In a distribution territory dispute, the Fourth Circuit Court of Appeals held that a Maryland Federal District Court properly considered parol evidence and reasonably found that the distributor’s territory encompassed an automated fulfillment center. Davis v. Bimbo Foods Bakery Distribution, LLC, 2026 WL 226748 (4th Cir. Jan. 8, 2026).
Walter Davis and Bimbo Foods Bakery, the manufacturer of several popular baked goods brands, entered into a distribution agreement in January 2011, under which Bimbo granted Davis the exclusive distribution rights to a territory encompassing Frederick County, Maryland. The distribution agreement granted Davis the rights to deliver to “Outlets” within the territory, and defined Outlets as, “all retail stores and institutional accounts which purchase Products by store door delivery.” Notably, “retail stores” and “store door delivery” were not defined terms in the agreement. In February 2020, Kroger opened an automated fulfillment center in the territory. The fulfillment center did not service stores directly, but instead supplemented inventory of nearby Kroger stores and fulfilled orders from online consumers. Bimbo informed Davis that it intended to allow another distributor to deliver to the fulfillment center, after which, Davis sued for anticipatory breach of the distribution agreement. Davis sought (i) a declaration that the fulfillment center constituted an “Outlet” and (ii) an injunction preventing Bimbo from using other distributors to deliver to the fulfillment center. After a four-day bench trial, the trial court found in favor of Davis. Bimbo appealed.
The Fourth Circuit held that the district court did not clearly err when determining that the fulfillment center constituted an Outlet under the distribution agreement. On appeal, Bimbo first argued that, because the term Outlet was unambiguous, the district court erred by considering parol evidence to determine the meaning of the two undefined terms—“retail stores” and “store door delivery.” The Fourth Circuit disagreed, noting that both Bimbo and Davis proffered competing dictionary definitions of those terms, and that, because neither definition resolved the open question in the context of the case, the district court properly considered parol evidence in the form of testimony from experts and former Bimbo employees. Second, Bimbo argued that the district court erred by finding that the terms “retail stores” and “store door delivery” included the fulfillment center. Again, the Fourth Circuit disagreed, reasoning that (a) the distribution agreement’s plain text supported the district court’s conclusion, (b) the testimony of Bimbo’s former employees supported the district court’s finding, (c) and Bimbo’s proffered evidence to the contrary was confusing and counterintuitive.