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IN THE SUPREME COURT OF THE STATE OF HAWAI#I ---o0o-- LINDA GUMP, Respondent-Plaintiff-Appellee, v. WAL-MART STORES, INC., a Delaware corporation, PetitionerDefendant-Appellant, and KBRL, Inc., a Hawaii corporation, JOHN DOES 1-10, JANE DOES 1-10, DOE CORPORATIONS, PARTNERSHIPS, GOVERNMENTAL UNITS or OTHER ENTITIES 1-20, Defendants NO. 21670 CERTIORARI TO THE INTERMEDIATE COURT OF APPEALS (CIVIL NO. 96-112K) July 27, 2000 MOON, C.J., LEVINSON, NAKAYAMA, RAMIL, JJ. AND CIRCUIT JUDGE WONG*, ASSIGNED BY REASON OF VACANCY

OPINION OF THE COURT BY NAKAYAMA, J. Petitioner-appellant Wal-Mart Stores, Inc. (Wal-Mart) has applied to this court for a writ of certiorari to review the opinion of the Intermediate Court of Appeals (ICA) in Gump v. Wal-Mart Stores, Inc., No. 21670 (Haw. Ct. App. Nov. 17, 1999) (slip op.) [hereinafter, the "ICA's opinion"], affirming the trial court's judgment in favor of the plaintiff and various orders of the trial court. Wal-Mart argues that the ICA erred in 1) the ICA should not

affirming the judgment and orders because:

* Acting Associate Justice Wong, was assigned by reason of the vacancy created by the resignation of Justice Klein, effective February 4, 2000. On May 19, 2000, Simeon R. Acoba, Jr. was sworn-in as associate justice of the Hawai #i Supreme Court. However, Acting Associate Justice Wong remains on the above-captioned case, unless otherwise excused or disqualified.

have adopted the "mode of operation" rule; 2) the ICA misapplied the rule by omitting certain requirements; 3) Gump did not prove that Wal-Mart failed to exercise reasonable care; 4) the settlement paid by Defendant KBRL, Inc. [hereinafter "McDonald's"] to Gump should have been set off against the amount of the jury's verdict; and 5) the trial court should have included McDonald's on the special verdict form. We hold that

the ICA did not err in adopting the mode of operation rule. However, its application is limited to the circumstances of this case, wherein a commercial establishment, because of its mode of operation, has knowingly allowed the consumption of ready-to-eat food within its general shopping area. We further hold, as a

matter of law, that the McDonald's settlement should have been set off against the amount of the jury's verdict against WalMart. Therefore, we reverse the ICA's opinion insofar as it

affirmed the amount of damages entered against Wal-Mart and affirm the opinion, as modified by our analysis, in all other respects. I. A. BACKGROUND

Factual and procedural background This case arose out of an incident in which Gump

slipped on a french fry outside the McDonald's restaurant but 2

inside the premises of Wal-Mart and sustained injuries. restaurant is located inside the Kailua-Kona Wal-Mart.

The The

factual and procedural background is described in the ICA's opinion. We repeat only the facts relevant to the issues

discussed herein. On October 2, 1997, Wal-Mart filed a motion for summary judgment arguing, inter alia, that it was entitled to summary judgment on the negligence claim because it did not have notice of the fallen french fry. The trial court denied the motion.

Prior to trial, Gump reached a settlement with McDonald's, pursuant to which Gump released McDonald's in exchange for $5,000. Upon Gump's motion in liminie regarding the

dismissal of McDonald's, the trial court ruled that the issue of McDonald's liability would not be raised before the jury and that McDonald's would not be included on the special verdict form. its opposition to the motion, Wal-Mart also argued that, if the jury awarded damages to Gump, Wal-Mart was entitled to a set off in the amount of Gump's settlement with McDonald's. The trial In

court stated that it would not apply a set off because Wal-Mart had not filed a cross-claim against McDonald's. The evidence adduced at trial established that McDonald's maintained a sign inside the restaurant that read, 3

"Patrons, please do not leave these premises with food." However, Wal-Mart employees generally did not approach customers who took McDonald's food into the store unless they saw the customers "do something that would be hazardous . . . ." According to Bryan Wall, who was the store manager at the time of the incident, Wal-Mart had one or two employees patrolling the store at any given time and looking for spills or other hazards. Wall also testified that all employees were trained to constantly look for potential hazards and that the store called periodic "zone defenses" during the day. When a zone defense was called,

employees stopped what they were doing to pick up debris on the floor and clean up any spills. However, Wall was unable to

specify how often the zone defenses occurred or whether or when one had been implemented prior to Gump's fall. The jury awarded Gump $20,000 in general damages and $6,500 in special damages and apportioned liability 95% to WalMart and 5% to Gump. On April 23, 1998, the trial court entered

final judgment in favor of Gump, ordering Wal-Mart to pay $25,175 in damages. Wal-Mart subsequently moved for a judgment

notwithstanding the verdict (JNOV), arguing that there was no evidence that it had notice of the fallen french fry or that it had breached any of its maintenance procedures. 4 In the

alternative, Wal-Mart requested a new trial in which McDonald's could be included on the special verdict form. denied the motion. B. Wal-Mart timely appealed. The trial court

The ICA's opinion On appeal, Wal-Mart argued that the trial court erred

in:

1) denying Wal-Mart's motion for summary judgment as to the

negligence claim; 2) dismissing McDonald's, excluding evidence regarding McDonald's liability, omitting McDonald's from the special verdict form, and refusing to set off the McDonald's settlement against the amount of the jury's verdict; 3) allowing Gump to introduce evidence of prior accidents; 4) sanctioning Wal-Mart under Rule 26 of the Hawaii Arbitration Rules; 5) sanctioning Wal-Mart for settlement conference violations; and 6) denying Wal-Mart's motion for JNOV or a new trial. affirmed the trial court on all points. The ICA

In its application for

certiorari, Wal-Mart does not contest issues 3, 4, and 5. In affirming the trial court's denial of Wal-Mart's motion for summary judgment as to the negligence claim, the ICA adopted the mode of operation rule and held that the rule relieved Gump of her burden to prove that Wal-Mart had notice of the french fry. The ICA also held that the trial court properly

dismissed McDonald's from the case and excluded evidence of 5

McDonald's liability because Wal-Mart had not asserted a crossclaim for contribution against McDonald's. In addition, the ICA

held that the trial court did not abuse its discretion in refusing to include McDonald's, a non-party, on the special verdict form. The ICA also affirmed the trial court's denial of

Wal-Mart's motion for JNOV or, in the alternative, a new trial. Wal-Mart filed a timely application for certiorari on December 17, 1999.1 Wal-Mart argues that the ICA erred in

affirming the judgment against Wal-Mart where there was no proof of actual or constructive notice and no proof that Wal-Mart failed to exercise reasonable care. Wal-Mart also argues that

the ICA erred in affirming the award of damages where Wal-Mart was denied the opportunity to establish McDonald's liability and/or the trial court refused to set off the McDonald's settlement against the amount of the jury's verdict against it. II. STANDARD OF REVIEW

The adoption of the mode of operation rule and establishment of the requirements of the rule are questions of

The Hawaii Restaurant Association and the Hawaii Insurers Council (HIC) filed briefs of amicus curiae on January 18 and 19, 2000, respectively. The Building Owners and Managers Association (BOMA) and the Institute of Real Estate Management filed a joint amicus brief on March 28, 2000. All argue that the ICA erred in adopting the mode of operation rule. HIC and BOMA also argue that cross-claims should not be required in order to litigate the liability of settling parties.

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law.

Questions of law are reviewed de novo under the right/wrong Roes v. FHP, Inc., 91 Hawai#i 470, 473, 985 P.2d 661, The trial court's findings of fact are reviewed

standard. 664 (1999).

under the clearly erroneous standard and its conclusions of law are reviewed under the right/wrong standard. 91 Hawai#i 1, 8, 979 P.2d 586, 593 (1999). [Hawai#i Rules of Civil Procedure (HRCP)] Rule 41(a)(2) provides in pertinent part that "[e]xcept [by stipulation], an action shall not be dismissed at the plaintiff's instance save upon order of the court and upon such terms and conditions as the court deems proper." HRCP Rule 41(a)(2) (emphasis added). A court's imposition of such terms and conditions would be reviewable for an abuse of discretion. Sapp v. Wong, 3 Haw. App. 509, 512, 654 P.2d 883, 885 (1982). Moniz v. Freitas, 79 Hawai#i 495, 500, 904 P.2d 509, 514 (1995) (some alterations in original). Whether Wal-Mart was entitled to Brown v. Thompson,

set off the McDonald's settlement under the Uniform Contribution Among Tortfeasors Act (UCATA), HRS

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