## Facts

- Thomas M. Coughlin was a long-time Wal-Mart executive and director, including leadership over loss prevention functions addressing internal theft, fraud, and abuse.
- Wal-Mart announced Coughlin’s retirement, and the parties executed a Retirement Agreement on January 22, 2005, containing a mutual general release of “all claims,” including “known or unknown,” in exchange for substantial retirement benefits.
- After the agreement, Wal-Mart received a report that Coughlin used a company-issued gift card for personal purchases, prompting an internal investigation.
- Wal-Mart’s investigation allegedly uncovered broader misappropriation of company funds and assets by Coughlin.
- Wal-Mart alleged that, while negotiating and entering the Retirement Agreement and release, Coughlin failed to disclose his misconduct and made or maintained corporate certifications and disclosures representing he was not engaged in wrongdoing.
- Wal-Mart sued, asserting breach of fiduciary duty (nondisclosure in a self-dealing transaction), fraud/fraudulent concealment, and fraudulent inducement to enter the Retirement Agreement and release.
- The circuit court dismissed under Rules 12(b)(6) and 9(b), concluding the release barred the claims and the fraud allegations lacked sufficient particularity.

## Issues

1. Whether a corporate officer/director negotiating a self-dealing retirement agreement owes a fiduciary duty to disclose material facts about his own misconduct, such that nondisclosure can render the agreement and release voidable.
2. Whether claims for fraud, fraudulent concealment, and fraudulent inducement were pleaded with sufficient particularity under Arkansas Rule of Civil Procedure 9(b) to survive dismissal under Rule 12(b)(6), despite a broad, unambiguous mutual release.
3. Whether fraudulent intent and the parties’ intent regarding the scope of the release could be resolved on a motion to dismiss.

## Decision

- The Arkansas Supreme Court reversed the dismissal and remanded for further proceedings.
- The court held Wal-Mart sufficiently alleged that Coughlin, as a fiduciary, had a duty to disclose material facts (including alleged fraud and misappropriation) before entering a self-interested agreement with the corporation.
- The court held Wal-Mart pleaded fraudulent inducement and related fraud theories with adequate particularity to satisfy Rule 9(b) and state claims under Rule 12(b)(6).
- The court ruled the circuit court improperly made premature factual determinations regarding fraudulent purpose and the effect of the release; those matters were for the fact-finder.

## Legal Principles

- Corporate officers and directors owe duties of good faith and disclosure to the corporation, including in transactions where the fiduciary is personally interested.
- A fiduciary’s failure to disclose material facts concerning his own alleged fraudulent conduct before entering a self-dealing contract with the corporation can render the contract voidable.
- A broad, unambiguous release does not automatically bar claims that the release and underlying agreement were procured through fraudulent inducement or breach of fiduciary duty.
- Under Rule 9(b), fraud-based claims must be pleaded with particularity, including the nature of the misrepresentations or concealment and reliance; when adequately pleaded, dismissal at the pleading stage is improper.
- Fraudulent intent and the parties’ intent as to whether a release covers claims grounded in alleged fraudulent procurement are generally questions of fact not suitable for resolution on a motion to dismiss.

## Conclusion

The court held that Wal-Mart’s complaint plausibly alleged that Coughlin’s fiduciary nondisclosure and related fraud induced the retirement agreement and release, so the release could not defeat the claims at the pleading stage and fact issues regarding intent and materiality required further proceedings.


Wal-Mart Stores, Inc. v. Coughlin, 369 Ark. 365 (Ark. 2007)