Contract dispute drives parties to drink

The parties’ licensing agreement referred to “Iced tea, Ready-to-Drink (RTD) Teas, RTD Beverages.” One side argued that the term “Ready-to-Drink Beverages” included “all beverages that are as-is ready for consumption including energy shots and vitamin water”; the other contended that, “as tea (i.e., the main product under the Agreement) is part of a category of beverages that generally require an additional step of preparation prior to consumption, the term may only cover only the beverages within this category.” Drinking deeply from principles of contract interpretation, the Fifth Circuit found the contract ambiguous because both positions were reasonable. Turning then to the testimony of the witnesses involved in drafting the contract, the Court found undisputed testimony in favor of the narrower view, and gave no weight to testimony from witnesses who had opinions but “did not participate in the negotiations.” The Court also avoided a dispute about who drafted the term, noting that “it is not necessary to determine who the drafter was because the term is only construed against the drafter ‘[I]n case of doubt that cannot be otherwise resolved.” Chinook USA v. Duck Commander, Inc., No. 17-30596 (March 15, 2018, unpublished).