An Arkansas (search) judge Tuesday dismissed a large part of Wal-Mart Stores Inc.'s lawsuit against former Vice Chairman Tom Coughlin, saying the executive and the company had agreed not to sue one another over any events that happened during Coughlin's tenure.

Wal-Mart (WMT) had claimed Coughlin, a protege of company founder Sam Walton (search), misused $500,000 in cash and property over a number of years.

Benton County Circuit Judge Jay Finch (search), whose courtroom is about a mile from Wal-Mart's headquarters, said Wal-Mart failed to show that Arkansas law required a company officer to disclose any improprieties before signing a general release from liability.

Finch said Wal-Mart can still pursue losses that occurred after Jan. 22, when the company and Coughlin waived their right to sue over past events. Wal-Mart says it gave Coughlin $400,000 in April because of a benefits calculation error and wants the money returned.

Wal-Mart, the world's largest retailer, had sued the 28-year company veteran this summer after referring the matter to federal prosecutors.

But an agreement between Coughlin and Wal-Mart said they would release each other "from any and all liability from claims, causes of actions, demands, damages, attorneys fees, expenses, compensation or other costs or losses of any nature whatsoever, whether known or unknown."

Finch's order said Wal-Mart could only pursue claims for any alleged wrongs that occurred after the release was signed.

"We grant Coughlin's motion to dismiss that part of Wal-Mart's complaint of all allegations occurring prior to signing the mutual release," Finch wrote. "With regard to Wal-Mart's post-release allegations, we deny Coughlin's motion to dismiss."

Coughlin retired in January but remained on the company board. He resigned from the board in March, when the company disclosed it was handing documents over to the Justice Department showing that $500,000 had been misused.

A grand jury has been meeting in Fort Smith to address Wal-Mart's claims against its former executive. Coughlin, through his attorney, has denied any wrongdoing.

P.K. Holmes, an attorney for Wal-Mart and a former U.S. Attorney for western Arkansas, told Finch at a hearing last month that Coughlin, as an officer of the company, had a fiduciary duty to disclose information about how Wal-Mart funds were being used.

"Coughlin as an officer of the company cannot fraudulently sign a release and then rely on the release for protection from prosecution," Wal-Mart spokesman Marty Heires told the Associated Press.

The company sued Coughlin, seeking the return of compensation he received from a retirement agreement plus any money he misappropriated. The lawsuit also seeks $400,491.90 that the company says Coughlin received April 12 as the result of a benefits error.

Wal-Mart disclosed in April that it was suspending Coughlin's benefits. Under his retirement agreement, Coughlin is to receive his base salary of $1.03 million for two years.

A notice in a filing with the Securities and Exchange Commission said Coughlin would lose 186,407 shares of restricted stock, worth $9.77 million at the end of the company's last fiscal year.

Coughlin led the company's discount and warehouse stores divisions until late last year.