After business has been halted due to a devastating structure fire in December, EXO Nail Bar and Lounge is suing the former operators of the nail salon portion of the business for allegedly disparaging the trade name before opening a new salon in Maryville.
Specifically, the suit states that defendants Ricky Thai, Jenny Phan, XOXO Nail Bar Inc., and Casca Nail Boutique LLC misrepresented financial statements, sold more than $355,000 worth of gift cards but failed to redeem them, and breached confidentiality agreements before a Dec. 30 , 2021, structure fire broke out in the nail salon portion of the building.
EXO Industries LLC, EXO Nail Bar LLC, EXO Nail Salon LLC, EXO Lounge, LLC and GG Madison LLC filed the complaint in the St. Clair County Circuit Court through attorneys Chad Richter and Laura Schrick of Mathis Marifian & Richter Ltd. in Edwardsville.
The complaint states that XOXO Nail Bar does business as EXO Nail Bar and is owned by Thai. Phan is listed as Thai’s wife, employee of XOXO Nail Bar and organizer and manager of Casco Nail Boutique.
EXO Partners claim they offered “a unique and proprietary business concept which merged Vietnamese and American cultures to form an integrated, innovative business and revenue model that hinged on the success of the nail bar and lounge working seamlessly in unison together to provide an exceptional first class nail salon and entertainment guest experience.”
The EXO Nail Bar and Lounge became operational in December 2019.
The plaintiffs incurred costs in excess of $750,000 in order to develop the brand and business development. The EXO Partners entered into confidentiality agreements with entities including construction contractors, architects, designers and employees.
Following development, Thai entered into a lease agreement in 2018 to provide nail salon services at the EXO Nail Bar and Lounge located at 2157 Center in Edwardsville. The services were provided through Thai’s company XOXO Nail Bar Inc. Thai was allegedly responsible for rent and other costs as well as the split cost of an espresso machine.
On April 22, 2021, Phan allegedly filed the articles of organization for Casca Nail Boutique. In April and May 2021, Phan allegedly accessed the EXO Partners’ social media accounts and placed herself as sole administrator without authorization - “restricting and excluding EXO Partners and their employees from accessing or otherwise controlling its content.”
On May 18, 2021, GG Madison allegedly gave Thai notice of default under the terms of the lease agreement for failing to provide accurate financial and accounting reports, failing to pay rent and ceasing to conduct business without notice to customers with scheduled appointments. EXO Partners claim they also demanded Phan relinquish control over the plaintiffs’ social media.
“After receiving reassurances from defendants that the unauthorized access would cease and the nail salon returning business operations, the EXO Partners withdrew the election to terminate … the lease agreement,” the suit states.
In August 2021, EXO Partners sought to retain Thai’s nail salon services at franchised locations. Thai refused, saying he did not have the capacity to create an additional EXO location. He then asked for the EXO brand ownership to be signed over to Phan. Instead, the plaintiffs allegedly offered for Thai and Phan to buy in to the brand, which they denied.
In September or October 2021, the performance and quality of Thai’s nail salon services “were drastically decreasing, causing extraordinarily long wait times and numerous negative customer reviews.” Customers were also referred to other salons, the suit states.
On Dec. 27, 2021, Thai allegedly contacted EXP Partners requesting a meeting to discuss the EXO Nail Bar and Lounge. The following day, he registered the trademark of Casca Nail Boutique, which indicates the goods and services related to nail salons and cocktail lounges.
Then on Dec. 30, 2021, EXO Nail Bar and Lounge sustained a structure fire that allegedly originated in Thai’s nail salon section of the premises. The suit states that prior to the fire, Thai and Phan began exploring business locations to operate Casca Nail Boutique.
Shortly after the fire, the defendants allegedly entered into a lease agreement for a commercial property in Maryville. The plaintiffs claim they operated Casca Nail Boutique using EXO Partners’ proprietary systems and trade secrets.
On Jan. 4, Thai and Phan met with the plaintiffs to discuss the lease agreement. The defendants allegedly informed them that they were leaving for Vietnam and would no longer be working in the nail bar/salon industry.
EXO Partners allegedly sent a termination of lease agreement and non-compete agreement to the defendants on Jan. 12. Thai allegedly indicated that he would not sign the agreement unless Phan was removed. Updated agreements were sent the following day, but they were never signed, the suit states.
“After twenty-five months of operation, the EXO Nail Bar and Lounge business is temporarily inoperable due to the damage sustained to the premises from the fire incident,” the suit states.
During this time, Thai and Phan allegedly represented to EXO Partners that the nail salon faced severe financial hardship numerous times.
From December 2019 to December 2021, Thai allegedly sold $355,630.04 in gift cards. EXO Partners claim they have demanded Thai refund the gift cards to provide an accounting of the gift card balance. He has allegedly refused or neglected the responsibility.
“Defendants Thai and XOXO engaged in deceptive trade practices during their course of business by selling gift cards to consumers under the EXO tradename and representing to consumers that defendants would honor the gift cards as payment for nail salon services provided by defendant Thai and XOXO at the EXO Nail Bar and Lounge location,” the suit states.
EXO Partners claim Thai and Phan conspired to collect revenue from the gift card sales but did not intend to honor them. The defendants allegedly sought to terminate the lease agreement and cease operations before the gift cards could be redeemed.
“As of the date of filing, EXO Partners have been forced to redeem approximately $72,391.20 worth of gift cards sold by defendant Thai to preserve the EXO tradename,” the suit states.
The plaintiffs claim the defendants intended to disparage the EXO tradename “for the benefit” of Casca Nail Boutique.
Additionally, the complaint alleges that Thai was responsible for paying a total of $844,475 in rent and additional fees during the two-year period that the salon was operational. However, he allegedly paid a total of $189,000 in monthly rent and $148,622.19 in additional rent.
The plaintiffs seek monetary relief to “adequately and fully compensate plaintiffs for their losses, including all foreseeable and consequential damages arising therefrom, together with punitive damages.” They also seek to permanently enjoin and restrain the defendants from offering the sale of alcohol in conjunction with nail salon services, using EXO Partners’ brand aesthetics and experiences, operating a nail salon in conjunction with a lounge and employing vendors or other business partner prospects of EXO Partners.
Defamation suit
EXO Nail Bar and EXO Lounge are also currently litigating a defamation suit against several individuals accused of making defamatory statements on social media. That suit was filed through attorneys Russell Watters and John Cunningham of Brown & James PC in Belleville.
Watters and Cunningham filed a motion to withdraw as counsel on March 23, stating that they “desire to terminate their representation” of the plaintiffs. A hearing on the motion is set for June 10 at 11:40 a.m. with Circuit Judge Christopher Threlkeld presiding.
The defamation suit was filed in Madison County Circuit Court against Jonas Cathey, Ashley Garrison, Stefanie Anderson, Michelle Lynn Baker, Rebecca Obermark, Amya Helms, Drake Wesser, also known as Drake Chandler, and Hannah Weinreich.
EXO Partners claim they suffered damages after the defendants accused the plaintiffs of being investigated by the FBI for sex trafficking, money laundering and drugs.
The defendants denied the allegations and filed motions to dismiss, which remain pending. They argue that their statements are opinions and are protected by the First Amendment. Those motions remain pending.