If you are a partner in a business you have a fiduciary relationship with your fellow partners. That relationship means that partners owe each other fiduciary duties which a partner must abide by when acting on behalf of a business. Two former partners of a Texas real estate company claim their former third partner bought them out knowing the business would soon be much more valuable because it would be featured on a cable TV show and didn’t tell them before the purchase was finalized. The plaintiffs accuse Chip Gaines of HGTV’s Fixer Upper defrauded them in the process.
The fiduciary duty between partners includes several different duties, including the duty to act in the utmost good faith and fair dealing, and the duty of loyalty. A violation of a fiduciary duty could be putting the individual’s interests over that of the business. A common type of breach of fiduciary duty occurs when a business partner learns of an opportunity in his work as a partner and takes advantage of that opportunity for his personal benefit without first notifying or receiving the consent of his other partners. Plaintiffs could argue that’s the case here.
The two former partners of Gaines in the creation of the Magnolia Real Estate Company claim he bought them out without telling them in 2013 that HGTV will be broadcasting the show nationally “and that the show would prominently feature the ‘Magnolia’ brand name,” reports KWTX. The show features Gaines and his wife renovating various properties (fixer uppers).
In the lawsuit filed in state district court in Waco, Gaines’s two former partners, lawyers John L. Lewis and Richard L. Clark, seek more than $1 million in damages and non-monetary relief. Gaines’ attorney told KWTX the lawsuit was “meritless” and that it’s “disappointing” to see the plaintiffs were trying to “take advantage of the hard work and success of Chip and Joanna Gaines.” Lewis, Clark and Gaines were equal partners founding the Magnolia Real Estate Company in 2007.
The lawsuit states,
• For their first six years, the company operated in Waco with a single real estate agent.
• Gaines worked out a deal with HGTV for the “Fixer Upper” program without telling his partners and that he planned on featuring the Magnolia brand name.