Introduction
The majority opinion in Davis v. Bimbo Foods Bakeries Distribution, LLC, No. 24-2264, 2026 U.S. App. LEXIS 439 (4th Cir. Jan. 8, 2026) held that an automated grocery fulfillment center could be considered a “retail store” under the relevant contract, finding ambiguity in the term and relying on extrinsic evidence to interpret its meaning. The district court’s approach, which was affirmed by the majority, involved looking beyond the plain meaning of “retail store” and considering trade usage and the specific context of the distribution agreement. The majority rejected the argument that only facilities primarily selling merchandise directly to ultimate consumers qualify as retail stores, instead adopting a broader interpretation that could encompass automated fulfillment centers.
The dissent in Davis v. Bimbo Foods Bakeries Distrib., LLC argued that an automated grocery fulfillment center does not qualify as a “retail store” under the plain meaning of the term, as it does not primarily sell merchandise to ultimate consumers but instead functions mainly as a warehouse for storing and shipping products. The dissent criticized the district court for finding the term “retail store” ambiguous and relying on extrinsic evidence, rather than applying its ordinary dictionary definition as required by Pennsylvania law. It was concluded that the fulfillment center should not be considered a retail store, and thus the district court’s judgment should be reversed.
In the end, as discussed below, parol evidence gave the court a complete picture of how the relevant terms functioned in practice. It allowed the judge to interpret the contract in a way that honored the parties’ true commercial expectations rather than freezing the agreement in a narrow, traditional retail model that no longer reflected the realities of modern distribution. Through that evidence, Davis proved that the automated fulfillment center met both contractual prerequisites for an Outlet—it was a retail store as understood in the industry, and it accepted goods by store‑door delivery as that term was used in 2011. Because the contract granted him exclusive distribution rights to all Outlets in his territory, parol evidence became the bridge between the general language of the written agreement and the specific, technologically updated world in which the dispute arose. With it, Davis secured a declaration of his exclusive rights, an award of lost profits, and a complete affirmance on appeal.
Decision
Walter Davis had been a bread distributor for Bimbo Foods Bakeries Distribution, LLC since 2011. When he entered the relationship, he purchased an exclusive territory anchored in Frederick County, Maryland, and he did so on Bimbo’s standard form “Distribution Agreement.” That agreement gave him the exclusive right to wholesale Bimbo’s products—brands such as Sara Lee and Entenmann’s—to “Outlets” in his territory. The contract used that term repeatedly but defined it only in broad strokes: “Outlets” were retail stores, restaurants, and institutional accounts that purchased products by “store door delivery.” It excluded street vendors, concessions, and vending machines, and it said nothing more about what counted as a “retail store,” nor did it explain what “store door delivery” actually meant. The agreement also imposed familiar merchandizing obligations on the distributor—stocking, rotating, replacing stale goods, and hanging promotions—while recognizing that some accounts (like restaurants and institutional buyers) might not want or need those services.
Nearly a decade later, the retail world around Davis had changed. In early 2020, he learned that Kroger intended to open a highly automated grocery fulfillment center inside his territory—a cavernous facility where humans would be few, robots would be many, and the public would not be admitted. The center would replenish regional brick‑and‑mortar stores and also pick and ship online orders directly to consumers. Drivers and distributors would never step beyond the loading docks; they would leave pallets at the bay, and the center’s staff and robots would handle the rest. When Bimbo announced that someone other than Davis would service the new facility, Davis saw his exclusive territory shrinking before his eyes. He went to federal court, alleging anticipatory breach and asking for a declaration that the fulfillment center was an “Outlet” within the meaning of his agreement, along with an injunction and damages for lost revenue. Bimbo proceeded to award the center to another distributor anyway.
In November 2023, the district court conducted a four‑day bench trial. Because everyone agreed the facility sat inside Davis’s territory, the fight narrowed to a single hinge: Was the center an “Outlet”? That answer turned on two subordinate questions the contract left opaque: Was the center a “retail store”? And did it “purchase” by “store door delivery”? The court confronted these terms and found both clouded by context. Dictionaries did not foreclose either side’s reading, and the parties’ proposed meanings diverged in ways that ordinary definitions did not resolve. The court therefore admitted and weighed parol evidence—industry custom, trade usage, and the parties’ own course of performance—to illuminate what the contract’s framers intended.
At trial, Davis and several former Bimbo insiders painted a consistent picture: in the trade, a retail store was not defined by a cash register ringing within arm’s reach of the customer but by whether the facility sold goods to the ultimate consumer. They testified that by 2011—when this very agreement had been signed—online orders already existed, and industry actors understood that a facility fulfilling those orders could stand in the shoes of a retail store even without a showroom or foot traffic. Their testimony suggested that the term “retail store” had stretched to encompass omni‑channel models in which the selling event occurred digitally while the goods moved from wherever the retailer housed them at the moment of sale.
Bimbo offered a very different picture. Its witnesses proposed that a “retail store” was, in common sense and in the trade, a place where customers came inside, where shelving, merchandising, and in‑store promotion defined the relationship with the supplier. From that perspective, a robotized warehouse that received pallets at a dock and never greeted a shopper through the front door could not plausibly be a store—retail or otherwise. Yet, when pressed, Bimbo’s witnesses struggled to link their view to external authorities; their testimony read more like a litigation gloss than a reflection of settled industry usage.
The district court weighed this evidence and credited Davis’s side. It found that the term “retail store,” when applied to the facts of this dispute, did not exclude a facility that sold directly to end consumers through online transactions fulfilled from a non‑public building. The court emphasized the mismatch between Bimbo’s position at trial and the understanding of its own former personnel who had lived with these contracts. The court concluded that the fulfillment center counted as a “retail store” within the contract’s meaning.
The court then turned to “store door delivery.” Here too, the words had been left undefined, and the parties advocated sharply different readings. Bimbo contended that “store door delivery” was more than mere delivery; it supposedly bundled the merchandizing and promotional services cataloged elsewhere in the agreement—tasks that could not be performed at a locked‑down fulfillment center. Davis countered with trade‑usage sources and testimony describing “store door delivery” as what the phrase suggested: delivery to the doors of the store (or consignee)—i.e., to the recipient’s place of business—full stop. The court found Bimbo’s construction internally incoherent because it effectively required the contract to treat “Outlets” as a class that both included and excluded themselves depending on services the recipient happened to request. It also noted that the agreement’s examples of non‑Outlets—street vendors, concessions, vending machines—shared a practical feature: they had no doors to receive deliveries in the ordinary sense. Drawing on a trade dictionary that defined “store‑door delivery” as the movement of goods to the consignee’s place of business, and on credible testimony from industry veterans, the court found that the fulfillment center did accept goods by store door delivery: trucks arrived at the center’s doors and left the products there. The fact that Kroger’s robots, rather than Davis, performed in‑store merchandising was irrelevant to the nature of delivery.
With both predicates satisfied—retail store and store door delivery—the district court declared that the center was an “Outlet” under the agreement, that Davis possessed the exclusive right to supply it, and that Bimbo’s deviation caused lost revenue exceeding $450,000. It entered a declaratory judgment, awarded costs and damages, and effectively restored the territorial exclusivity the contract had promised.
Bimbo appealed to the Fourth Circuit. On appeal, the panel applied Pennsylvania law under the agreement’s choice‑of‑law clause. The majority began with first principles: Pennsylvania courts seek the intent of the parties and apply the plain meaning of unambiguous terms, but they also recognize that ambiguity arises in context—that is, when a term is reasonably susceptible to more than one meaning as applied to the facts at hand. When such ambiguity exists, courts may look to parol evidence—industry custom, course of performance, and other extrinsic sources—to fix the term’s meaning. The panel also recited the appellate standards: it would review the interpretation of the contract de novo, but any factual findings resolving ambiguous language—such as the weight of witness testimony on trade usage—would be set aside only for clear error.
Applying that framework, the majority agreed with the district court on both counts. First, it held that “retail store” was ambiguous in this factual setting. Competing dictionary definitions did not definitively exclude Davis’s reading, and the testimonial record supported an industry understanding capacious enough to include an online‑fulfillment operation that sold to end consumers. The majority emphasized that Pennsylvania law did not require the court to elevate the most common colloquial meaning over a reasonable trade‑usage meaning when the contract’s application to novel facts was genuinely contested. Second, the panel accepted the district court’s store‑door‑delivery finding. It found Bimbo’s effort to graft the agreement’s merchandizing obligations into the definition of “store door delivery” both unmoored from the text and contradicted by trade materials that described direct/store‑door delivery with varying scope across contexts. By contrast, the straightforward notion that a consignee receives store‑door delivery when product is physically delivered to its doors fit both the words and the evidence. Because these were factual determinations about ambiguous terms, the panel asked only whether it was left with a “definite and firm conviction” that the district court had erred. It was not.
Judge Rushing wrote separately to concur. In her view, the district court’s description—“a place of business that sells goods directly to the consumer”—already captured the ordinary, unambiguous meaning of a retail store and comfortably included the fulfillment center. She thus would have affirmed on even simpler grounds: the words themselves, read in their ordinary sense, sufficed to bring the center within the contract.
Chief Judge Diaz dissented. He would have treated “retail store” as unambiguous and would have confined the court to the contract’s “four corners.” In his telling, plain meaning made this an easy case: a robotic warehouse that primarily stores and ships could not be a retail store, and to say otherwise was to stretch the language beyond recognition. He warned that allowing context to create ambiguity where ordinary speech did not would license courts to rewrite contracts and to bless bespoke definitions after the fact. To him, it was “just a warehouse,” and the judgment should have been reversed.
The majority, however, found the district court’s analysis not merely permissible but compelling. It affirmed the declaratory judgment and damages in Davis’s favor and left in place the conclusion that, under this contract and this record, a modern, consumer‑fulfillment facility—though closed to the public—could function as a retail store that purchases by store‑door delivery within the meaning of the parties’ agreement. In doing so, the court signaled a practical lesson for distribution relationships drafted in an earlier retail era: when contracts speak in general commercial terms and commerce itself evolves, trade usage and course of performance may carry real weight in deciding who holds the keys to new channels like automated fulfillment centers.
Parol Evidence Policy Across States
Different states approach parol evidence differently because they hold different views about the role of the written contract itself. In some jurisdictions, courts treat the written agreement as the final and most reliable expression of the parties’ deal. Those states follow a stricter, more traditional version of the parol evidence rule, believing that once parties commit their agreement to writing, anything said or negotiated beforehand is too unreliable to be considered later. Judges applying that view worry that allowing outside evidence would undermine the certainty and predictability of written contracts, open the door to self‑serving testimony, and invite constant attempts to rewrite a deal after one party decides it is unhappy with the outcome. Under this philosophy, the writing is king, and only the words on the page matter unless the writing is facially ambiguous.
Other states adopt a more flexible, modern approach. These states reject the idea that language can be fully understood without context, and they see the written document as only one part of determining what the parties actually meant. They acknowledge that commercial relationships, especially in technical or specialized industries, often rely on trade customs, shared assumptions, or course‑of‑dealing practices that a contract may not explicitly spell out. Courts in these jurisdictions are more willing to say that meaning depends on how the words are used in the real world, not just on dictionary definitions. Under this view, extrinsic evidence—industry practice, negotiation history, behavior between the parties—helps the court honor the parties’ true intent rather than forcing them into meanings they never actually shared.
These two approaches reflect a deeper philosophical divide. The stricter states emphasize certainty, finality, and the integrity of the written word; they fear that allowing parol evidence invites opportunistic reinterpretation of contracts. The more flexible states emphasize accuracy, fairness, and the importance of context, believing that language is inherently imperfect and that contractual intentions are often shaped by background understandings that the writing alone cannot capture. As a result, a state’s stance reflects its beliefs about what contract law is meant to protect: the text itself, or the parties’ actual deal as they understood it at the time.
Both philosophies claim to protect contractual intent, but they disagree about how best to uncover it. This is why parol evidence rules vary so widely: states make different judgments about whether the greatest danger lies in distorting a contract by looking outside it or in misinterpreting it by refusing to look beyond its words.
Parol Evidence Doctrine
Parol evidence ultimately became the tool that allowed Davis, the franchisee‑distributor, to overcome the narrow, text‑only reading that Bimbo insisted upon and to show the court what the disputed contract language genuinely meant within the real-world bakery distribution industry. Once the district court determined that the phrases “retail store” and “store door delivery” were ambiguous in the context of a modern, automated fulfillment center, the court was free to look beyond the four corners of the written agreement. At that moment, the evidentiary playing field shifted in Davis’s favor because the surrounding industry practices, the parties’ course of dealing, and even Bimbo’s own former employees all painted a picture that aligned with Davis’s understanding and not the rigid definition Bimbo asserted during litigation.
Through this external evidence, Davis demonstrated that when the contract was formed back in 2011, distributors and manufacturers in the baking and grocery industry already understood “retail store” to refer not merely to the classic, customer‑facing brick‑and‑mortar location, but to any facility that sold goods directly to consumers, even if the order was placed online and the consumer never set foot inside the building. Witnesses who had worked for Bimbo testified that fulfillment centers existed at the time and were understood as retail points of sale because the product left those facilities in satisfaction of a consumer’s order. This testimony contradicted Bimbo’s portrayal of a retail store as a place requiring shoppers, shelves, and in‑store merchandising. Because parol evidence allowed the court to hear this testimony, the district judge was persuaded that Bimbo’s narrow definition was a litigation‑created interpretation rather than the meaning the parties shared when the agreement was signed.
The same advantage emerged when the court examined the meaning of “store door delivery.” Bimbo insisted that store‑door delivery was a term of art that inherently required a distributor to perform merchandising tasks—stocking shelves, rotating inventory, placing promotional materials—tasks that could not be carried out at a robotic fulfillment center. But once the ambiguity was established, Davis introduced trade‑usage materials and witness testimony showing that store‑door delivery simply meant delivering the goods to the doors of the recipient’s place of business, nothing more. Industry dictionaries backed that meaning, as did testimony from former Bimbo managers who had themselves used the term to describe deliveries to facilities similar to the Kroger fulfillment center. Because the court was allowed to consider this evidence, it rejected Bimbo’s attempt to fold the promotional obligations into the definition of “store door delivery,” finding that delivery to the center’s loading docks satisfied the contract as the industry understood it.
Parol evidence also enabled the court to see the internal inconsistencies in Bimbo’s position. Bimbo’s own witnesses conceded on cross‑examination that distributors could complete store‑door deliveries without performing any merchandising services at all, which directly undermined the company’s theory. The trade article Bimbo attempted to rely on proved unhelpful because it acknowledged that the meaning of direct or store‑door delivery varied depending on context, and even described emerging forms of the service that combined several functions Bimbo claimed were indispensable. By allowing all of this extrinsic evidence into the record, the court was able to see that Bimbo’s litigation stance conflicted not only with industry usage but also with its own historical behavior.
