WACO, Texas (KWTX) Two former partners of Chip Gaines in the creation of the Magnolia Real Estate Company are suing the “Fixer Upper” star for fraud, claiming that Gaines bought them out without telling them that HGTV had decided to broadcast the show nationally “and that the show prominently featured the ‘Magnolia’ brand name.”
(Photo by Neal Klaeser)
In the 24-page lawsuit filed Wednesday in state district court in Waco, Gaines’s two former partners, lawyers John L. Lewis and Richard L. Clark, are seeking more than $1 million in damages and non-monetary relief, as well.
Gaines’ spokesman declined to comment on the suit, but his attorney, Jordan Mayfield, told KWTX Thursday, “We are confident that these claims will be found to be meritless, and it is disappointing to see people try to take advantage of the hard work and success of Chip and Joanna Gaines."
Lewis and Clark were equal partners with Gaines in founding the Magnolia Real Estate Company in 2007.
The suit says that for the first six years, the company largely operated in Waco with a single real estate agent.
The suit claims Gaines worked out a deal with HGTV for the “Fixer Upper” program without telling his partners and that Gaines planned on featuring the Magnolia brand name.
Gaines bought their shares of Magnolia Real estate for $2,500 each, the suit says.
"With this insider information in hand, Chip Gaines convinced plaintiffs to sell their membership interests in Magnolia Realty quickly to him before a public announcement that “Fixer Upper” was picked up by HGTV."
The suit, which also names Magnolia Realty, Scripps Networks Interactive, Scripps networks LLC and High Noon Entertainment which produces the show, claims Gaines pressured Lewis and Clark to sell “before they discovered the company’s value was radically enhanced by ‘Fixer Upper.’”
When Clark balked at the terms of the buyout, the suit alleges Gaines sent a text advising Lewis to tell Clark “to be careful.”
“I don’t come from the nerdy prep school he’s from. And when people talk to me that way they get their asses kicked. And if he’s not ready to do that he better shut his mouth. I’m not the toughest guy there is, but I can assure you that would not end well for [R]ick,” the text read, according to the suit.
Since the show debuted, the suit says, Magnolia has grown from a single-agent firm to one that employs “over 93 real estate agents, and a support staff, and now operates in nearly every major city in Texas.”
In addition to monetary damages, the suit seeks rescission of the sale of the company or fair value for Lewis’ and Clark’s interest, payment of salaries, bonuses in-kind benefits and distributions they would have received as partners