The $60 million lawsuit was filed by the siblings' former business associate and Spotted Friend founder Fima Potik.
Potik is charging the Lohans with breach of fiduciary duty and loyalty, unfair competition and breach of contract, reports The Hollywood Reporter.
In 2013, the Lohans reportedly agreed to be part of Potik's company, with Lindsay given the post of co-founder. The actress was tasked to promote Spotted Friend, an app which allows users to view celebrities' and friends' closets and shop similar items from the viewed wardrobes.
Lindsay was to mention the app in appearances on television and get celebrity friends to use it and promote it on social media. She was also tasked to get the app some online publicity via high-trafficked celebrity websites such as TMZ and Perez Hilton.
Potik, who is represented by Kenneth David and Marc Kasowitz, claims in the lawsuit that he found out the siblings have been meeting with investors without him.
He also claims that after learning his company's secrets, the Lohans used his "business plan and proprietary information as a blueprint to form a competing company, Vigme" which he discovered after reading an article on The New York Post.
Manhattan Supreme Court judge Saliann Scarpulla has passed a temporary restraining order against the Lohans on Friday, which restrains them from marketing or promoting Vigme, reports Fox News.
Meanwhile, the Lohans' and Vigme's legal representative Ravi Batra, says there is no truth to Potik's claims and that "Fima is an inept plagiarizer who fraudulently induced Lindsay, Mike and Chris to join him with [false] representations that he would have a product-recognizing app by June 2013 - an app he still hasn't created."
He added, "Fima's days of being a celebrity-leech are over."
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