Not So Fast--Supreme Court Clarifies Fiduciary Duty in Wal-Mart Case
The Arkansas Supreme Court reversed a 12(b)(6) dismissal in Wal-Mart Stores, Inc. v. Coughlin, No. 06-315 (4/12/07).
Wal-Mart's dispute with Tom Coughlin is well-chronicled by Arkansas Business. Coughlin misappropriated hundreds of thousands of dollars from Wal-Mart. Without disclosing these misappropriations, he entered into a Retirement Agreement with Wal-Mart. Under the agreement, the parties released each other from all claims that existed or that may exist. Wal-Mart sued to void the agreement and to claim fraudulent inducement, but the trial court granted Coughlin's motion to dismiss.
The Supreme Court reversed, holding that Wal-Mart properly stated a claim. The court cited a number of state and federal cases stating that a fiduciary owes a duty of full disclosure when entering into a mutual release with the corporation. The court made it clear that this decision did not create new law:
We emphasize, however, that this duty of a fiduciary to disclose is embraced within the obligation of a fiduciary to act towards his corporation in good faith, which has long been the law in Arkansas. Stated differently, we are not adopting a new principle of fiduciary law by our holding today but simply giving voice to an obvious element of the fiduciary's duty of good faith.
