Jul 26, 2022

TIKI2 Defeats Frivolous Lawsuit Brought by LSG Vodka, W. Scott Murray

Years-Long Ordeal Highlights Abusive Loophole in Texas SLAPP Law, Threat to Small Businesses

AUSTIN – Local design agency TIKI2, with assistance of legal counsel, recently forced an end to a 2018 suit initiated by LSG Vodka LLC d/b/a Perspectv Distilling Company (now known as Real Good Spirits LLC). That lawsuit, which TIKI2 has always maintained was frivolous, originated from the aftermath of a failed 2016 business deal between William Scott Murray — operating as LSG Holdings LLC and LSG Spirits LLC — and Flagrant Brands. Despite having an agreement in place, days before Flagrant’s trademark application was to expire — and assurances to Flagrant the purchase was still proceeding — Murray chose to add “the” to Flagrant’s product name and present it as an original brand.

Murray, using another LSG entity (LSG Vodka), then filed suit against Flagrant Brands in 2017 after Flagrant asserted its intellectual property rights. The lawsuit, prosecuted by Murray’s girlfriend and business partner Amy C. Welborn, did not end on merit or fact; rather, expensive courtroom antics that earned rebuke from the presiding judge forced an unjust settlement.

TIKI2 was the agency of record for Flagrant, providing design, brand development and marketing for the company since 2014. Because that relationship existed — and having “won” against Flagrant — W. Scott Murray and his company LSG Vodka next targeted TIKI2 with duplicate complaints previously levied against Flagrant. TIKI2 immediately moved for dismissal based on the Texas Citizens Participation Act (TCPA), a law designed to stop intimidation lawsuits.

“The suit was bogus. Even the judge at the dismissal hearing asked why Flagrant was not in the courtroom,” said Christopher Novosad, Chief Creative Officer of TIKI2. While the Third Court of Appeals upheld some of TIKI2’s rights — obliterating half of LSG Vodka’s spurious accusations — the lawsuit did not end as it should due to a glaring legal flaw: a commercial speech exemption. What imperils Texas small businesses is a commercial speech exemption that applies if a defendant is simply “engaged in the business of selling or leasing goods or services.” TIKI2 remained legally vulnerable to litigation abuse, even though it was another company’s product with advertising made at their direction.

“It was an eye opener to discover thousands of service providers like me are at risk — completely outside our control — if our clients fall prey to abusive litigants.” Novosad added, “You could be brought to court by people you’ve never met simply for engaging in normal commerce.”

According to Novosad, what followed was a Kafkaesque situation where it seemed that LSG Vodka and its investor-attorney Amy Welborn was interested only in using the court system to intimidate a settlement. By 2021, Defendant TIKI2 initiated the discovery process. “It became clear from their blatant refusal to answer our inquiries there was no evidence to back up their claims,” said Novosad. “I could write a book on the deranged journey of absurdity we had to endure.”

According to the National Federation of Independent Business, small businesses are a favorite target of vexatious litigants since they are more likely to settle. While most settlements are less than $5,000, a $1,000 demand could break a small company. According to the 2020 “Tort Liability Costs for Small Businesses” report, small businesses account for 39% of all commercial tort liability costs — totaling $182 billion. Novosad explained he was fortunate enough to have found a lawyer willing to work with TIKI2’s budget.

“If you choose to never surrender, don’t expect to break even. By defending yourself, you will lose time, opportunity and money — possibly your sanity — making sure the bad guys don’t win.”

LSG Vodka filed a nonsuit immediately after the judge’s ruling on TIKI2’s Second Motion to Compel would have forced them to explain their failures to uphold basic rules of court procedure and preserve LSG’s Rackspace email hosting server.

Novosad advises that it is important if you are hit with a nuisance suit — don’t freak out. Find a lawyer you trust, stick to the facts, and “fight like hell.” Winning a frivolous suit can protect your good name and preserve business property.

“Still, I’d rather the glaring hole in the TCPA were fixed,” Novosad mused, “It’s far, far better to not have never been in the position I was in at all.” Small businesses and gig workers should petition their state representatives and local chambers of commerce as well as looking for business activist groups, like Citizens Against Lawsuit Abuse (https://cala.com/), to make necessary changes to state law to preserve the viability of small-scale entrepreneurship in Texas.

 


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