is why I’m a litigation columnist and they are litigators: What looked like a knockout blow in Grupo Modelo’s opening to me, appeared as an opening for a counterpunch for the Kirkland team led by Sandra Goldstein, Stefan Atkinson and Sierra Elizabeth.
In a presentation that mirrored what Grupo Modelo’s lawyers had done the day before, Goldstein had her partner Daniel Cellucci pour cans of Corona Hard Seltzer and Modelo Ranch Water during her opening. Alongside the accused “not beers,” Goldstein had her partner pour a can of Labatt Blue Light Seltzer, a malt-based beverage whose trademark is owned by Grupo Modelo’s parent company Anheuser-Busch. All were clear, fizzy and—though no one was tasting or smelling them at the time—fruity.
What was the point of Goldstein’s pour? Grupo Modelo would admit that her client could actually make malt-based beverages like the clear, fizzy, fruity Labatt seltzer under the agreement Constellation Brands reached to license the Corona and Modelo trademarks for beer produced for consumers in the United States and Guam. Grupo Modelo entered that agreement in 2013 in the wake of antitrust scrutiny by the DOJ of the company’s acquisition by Anheuser-Busch.
During the course of her opening statement, the three glasses of clear, fizzy seltzers—one made with malt and two not—got mixed up, further underlining Goldstein’s point about the sort of distinction Grupo Modelo was asking jurors to make. Goldstein tried to focus jurors firmly on the language of the underlying agreements which defined “beer” broadly as “beer, ale, port or stout, malt beverages and any other versions or combinations of those things, even including nonalcoholic versions of those things.”
“At the end of the trial, I’ll ask you to find in favor of Constellation because Constellation has honored its contract,” she said at the end of her opening.
Two weeks later, after just a little more than an hour of deliberations, the eight Manhattan federal court jurors who heard the case were unanimous: Modelo had not proven that Corona Hard Seltzer and Modelo Ranch Water didn’t constitute “beer” or “Mexican-style beer” under the company’s agreement with Constellation Brands. Constellation Brands hadn’t violated the contract.
This week The Litigation Daily caught up with Goldstein, Atkinson and Elizabeth to discuss the spectacle of the opening, the flow of the trial, and, naturally, beer.
Goldstein said that dueling pours during opening statements were “a sign of things to come” at trial.
“We tried from the get-go to make clear to the jury that we’re not debating whether this looks, tastes or smells like yellow, hoppy beer. It doesn’t,” Goldstein said. “But the contract didn’t preclude us from making this product even though it’s not yellow, hoppy beer,”
Goldstein said the trial team was “heavy, heavily focused on the contract.” They pointed out that her client’s license was for perpetuity. She said that the agreement allowed Constellation Brands the flexibility to meet shifting consumer demands, as evidenced by its 23-word definition of the term “beer.” Even in the room where the deal was hammered out, at a time well before the recent explosion of hard seltzer brands, she said some of the products discussed were not yellow hoppy beers—Mike’s Hard Lemonade, for example. Goldstein said the particular products at issue at trial are aimed at an increasingly health-conscious beer-buying public looking for gluten-free alternatives.
“The contract called for something a lot broader than what you think of the first time you think of the word ‘beer’,” Goldstein said.
Atkinson said testimony about the negotiations themselves showed that the parties were discussing potential products, including a Corona green tea product, that could fall under the deal. But he added the requirement that products including malt didn’t come up in negotiations, or in contract language. “The more we focused on the contract and the broader deal that was reached, I think the easier it became for us to persuade the jury,” Atkinson said.
Elizabeth said the result of Goldstein’s presentation of the three clear, fizzy drinks during opening statements had something akin to the effect of a shell game. “Under their own theory, you couldn’t tell the difference between our products and what they say is allowed,” Elizabeth said.
All that said, Elizabeth, who joined the trial team as its newest member in the run-up to trial in December, admitted that she initially thought the case was a loser on its face. As did Goldstein: She admitted as much during closing arguments. “Ladies and gentlemen, when I first read the complaint in this case, I remember thinking to myself, there is no way hard seltzer is beer. There is just no way,” she said, according to the closing transcript.
They both agreed it was important to level with jurors on that point.
“We can’t go against people’s natural biases and inclinations,” Elizabeth said. “We cannot take someone who’s lived 40 years on this earth and believes ‘beer is beer’ and change their mind in two weeks. So how are we going to be in line with those people’s biases and their life experiences and still win the case?”
“I think that’s where we really homed in on our contractual arguments, but, more importantly, in my mind, our arguments regarding innovation,” Elizabeth said. She said it was important to highlight that the company negotiated for the right to continue to innovate to keep up with the changing tastes of consumers and paid a lot of money for that right. “We were able to stay in line with what people already believe, but also give them a story they could hook on to,” she said.
A spokesperson for Grupo Modelo said the company is disappointed with the verdict and is “evaluating all options.”