A judge on Friday ordered “Fixer Upper” TV star and Magnolia magnate Chip Gaines to give a deposition in a civil lawsuit in which he is being sued for fraud by two former business partners.
Gaines sought to quash the notice for his deposition, and his attorneys argued at a hearing Friday that the plaintiffs in the lawsuit, John L. Lewis and Richard L. Clark, have no case and are trying to broker a settlement by threatening to smear Gaines’ reputation.
Judge Jim Meyer of Waco’s 170th State District Court granted a motion by Lewis and Clark to compel Gaines to submit to a deposition, and a motion to postpone a hearing on Gaines’ motion to dismiss the lawsuit until after the deposition is taken.
Gaines was represented at the hearing by six lawyers, including former McLennan County District Attorney Abel Reyna, but Gaines did not attend. Lewis and Clark, who also were not at the hearing, are represented by Waco attorney John P. Mabry Jr.
“We just think that this case needs to go away,” B. Todd Patterson, one of the attorneys representing Gaines, said after the hearing. “That is why we filed our summary judgment motion, and we are looking forward to getting an opportunity to argue that before the court and get this case dismissed.”
The lawsuit, which seeks more than $1 million in damages, was filed in April 2017 and also names as defendants Magnolia Realty; Scripps Networks, the company that owned HGTV; and High Noon Productions, the company that produced “Fixer Upper.”
The lawsuit asserts claims of conspiracy liability, breach of fiduciary duty, fraud by nondisclosure and statutory fraud, and accuses Gaines essentially of insider trading, or having knowledge and withholding information from his partners that affected the financial well-being of the business.
Lewis and Clark, who were partners in Magnolia Realty with Gaines for seven years, allege Gaines concealed the “true nature and scope” of his dealings with HGTV as “Fixer Upper,” the home improvement show that led to Chip and Joanna Gaines becoming household names and helped build the so-called “Magnolia Empire,” was in the development stage.
After seven years, Magnolia Realty was not a runaway success, but Gaines “suddenly approached plaintiffs for the first time” about buying their shares in the business, according to court filings.
“Two weeks later, Defendant Gaines finally pressured plaintiffs into selling their shares to him and he took sole ownership of Magnolia Realty,” a motion states. “Two days later, Defendant Gaines announced on Facebook that the pilot for ‘Fixer Upper’ had been ‘fast-tracked’ three weeks earlier, which was before he approached Plaintiffs about buying them out of Magnolia Realty.”
By buying out his partners, Gaines alone capitalized on the growth of the realty company spawned by the immense popularity of the TV show, the suit alleges.
“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 contends.
“It’s just harassment,” Patterson said after the hearing. “Despite what Mr. Mabry says, there have been nothing but threats to harm Mr. Gaines, and that has happened from the outset of the case.”
Mabry, who replaced Waco attorney David Tekell as the plaintiffs’ attorney, denied Patterson’s assertion that they were trying to leverage a settlement by threatening to harm Gaines’ reputation and argued that his deposition is essential in proceeding with the case.
Mabry characterized the dispute as a “swearing match” between the parties with the outcome depending on who the jury finds most credible — Gaines or Lewis and Clark.
“I think the judge did what was right in this case and ordered Mr. Gaines to give a deposition just like any other litigant in any other case,” Mabry said. “We simply want to take Mr. Gaines’ deposition to determine what he knew and when he knew it. Mr. Gaines has hired six lawyers, including a felony criminal defense lawyer, and he fought as hard as I have ever seen anyone fight to avoid giving a deposition. So it makes you wonder. What is he afraid of and what is he hiding?”
Patterson began his arguments to the judge Friday by saying, “This isn’t an ordinary case. This is a case filed by two lawyers against a successful, prominent and now famous businessman.”
Mabry countered that the case actually is fairly simple and that Gaines, despite his wealth and popularity, should be subject to give a deposition like anyone else, asserting that everyone should be equal in the eyes of the justice system.
Patterson argued that the request for deposition should be quashed because Lewis and Clark were well aware that the Gaineses were taping a pilot for a home improvement show, that there was nothing in the Magnolia Realty agreement to prevent him from working for a competing company and that Clark researched how much the company was worth at the time of the sale and Gaines paid them a fair price that they agreed to. Also, Patterson said, the realty company and “Fixer Upper” are “wholly unrelated entities.”
Patterson said Lewis is hard-pressed to say he was unaware of Gaines’ plans because he acknowledged in his deposition that he represented Gaines in his contract talks with HGTV and that the home the Gaineses renovated for the pilot “literally was in Lewis’ backyard.”
“Finally, this case has become personal,” Patterson said. “From the outset and continuing, there seems to be a desire to harass and harm a successful businessman in this community.”
Mabry denied that he or his clients have made attempts to put a stain on Gaines’ brand while the lawsuit has been pending.
“Have some general statements been made? Yes,” Mabry said after the hearing. “Big surprise. We don’t think the deposition of Chip Gaines will go very well for Chip Gaines. Big surprise. We think it is going to feel like he got hit with a sledgehammer because the sledgehammer are his own words and actions and his history of misleading people and concealing information from people for his pecuniary and financial gain.”
Patterson, of Houston, said Reyna, a two-term McLennan County DA before losing last year to Barry Johnson by 20 percentage points, was brought into the case to renew efforts to get it resolved.
Mabry and Reyna have been friends for years, and Mabry said Reyna has proposed what he characterized as “creative, out-of-the-box solutions” to resolve the case such as business ventures or land deals between Gaines and Lewis and Clark. The parties also have discussed “just walking away” and dismissing the suit, Mabry said.