Green Building Litigation--Whither the Lawsuits?

Shaw Development v. Southern Builders, the first "green" lawsuit, caused a lot of legal handwringing in 2008, with many predicting scads of green building litigation to follow.  Now, almost halfway into 2009 we have seen...nothing.  I have a few theories:

1. Green building is a tiny (though growing) proportion of overall building--While very newsworthy, green building comprises only a tiny proportion of overall building.  According to McGraw Hill, just 2% of construction is green, although that looks to grow over the next few years. 

2. Owners are too afraid to measure their building performance--In order to prove breach of contract or failure of products, performance needs to be measured.  But if owners show that their buildings are not acheiving the energy efficiencies or cost savings or occupant health benefits promised, the owners themselves may be open to suits from occupants, investors, etc.  Better to keep head in the sand.

3. Economic downturn--As builders, developers and management companies struggle just to survive, companies do not have the extra capital to spend on expensive litigation.

4. It's just a matter of time--Green buildings are too new and the technologies have not been in place long enough to fail.  As more green buildings are constructed, more litigation will develop.

Any other theories? 

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Steve Sacks - May 28, 2009 4:01 PM

Great post, Shari.

I don't mean this as a gratuitous pat on the back, but I think us lawyers are getting wise, and inserting specific language in contracts that helps avoid litigation. Certainly, Shaw set off alarm bells, and contracts are getting very specific to cover green nuances in construction. I recently read a contract that had over 50 pages of green specifications for the contractor - many of them tied to specific LEED requirements. If Shaw had that kind of detail in their contract they would have never gone to court.
Cheers, and thanks again for the thought-proviking post.

Bethany - May 28, 2009 4:49 PM

Here in the Comox Valley in Canada people are VERY concerned about the building industry becoming more sustainable. I think has a lot to do with the lifestyles that come with living in an areas such as this.

I think there should be something in place that helps to define "green". Many community members are concerned that the products they are investing in are not actually "green" at all - but only marketed as such. They share the same concern regarding using "green" builder. Is that builder actually knowledgeable regarding "green" building? Do they actually care about sustainability? - or are they just trying to make a buck from yet another trend?

I've really enjoyed talking to people in my community about this. I've found it very useful in deciding how our construction company will become more responsible to the earth and to our clients.

John Haak - May 29, 2009 8:44 AM

just a 'thanks' for the very timely and informative posts.
keep up the great work!

Mark Rabkin - May 29, 2009 11:23 AM

One of the key failures in Shaw was the failure to receive the tax incentive offered by the Maryland Energy Authority. Had the parties involved taken the time to read the language of the incentive, they would have known that the tax benefits are contingent on a specific time frame from approval until significant completion had been achieved (11 months). Like Nevada before it, legislation providing financial incentives for eco-friendly projects are being closely reviewed for enforceability and attainability.

I agree with Steve in that the legal community is beginning to understand their role in the importance of new contractual exposures created in "green" building. An enforceable contract between all parties is crucial to a smooth development project as well as effective risk transfer and risk sharing mechanisms. Parties to a "green" building project also should play a greater role throughout the process whereas in the past they typically know their role and shut their mouth.

However, as "green" building advocates are selling the benefits of sustainable structures, many of the actual performance results have yet to percolate. Should these buildings fail to meet the expectations of the owners as it relates to reduced operating and maintenance costs, increased occupant health and productivity and increased asset value, you could see claims coming down the pipe by dissatisfied property owners.

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