Green Building Law Blog : Green Building Lawyer & Attorney : Shari Shapiro: Calliope Communications, LLC

Today I am going to highlight a bunch of interesting articles that have come out lately which interest me. Some of these will become future posts, but I want to highlight them as they come out to keep my readers up to date, and give you something to read in your spare time.

1. The USGBC issued a short white paper on Greening the Codes and the compatibility of LEED with green codes.  It is very good, and makes the point that LEED and green codes work together to encourage green building. 

2. The United States Council Of Mayors passed resolutions to promote green building in cities, including encouraging the passing of a clean energy bill by Congress and the adoption of green construction codes.

3. The DOE announced $76 million in green building and energy efficiency technology grants.

So now I want to know...What are YOU reading? 

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Today, my co-conspirator and green building blog buddy over at Green Building Law Update criticized a post I wrote a few weeks back on Wisconsin governor Jim Doyle vetoing a green building bill that mandated 15% of gross square footage of state space to be LEED certified.  The essence of Chris' piece is that

The Governor properly vetoed spending state funds to certify public buildings as green.

Except, that's not why he vetoed the bill.  He vetoed it because it requires all moneys available for use by the building commission to be devoted to making state buildings green.

In his letter to the senate he stated:

[The requirement that all moneys be used for greening buildings] will result in all current maintenance projects being delayed indefinitely.  In the future, the commitment of all these funds for this single purpose will also sharply curtain the state's ability to build new building or maintain its existing facilities. 

In short, he vetoed it because it was too expensive and that money should be used for building new, non-green facilities or repairing old ones in a non-green manner.

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The Northland Pines LEED appeal (a complete history is available here) and the Deepwater Horizon spill illustrate an inherent problem in any regulatory system--there will always be people who are looking to avoid regulation and commit fraud, and there will always be regulators looking to protect the status quo of regulations. 

Many people have called for the abandonment, execution and other stringing up of the LEED system because there are flaws, perhaps including the ones identified in the Northland Pines appeal. Just in the past few weeks, in addition to Northland Pines, we have seen criticism of the USGBC for its wood credits and its alleged failure to take into consideration human health issues.  Frank Gehry, from his vaunted position as one of the world's most famous architects, has fired his own shots at the LEED system, saying:

“I think the issue is finally a political one,” Gehry said. Referring to the LEED (for Leadership in Energy and Environmental Design) rating system...Gehry said: “A lot of LEED is given for bogus stuff.” The costs of making a green building are “enormous,” he said, and “they don’t pay back in your lifetime.”

He tried to clarify his position here a few days later.

But we cannot throw out the baby with the bathwater.  LEED is the system that got people started thinking about the greenness of the built environment.  It needs to progress, as all regulatory systems do, through amendment and challenge, like laws do.  It is neither right for the USGBC to resist or be defensive to this natural regulatory process, nor is it right for LEED's critics to suggest dismantling the entire LEED system.  As my mother once said, there has to be something between everything and nothing.

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GBLB spoke with Consulting engineers Lawrence G. Spielvogel, of King of Prussia, Pa., and Mark S. Lentz, of Sheboygan Falls, Wis who advised on the Northland Pines appeal, the first third party appeal of a LEED project.  Background on the Northland Pines appeal is available here.

GBLB: How did you become involved in the appeal:

Mark: Larry got involved at my request. A number of members of the Northland Pines building committee asked to visit a couple of my projects. We are doing some things that are unique in the world. Ultra high efficiency buildings and buildings utilizing entirely outside air. I was asked to come up to Eagle River [Wisconsin] to make a presentation [for the Northland Pines High School project]. When I found out the Board had engaged another engineer who was trying to steal my technology, I withdrew from the competition for the Northland Pines project in writing. In the meanwhile, I became friends with some of the Building Committee members. Some of the building committee members realized they were not getting what they anticipated [from the selected Northland Pines team], they raised a stink. When the designer threatened to sue them, they asked me to review the design to provide a defense for their decision. I realized I would need reinforcement, because being a local competitor I would look biased, so I asked Larry to come in on behalf of one of the appellants. We have worked together to review the project and to make sure the project did comply and to review the award of LEED Gold.

GBLB: When was the decision to appeal made? 

Mark: The decision to make the appeal was made when the grant of Gold was made. The USGBC ostensibly had a rigorous review process and we found out that there is no review of the plans, specifications or construction documents.

Larry: The first time the USGBC saw the specifications was when Brendan Owens [Vice President, LEED Technical Development for USGBC] asked for a set after the appeal had been filed.

Mark: I would have expected them to review of the plans, specifications or construction documents because it is impossible to verify compliance [with the ASHRAE codes] without it.

Larry: What [the USGBC] accepted was designers' certification that compliance was achieved. When the issues started to heat up at the public school board meetings, Mark and I put together a list of violations of Section 62 and Section 90 [of the ASHRAE code] before the design was even bid. Some of issues were corrected when they submitted plans for building code.

Mark: There are literally hundreds of violations with code.

Larry: One of the things Brendan Owens said was that receipt a certificate of occupancy was evidence of compliance with standard 62 and standard 90, and was incredulous that anyone would not design to those standards.

Mark: At that point, the designers were very much aware of the defects.

Larry: As was the USGBC.

GBLB: What was your goal with the appeal?

Mark: Our goal was to get the LEED plaque removed. To have that building qualify undermines everyone who is playing by the rules. It underminds their efforts and their achievements.

Larry: The message that USGBC now sends is that it is not necessary to comply at the time you get your plaque, and later, close is good enough.

Mark: And if you know that you’re not compliant, we are not going to take the plaque from you.

GBLB: How would you see the appeals process change?

Larry: It should be done by independent unbiased third parties, like [American Arbitration Association], under the rules of construction arbitration.

GBLB: What is next for the Northland Pines situation?

Mark: As far as we’re concerned, the appeal is over.  For the record, the building still does not comply with the prerequisites, or the building code.

This was never intended to be an attack on the USGBC. It was intended to hjold the designers feet to the fire

Larry: The resident appeallnts have been approached by attorneys, and they are not interested. They have had their fill of this, but should this ever come to blows, the appellants have videos and tapes of the conference calls with USGBC. 
 

GBLB: Did you expect this degree of attention when you filed the appeal? 

Larry: This has gotten a lot of attention from the legal community, but what it really needs is attention from the architecture and engineering community.

Mark: It would force the USGBC to answer some very uncomfortable questions.

Larry: The question is how qualified are the people who are certifying the buildings. Just because you have a lot of letters after your name doesn’t mean anything.

Mark: The other thing is whether the review process itself is credible. It raises doubts about every single previously accredited building..

GBLB: How could LEED process be changed to better reflect “green” buildings?

Larry: Competant review.

Mark: The construction documents themselves need to be reviewed by people who are technically competent to do so, as well as documentation reflecting the prerequisites.

Just because a building gets a Certificate of Occupancy, It doesn’t mean that the building complied with the code, just that the inspectors didn’t find any problems.

PUBLISHER'S NOTE:  The USGBC was contacted for an interview to respond.  No response was received at the time of publication.  Also, the facts and opinions expressed in this interview are those of the interviewees, and the publisher of this Blog makes no representations as to their truth or falsity.

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In the past few weeks, the Northland Pines Third Party LEED challenge has exploded, the Washington Building Industry Association sued the State of Washington to enjoin their energy code from taking effect, and a private lawsuit which could potentially turn into green litigation emerged onto the scene.  In other words, the wave of green litigation which I first predicted back in 2007 has arrived. 

What does this mean? 

1. More third party challenges--For every building project, there are naysayers.  Some will see the Northland Pines challenge as a mechanism for attacking potential development, either during the development process by threatening a challenge, or after the development is completed by filing one.   
2. Building interest group litigation mushrooming--If the BIAW challenge in Washington holds water, building interest groups nationwide will attack green building regulations where the only true path to compliance is through energy efficient HVAC equipment. 
3. Private litigation with a green tinge--As people occupy green buildings, typical construction challenges emerge.  Expect these to incorporate challenges to the "greenness" of the building.

These suits will be complex, and will involve not only knowledge of LEED and green building, but also the energy codes and other ancillary regulations implicated in these suits.  Green building law has arrived.  Is your lawyer ready? 

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The USGBC issued a statement regarding the Northland Pines dispute:
 

USGBC stands by its conclusion that the Northland Pines High School project and project team complied with all the requirements necessary to achieve LEED Gold certification. In response to a complaint, USGBC followed its certification challenge policy, which requires a thorough and technically rigorous review of the project. Given the vociferous and confrontational nature of the complaint, we further asked for two additional and separate technical reports detailing the expert professional opinions of highly regarded independent consultants. Their findings agreed with ours.

 

Anyone who has actually been through a LEED certification review knows that it is a dialogue between the project team and the reviewer. After reviewing the documentation submitted by a project team, the reviewer issues a request for more information in a “Preliminary Review”. The project team responds to any reviewer comments and resubmits. The reviewer then reassesses the project and issues a “Final Review”.

 

The process USGBC used to deal with this appeal was similar to our standard process but in addition to having the original submission and reviewing everything we normally review we also had the complaint document. There were issues in the complaint document that were not (from our independent consultant’s point of view) adequately addressed by the 2007 submission so we asked for and received additional clarifying documentation from the project team. This additional documentation answered all open questions and made it possible for USGBC and the independent consultants hired to provide their expert technical opinions to conclude that the project does in fact comply with LEED Gold requirements.

 

LEED’s intent, and USGBC’s mission, is about helping people learn about and understand how to design, build and operate better buildings. Buildings are complex systems of systems and any of the 100,000 of decisions associated with design, construction and operation can always be second-guessed. We are confident that our due diligence has been more than sufficient to put these issues to rest, and we are moving forward to focus our efforts where they do the most good -- advancing the market uptake of green buildings and communities that is at the heart of our work.
 

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Northland Pines High School in Eagle River, Wisconsin will go down in the annals of green building history as the first third party appeal of a LEED certification.  In short, two engineers and five local citizens appealed the grant of LEED Gold certification based on the school's alleged failure to comply with the energy, commissioning and indoor air quality prerequisites.  The complaint is available here. 

According to the appeal: 

• EA1, Prerequisite, Fundamental Building Systems Commissioning was not complied with. The first three steps of the Commissioning Process include review of design intent, basis of design documentation, and incorporation of commissioning requirements into the Construction Documents. All are required prior to bidding and construction. The reviewing professionals have been unable to confirm that any were performed. Had a competently executed Design Review been performed by the Commissioning Agent, as required by LEEDTM NC 2.1, ANSI/ASHRAE/IESNA Standard 90.1-1999 and ASHRAE Guideline 1- 1996, the majority of the EA2 and EQ1 violations identified by the reviewing professionals  should have been identified by the Commissioning Agent and corrected by the design team prior to the issuance of the Construction Documents for bid.
• EA2, Prerequisite, Minimum Energy Performance: The design of the HVAC systems and other listed elements of the building do not comply with all of the requirements of ANSI/ASHRAE/IESNA Standard 90.1-1999. The scope and number of prerequisites violations was pervasive.
• EQ1, Prerequisite, Minimum IAQ Performance: The design of the HVAC systems failed to comply with ANSI/ASHRAE Standard 62.1-1999, Ventilation for Acceptable Indoor Air Quality. Validation computations were performed to determine the actual basis for ventilation rates and to determine what the actual ventilation requirements would have been had the required Ventilation Rate Procedure computations been performed. These computations established that the actual basis for ventilation was the Wisconsin Enrolled Code, which produces significantly lower ventilation rates at both individual zones and at the system level than those which would have otherwise been required to comply with ANSI/ASHRAE Standard 62.1-1999.

In April, the USGBC upheld the Northland Pines certification, stating:

After extensive review, USGBC and its consultants have no reason to believe that the project failed to meet all of the LEED prerequisites and credits that it has attempted. Thus, USGBC will not act to revoke certification or disallow any prerequisites or credits. Northland Pines High School will retain the 40 points awarded to the project in its original review. The project remains certified at the Gold level.

This week, the appellants, unsatisfied with USGBC's review, issued a three page reply, entitled "LEED Credibility Destroyed". 

It is obvious that USGBC fails and refuses to acknowledge their inability to enforce and their unwillingness to support their intellectual property or defend their client's property rights. Both independent consultants to the USGBC share the same shame as the designers and contractors who submitted the LEED® application to the USGBC for not admitting that this building does not comply with the two prerequisite ASHRAE Standards in their entirety. Mr. Taylor, who knew better or should have known better, is even more culpable by virtue of his service on both ASHRAE committees and chairing one.

We are awaiting the USGBC's response, due any time, defending its position. 

The question has become are the Northland Pines objectors Needling Naysayers or Constructive Critics? And why does it matter? If the Northland Pines objectors are constructive critics, they should be encouraged by USGBC.  Valid complaints about construction fraud should have a place within the LEED system.  But the process could easily become overwhelmed by Needling Naysayers, or as my husband calls them, BANANAs--Build Absolutely Nothing And Nowhere Anytime.  I could see the USGBC/GBCI overwhelmed by neighbors objecting to every project, slowing down the process, making it more expesive and discouraging green building and LEED certification.  This is what often happens in local government zoning hearings and land development approvals processes.

USGBC/GBCI is in the process of amending its challenge process.  The new process  needs to strike a balance between allowing sunshine in to expose fraud, and providing USGBC/GBCI the opportunity to cut off baseless claims.   

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In a bold new risk publication out today from Lloyd's of London, entitled Sustainable Energy Security: Strategic Risks and Opportunities for Business,  the insurance heavyweight states in no uncertain terms that businesses that fail to prepare for short and long term energy crises face potentially catastrophic risks:

Energy security and climate change concerns are unleashing a wave of policy initiatives and investments around the world that will fundamentally alter the way that we manage and use energy. Companies which are able to plan for and take advantage of this new energy reality will increase both their resilience and competitiveness. Failure to do so could lead to expensive and potentially catastrophic consequences.

Lloyds notes the importance of government regulation in managing the energy crisis.

Without an international agreement on the way forward on climate change mitigation, energy transitions will take place at different rates in different regions. Those who succeed in implementing the most efficient, low-carbon, cost-effective energy systems are likely to influence others and export their skills and technology. However, the lack of binding policy commitments inhibits investor confidence. Governments will play a crucial role in setting policy and incentives that will create the right investment conditions, and businesses can encourage and work with governments to do this.

The insurance industry makes it costly--through raising the price of insurance--to do business in risky ways.  If Lloyds prices insurance for carbon dependent businesses much higher, it could force businesses to reevaluate their stance with respect to greenhouse gas regulation.  Where the insurance industry leads, businesses will likely follow.

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I posted last week that the Deepwater Horizon Spill might be a "Love Canal" moment spurring federal environmental legislation.  I am not the only one who thinks so. According to EE News (subscription required):

About two-thirds of respondents believed that Congress needs to take action that will be "more than a Band-Aid" and to "pass real reforms to hold polluters accountable and invest in clean American energy," according to the poll, which was conducted by Benenson Strategy Group and released by the League of Conservation Voters and the Clean Energy Works campaign, a coalition that includes environmentalists, labor unions and a number of other interest groups.

Public outrage + environmental disaster = regulation.  Stay tuned.

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On Friday, I posted the complaint for BIA v. Washington State Building Council, filed on May 25, 2010 by the Building Industry Association of Washington to enjoin (or, in regular english, stop) the Washington State Energy Code from taking effect on July 1, 2010.  The case is structured similarly to AHRI v. City of Albuquerque, which I have written about extensively on GBLB.

The foundation of both AHRI and BIA is in essence one of preemption--that the federal government has enacted laws that prevent lesser governmental authorities from passing laws on the same subject.  In BIA, the plaintiffs allege that the requirements of the Washington State Energy Code

in conflict with and preempted by federal law and regulations which govern the energy efficiency of certain residential heating, ventilation air conditioning and plumbing product, including the Energy Policy and Conservation Act of 1975 ("EPCA"), as amended by the National Applicance Energy Conservation Act of 1987 ("NAECA"), Public Law No. 100-12, and the Energy Policy Act of 1992 ("EPACT"), Pubilc Law No. 102-486, 42 U.S.C. Sec. 6297.  As a result, Chapter 9 violates the Supremacy Clause in Article VI of the United State Constitution.

What is most interesting about the BIA suit is that the Washington State Energy Code did not mandate enhanced energy efficiency of the HVAC equipment.  Rather, it allowed for a point system whereby energy efficienct HVAC components were one path for compliance with an overall energy efficiency target.  The BIA complaint alleges that it is essentially impossible to comply with the energy efficiency targets without  installing enhanced HVAC equipment.  This is an interesting twist on the AHRI  case, because here it is possible to comply with the Washington State Energy Code without running afoul of federal HVAC energy requirements. 

Another interesting argument is in a footnote.  One path for compliance with the Washington State Energy Code is to build a house less than 1500 square feet.  The complaint states:

Plaintiffs would submit that a blanket regulation forcing individuals to live in or contruct a home of a certain size runs afoul of constitutional protections against unlawful takings.

Two things are true: 1) the Washington State Energy Code is not a blanket regulation forching individuals to construct or live in a home of a certain size, and 2) even a blanket regulation that did not essentially eliminate all value from a property would not be considered a regulatory taking.  So this argument, while appealing at first glance, is probably not very valid. 

One time is an anomaly, twice is a pattern.  As states and local governments seek to regulate energy efficiency, I believe we will see more suits like AHRI and BIA  until the federal government upgrades HVAC energy efficiency requirements (which they are in the process of doing), or a nationwide energy efficiency building code goes into effect.

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This just in...According to King5.com:

The Building Industry Association of Washington filed a federal court lawsuit in Seattle to stop new regulations that are set to take effect July 1 for the construction of all new homes. It targets the Washington State Building Code Council, which created the new code that requires higher efficiency furnaces and hot-water heaters and other measures that make the home more enviormentally friendly.

This appears to be similar to AHRI v. Albuquerque, wherein the national trade associations for air conditioning, heating, and refrigeration sued the City of Albuquerque to enjoin their green building code.   The complaint is downloadable here.

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The nice people at HB Litigation and Lexis Nexis did a video of me speaking about green building law and energy regulation.  The videos are available here. 

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Yesterday I posted about why Gidumal v. Site 16/17 Development LLC was not green litigation. In short, the case incorporates allegations regarding the green components of the project as support for its regular construction claims, not for failure to acheive green requirements. It got me to thinking--what would legitimate claims regarding green construction defects look like? To some extent, it depends on who the parties are and what damages they are looking to require.  But assuming the facts of Gidumal v. Site 16/17 Development LLC (a condo owner suing the developer, architect and engineeer for post-occupancy deficiencies), I think the following claims would be relevant:

1. Breach of contract--If there was a contractual promise regarding the green nature of the building or the resource (energy, water, etc.) performance of the building, this could be grounds for a breach of contract claim. This is particularly relevant where condo documents or other contractual agreements list "LEED" or "Green" as a component of the offering.
2. Lanham Act/Consumer Protection violation-- The Lanham Act is a federal claim which prohibits false advertising, but it can only be brought by a competitor.  It requires the plaintiff to prove that there was a false or misleading statement made, the statement was used in commercial advertising or promotion, and the statement creates a likelihood of harm to the plaintiff. Most states, including New York (General Business Law Section 349 and 350), have consumer protection laws which function similarly, and can be brought by consumers for false advertising and deceptive trade practices.  Often such statutes provide for treble damage recovery. 
3. Fraud/Misrepresentation--To the extent that a plaintiff can plead with specificity that the owner, developer, architect or contractor knew that the building would not be green or was not being constructed to green standards, and intended that the condo owner rely on their representations regarding the green nature of the building, there would be claims for fraud and its cousin, misrepresentation.
4. Malpractice against architect, contractor or engineer--If it can be proven that these professionals acted outside the standard of care of a reasonable architect in constructing the building, this might be a valid claim.  Evidence of gross disparity between the energy modeling and the energy performance might be used as proof that a reasonable architect or engineer would not have designed or constructed a building in that way.
5. Construction defect claims against contractor--Certain states have specific laws for hidden construction defects, which may be available in addition to negligence or malpractice claims.
6. Breach of Warranty or Consumer Protection claim against manufacturer of green components--To the extent that the failure of the green features is due to failure of the components--the heat pump, or the insulation--there may be a claim for breach of warranty, consumer fraud or even breach of contract.  
7. Breach of Contract against the operator of the building--To the extent that the green failure is due to failure to maintain and upkeep the building, there may be a claim against the company operating or managing the facilities, particularly if their contract specifies that they have to operate the green components.   This claim may not be available to individual condo owners, but rather to the condo association or whomever is in contractual privity with the operating company.

The above is meant for information purposes only, and not to be relied upon as legal advice, as all situations are different.  But perhaps we will see an amended complaint in Gidumal v. Site 16/17 Development LLC that brings in some or all of these concepts.

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My good friend and savvy LEED litigation sleuth Steve Del Percio uncovered a case filed in New York that involves, among other things, an allegation of failure of the heating system to perform properly.  The luxury condominium building, at One and Two River Terrace in Manhattan was advertised as LEED Gold.  The Compalint alleges that an energy audit conducted by the plaintiffs revealed deviation of "49% over the USGC LEED and BPCA standards in the cumulative size of holes and cracks allowing infiltration of cold air." But this claim is about the performance of the heating system--failure to heat--not its energy performance.  The other claims in the case are similarly basic construction law claims--the failure of a railing to protect from falls and frosted glass windows where there were supposed to be clear glass, for example.

The case incorporates allegations regarding the green components of the project as support for its regular construction claims, not for failure to acheive green requirements.  In the five causes of action against the architects and the cause of action against the engineer, failure to construct a green building is nowhere to be found.  The causes of action against the developer do not include a cause of action for false advertising regarding the green components of the building.  In short, throwing in the energy audit information and noting that the building was LEED certified is the construction litigation equivalent of greenwashing. 

This is not to say that the case could not develop these claims through an amended complaint if more information is uncovered during discovery.  Indeed, with the press that the case is receiving--it got a mention in yesterday's Wall Street Journal--these areas might be developed further. 

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Comprehensive federal environmental regulation does not come easily.  First, there is the difficulty of crafting scientific regulations.  Then there are the entrenched interests to be combated, both in the private sector, and with the states and local governments who may have had authority prior to federal regulation. Compounding these issues is the high cost of regulation and enforcement itself.  Criticisms abound from the right--too much regulation--and the left--too little.  Even after regulations are passed, the government can expect years of litigation over the implementation of regulations.  What congressman needs that kind of headache?  

It takes a galvanizing catastrophe to catapault environmental regulation to the front of the federal stage.  In 1978, Niagara Falls, New York became the subject of national and international attention, controversy, and eventual environmental notoriety following the discovery of 21,000 tons of toxic waste that had been buried beneath the neighborhood by Hooker Chemical. Residents were found to have numerous health problems, including cancer and mental retardation.  After the dump was discovered and 800 families relocated, Congress was motivated to pass the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), or Superfund Act, which requires polluters to remediate toxic sites. 

Deepwater Horizon needs to be this generation's Love Canal moment.  Congress has an unparallelled opportunity to capitalize on the anger, the shock and the awareness of the fragility of the environment currently in the zeitgeist  to pass comprehensive energy legislation.  Thank god, Love Canal moments do not come along often.  It would be a pity to waste it.  

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The Wall Street Journal reported today about condo owners suing The Riverhouse One Rockefeller Park for $1.5 million in damages:

The suit by the Riverhouse tenants alleges various shortcomings.

It says the owners' engineers "found a deviation of 49%" over the LEED standards "in the cumulative size of holes and cracks allowing infiltration of cold air."

The complaint also alleges that air temperature for heating the apartment was too low, which the owners say is a sign that the building isn't maximizing energy efficiency.

More on this today at GBLB!

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On Friday, June 4, 2010 from 8:00 - 10:00 am, the Delaware Valley Green Building Council is hosting a green building forum with Pennsylvania state Senator John Rafferty to discuss proposed legislation aimed at promoting more efficient use of energy, water and natural resources through the use of green building standards for state owned and state funded green buildings.

The meeting will provide an opportunity to learn more about House Bill 444 and
Senate Bill 728, which will require that high performance green building standards be
implemented in most new or remodeled building projects owned or funded by the
Commonwealth of Pennsylvania.

I have attached the flyer here, I would love it if GBLB readers in the Philadelphia area would join me at this great event!

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