Judge Restrains Lindsay Lohan From Promoting Her Social Shopping App

A $60 million trade-secrets case targets the actress and her brother for surreptitiously working on a "clone" business and diverting celebrities
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Just a day after Lindsay Lohan, her younger bother, Michael Lohan Jr., and Vigme, Inc. were hit with a $60 million lawsuit over a mobile social commerce app that lets users peek into the virtual closets of celebrities and purchase wardrobe items, they are now subject to a temporary restraining order that prohibits them from promoting the technology and seeking partnerships and investments for the app.

Spotted Friend, founded by Fima Potik, filed the lawsuit in New York Supreme Court on Thursday and alleged that the Lohans had agreed in 2013 to become part of his company.

Lindsay Lohan herself was invited to join the company as a co-founder and given the responsibility of mentioning Spotted Friend on national television, getting sites like TMZ and PerezHilton to cover it, and cajoling other celebrities like Kim Kardashian to use the shopping tool via their Twitter feeds. Her success in getting other famous people on board was to be rewarding. For example, she was to be given an additional 2.5 percent interest in the company if she could get Leonardo DiCaprio and Sam Magid to sign on as advisers or investors.

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She also agreed to confidentiality, non-disclosure and non-compete conditions, according to the complaint, and after allegedly being provided extraordinary access to Spotted Friend's most sensitive trade secrets, the Lohans worked "surreptitiously to use Plaintiffs' business plan and proprietary information as a blueprint to form a competing company, Vigme, which is an online shopping community and interactive web and mobile-based marketplace that is identical in nearly every aspect to Spotted Friend."

The Lohans poached potential business partners from Spotted Friend, continues the lawsuit, and diverted potential celebrity clients too. For example, the suit mentions one meeting that Michael Lohan had with William Morris Endeavor last March about Spotted Friend and how two days afterward, Lohan wanted the talent agency to contact him directly. There's also work that in the same month, Potik and the Lohans met with Arianna Huffington, who allegedly agreed to become a Spotted Friend adviser before reportedly taking on that responsibility for Vigme. (Donny Deutsch is also reported to have become an adviser for Vigme.)

Potik says he discovered his competitor after reading a New York Post story about how Michael Lohan was raising capital for Vigme.

The lawsuit raises claims of breach of contract, breach of fiduciary duty and loyalty, misappropriation of trade secrets and unfair competition and also demands the holy grail of law — a permanent injunction that would seemingly put an end to Vigme if the claims hold up.

These things can take years to sort out in court, but the plaintiffs concurrently filed a motion for a TRO, where they discussed even more of the drama between the two companies — from the time in March that Michael Lohan allegedly met with a potential investor who didn't like Potik and how Lohan later began agitating for a larger membership interest in Spotted Friend to what happened in September, after Potik found out that the Lohans had become involved with Vigme.

According to the TRO motion, a lawyer for the Lohans made assurances that they had ceased their efforts on behalf of Vigme, and after weeks of discussion, a settlement agreement was sent for execution. However, that settlement wasn't signed, and on October 16, Michael Lohan is said to have attended Bloomberg L.P.'s Next Big Thing summit and began tweeting about Vigme.

Apparently, that caused the lawsuit to finally be filed with Potik's attorneys at the firm of Kasowitz, Benson, telling the judge that the harm is difficult to quantify but would be the loss of lucrative business opportunities.

The judge has accepted the early argument on why Potik is likely to prevail in the lawsuit and will experience harm and has issued a fairly broad TRO (see here). The Lohans will be able to challenge this at the next stage of the litigation — whether that TRO becomes a preliminary injunction until the resolution of the case. The judge wants a hearing to happen no later than November 20.

Email: Eriq.Gardner@THR.com
Twitter: @eriqgardner

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