Two former co-owners of Magnolia Realty filed a lawsuit against HGTV Fixer Upper star Chip Gaines for buying their stakes in the company two days before announcing the hit television show.
John L. Lewis and Richard L. Clark are demanding more than $1 million and their ownership stakes back -- or compensation for what their stakes would be worth now.
The lawsuit was filed Wednesday in McLennan County's 170th Judicial District Court. It names Fixer Upper production company High Noon Production, LLC. -- along with Scripps Networks and Scripps Networks Interactive, which operate cable network HGTV.
Lewis and Clark allege Gaines convinced them to sell each of their 1/3 ownership stakes in Magnolia Realty for $2,500 apiece, while withholding the fact that the value of those stakes would soon skyrocket as a result of the Fixer Upper national television program.
"In summary, at a time when only the Defendants knew that Fixer Upper had been fast-tracked for a one-hour premier on HGTV and was on the verge of radically changing their lives and business enterprises, Chip Gaines conspired to eliminate his business partners -- notwithstanding their longstanding friendship-- in order to ensure that he alone would profit from Magnolia Realty's association with Fixer Upper," the lawsuit stated.
Despite having already filmed a pilot and knowing the series was being picked up by HGTV, the lawsuit claims Chip told Lewis and Clark "there are no assets" and Magnolia Realty is "less than worthless." When Clark was reluctant to sell, the lawsuit claims Gaines became threatening.
"You better tell Rick to be careful," Gaines allegedly texted Lewis. "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 Rick."
Gaines even threatened to take Magnolia Realty's one employee and launch a competing real estate brokerage firm if the pair refused to sell, the lawsuit states. After the show's premier, Magnolia grew into a major real estate company with 93 real estate agents spread across Texas.
Lewis and Clark officially sold their stakes to Gaines on May 6, 2013. Two days later, on May 8, Chip publicly announced the HGTV show.
The show ended Lewis and Gaines' friendship, which first began around 1999 when Gaines sought legal services from Lewis, who is an attorney. The encounter led to a long friendship, which included lunches, hunting trips and daily conversations, the lawsuit said. The two even lived in the same neighborhood at one point.
Clark was a friend of Lewis, who invited him to become an equal business partner when Gaines and Lewis first decided to launch Magnolia Realty in 2006.
The final communication Lewis ever received from Gaines was an invitation to a Fixer Upper watch party, according to the lawsuit.
The lawsuit claims Gaines breached his fiduciary duty to Lewis and Clark by withholding information about the value of the Magnolia brand. And, it claims Chip committed fraud by not disclosing plans about Fixer Upper.
Waco Attorney Jordan Mayfield, who is representing Gaines, dismissed the lawsuit.
"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," Mayfield said in a statement.
