BrokerageNews Brief

‘Fixer Upper’ Chip Gaines’ real estate brokerage now a $1M-plus battleground

  • Richard Clark and John Lewis allege that "after secretly learning that Fixer Upper was to be fast-tracked for a one-hour premier on HGTV, Chip devised a plan to build the 'Magnolia' name into an empire without his business partners."

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If you’re familiar with the broker/owner behind Magnolia Realty in Waco, Texas, then you’re probably familiar with HGTV’s Fixer Upper and its stars — Chip Gaines, who along with his wife Joanna is the fixer-upper in question.

You’re probably less familiar with the names Richard Clark and John Lewis, but they were formerly two-thirds of Magnolia Realty, and in a lawsuit filed last week in McClellan County, Texas, Clark and Lewis are alleging that the real estate brokerage “owes its existence” to Chip Gaines’ relationship with them.

They also allege that “after secretly learning that Fixer Upper was to be fast-tracked for a one-hour premier on HGTV, Chip devised a plan to build the ‘Magnolia’ name into an empire without his business partners.”

To that end, Clark and Lewis are suing Gaines and several of his businesses for more than $1 million and “non-monetary relief” that includes either a “rescission of the sale” (a sort of “do-over” that would reinstate Clark’s and Lewis’ former 1/3-apiece ownership in Magnolia) or “fair value” for their ownership in the company.

Gaines had this to say about the lawsuit via Twitter:

In the petition filed, Clark and Lewis say that Gaines planned to turn Magnolia into an empire; they compare what’s happened to the “Magnolia” name to Martha Stewart, the Kardashians, the Olson Twins and even say “the scope of the Gaines’ self-promotion of their ‘Magnolia Empire’ … arguably rivals Donald Trump’s ubiquitous brand marketing.”

(Yes — they dragged the President into it.)

At the basis of Clark and Lewis’ allegations is that Gaines “pressured” them to sell their interests in the brokerage — which they agreed to do for $2,500 each. The lawsuit states that “they would have never agreed to sell their membership interests in Magnolia Realty” if they had known about the fast-tracked HGTV premier.

And since the sale, the popularity of the show has turned the real estate brokerage into a hot property. “Since May 2013, Magnolia Realty has grown from employing one individual to over 93 real estate agents, and a support staff, and now operates in nearly every major city in Texas.”

Clark and Lewis are suing for breach of fiduciary duty, fraud by nondisclosure and statutory fraud. They’re requesting a declaratory judgment — a binding judgment from the court.

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