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

There is chatter that the Clean Power Plan Final Rule will be released in early August, but also a strong effort to delay implementation until the various legal challenges are resolved. The stay could be imposed either judicially or legislatively. A bill passed the House and is currently pending in the Senate that would allow states to delay writing implementation plans until judicial review has concluded. A judicial stay could also be imposed. Given that the wheels of justice grind slowly, a stay could destroy the effectiveness of the CPP. Currently, the states' plans are due in 2016. If a stay is in place, the plans would be potentially delayed until after the next presidential election. The next president may or may not support the CPP, and could abandon it altogether. Even if executive support does not wane, the position of some states in complying with the law may. For example, in Pennsylvania, Republican Governor Tom Corbett was a leading voice opposing the CPP, and Pennsylvania passed a law requiring legislative approval of a CPP compliance plan. In 2014, however, Democratic Governor Tom Wolf was elected, and he is very supportive of the CPP, and Pennsylvania is developing its plan to comply. A change in state legislature or administrative make-up could easily go the other way. Moreover, the emissions reductions are measured at 2020 and 2030. If plans are delayed until after 2016, states will have a difficult, if not impossible, task of meeting the 30% emissions reduction target by the current dates. The rule compliance dates would have to shift, which could open up the CPP to more changes and further delays. The stay strategy is quite clever. Inertia is a powerful force. Once plans are submitted and underway, it will be much harder to derail the entire CPP framework. Economic incentives will change, and industries/jobs will grow around the new areas of investment. So, if a stay is put in place (most likely a judicial stay, because it is unlikely that Obama would sign a legislative stay), the CPP will face an uncertain future.

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There is a war on building codes across the United States, and Pennsylvania is ground zero.

After years of regular building code updates, a law was passed in 2011 (Act 1) at the urging of the Pennsylvania Builders Association to make it essentially impossible for building codes to be updated. 

Last Thursday, the Clean Air Council decided to take action, filing suit against the Commonwealth for its failure to adopt both the 2012 and 2015 codes, and challenging Act 1. The Petition in Commonwealth Court is available here, with the extensive exhibits available here. 

In summary, the suit alleges that the Pennsylvania Review and Advisory Council (RAC), the 19 member body charged with reviewing and adopting building codes rejected the 2015 codes for no reason and against the recommendations of its own technical review subcommittees. It also alleges that Act 1 violated the Pennsylvania and Federal constitutions by creating a process that makes code adoption impossible.

Pennsylvania is an example of a nationwide trend. Starting with the 2009 codes, homebuilders associations in many states have sought to delay or derail code updates by taking over administrative building code review councils and lobbying for draconian legislation. North Carolina is another example, where the codes are now on a 6 year cycle, and more legislation is in the works (HB255) to make adoption even more difficult. 

The implications for the built environment in terms of safety, energy efficiency, cost-effectiveness and resilience from natural disaster damage are massive. 

Of course, up-to-date codes save lives. Recently, a 2 year old child fell out of a window that was not built to the current codes. Had the current codes been in effect, the window would not have been able to open as far, preventing this tragedy. 

With natural disasters on the rise, making the built environment more resilient is critical. The Federal Emergency Management Agency (FEMA) determined that $1 spent on preparedness for natural disasters will save $4 in restoration costs. FEMA has also said that up-to-date building codes are among the most cost-effective mitigation measures. 

The 2015 codes include many flood-related provisions, including changes to the 2015 International Residential Code supported by FEMA’s Superstorm Sandy analysis report.

Up-to-date codes save consumers money and benefit the environment through greater energy efficiency. The 2015 codes are 15% more energy efficient than the 2009 codes, and 30% more energy efficient than the 2006 codes. The Department of Energy estimates that consumers will save between $4000-$24,000 over the course of a 30 year mortgage (2009 compared to 2015 codes), as well as reducing air pollution and greenhouse gas emissions. Simple payback will be less than two years. 

The health of the United State's manufacturing sector and the safe and effective installation of new technology also requires regular building code updates. 

Investment:  The investment decisions of electrical manufacturing companies like Eaton, Tyco, Lutron and others in capital equipment, machinery, and jobs are often based upon nationwide adoption of codes.  When those codes are not adopted, or adoption is delayed, decisions to make those investments and hire employees are negatively impacted. 

       Risk management:  Installation codes and product standards work hand in hand to ensure public safety and ensure that products perform in the manner in which the manufacture intends and customer expects.  Not adopting the latest code puts us at risk, first responders at risk, engineers at risk, distributors at risk, general contractors, electrical contractors and citizens at risk.  Liability can be increased for all of the above if up-to-date codes are not adopted.  These companies build products to meet new code requirements, and expect the equipment to be installed in that manner across the United States. 

 Innovation:  New technology, like ground source heat exchange, high-pressure decorative exterior grade compact laminates, dynamic glazing, solar energy systems, electric vehicle charging stations and many others have been gaining traction over the past few years.  Up-to-date codes provide guidance on the safe and effective installation of these new products.  For example, the 2015 codes have updated roofing requirements for installation, wind resistance, fire classification and others.  These changes will protect the lives of homeowners and first responders alike. 

The Clean Air Council chose to take this issue head on, and I will keep you updated on the progress. 

Image courtesy of kdshutterman at FreeDigitalPhotos.net

 

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Happy Monday!  

As I posted earlier, in Murray, et al v. EPA , plaintiff Murray Energy Corporation seeks to enjoin EPA's Clean Power Plan rule even before it has been issued as a Final Rule.  The Clean Power Plan proposes to regulate the carbon emissions of existing power plants under the Clean Air Act. 

 Last week, the states of New York, State of Connecticut, State of Delaware, State of Maine, State of New Mexico, State of Oregon, State of Rhode Island, State of Vermont, State of Washington, Commonwealth of Massachusetts, District of Columbia filed notice of their intention to participate as amicus curiae 

In June, Alabama, Kentucky, Oklahoma, South Carolina, West Virginia, Alaska, Nebraska, Ohio and Wyoming also filed an amicus brief in this case.

Assuming that the northeastern states support the Clean Power Plan, it sets up a sort of "Blue v. Grey over Green" battle, with the western states thrown in as well.   

There was also an interesting decision in the D.C. Circuit last week, lifting a stay on the EPA's Cross-Border Pollution Rule.  But, additional issues remain to be resolved in the DC Circuit case, so there will likely be more action on this critical rule.    

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On June 26, 2012, the United States Court of Appeals for the Ninth Circuit decided the BIA v. State of Washington case. The opinion can be downloaded here.

 In its decision, the Ninth Circuit held that the Washington State energy efficient building code was not preempted by Federal law.  This ruling was contrary to the ruling in a companion case, AHRI v. City of Albequerque, which was before the Federal District Court for the District of New Mexico. In the Albuquerque case, the court held that the code was preempted. 

Because there was a split, the interesting question is whether the cases, when read together, create a clear legal framework for ensuring that local energy efficient building codes are not preempted. In my opinion, the Washington court did not articulate a clear rule that can be used to guide local governments through the preemption waters. 

Both Albuquerque and the State of Washington passed building codes requiring that new buildings acheive certain levels of energy efficiency. In their suits, the trade associations alleged that the codes were invalid because they were preempted by Federal law.  Specifically, the trade associations alleged that the codes mandated the use of heating, ventilation and air conditioning systems that exceeded the energy efficiency standards set by the Energy Policy and Conservation Act of 1975 ("EPCA"), 42 U.S.C. Sec. 6295, et seq.

The Albuquerque code offered two paths--a prescriptive path, under which the installation of HVAC exceeding the Federal standard was required, and a performance path, under which a builder could choose how to acheive the required level of efficiency.  Early on, the Albequerque court held that the prescriptive path was preempted.  Ultimately, the court found that the performance path was not severable from the prescriptive path, and did not reach a verdict on the preemption of the performance path. 

The Washington code did not have a prescriptive path.  Rather, the Washington code had a point system, where different building techniques, including the installation of energy efficient HVAC systems, acheived different "scores."   

The Washington court differentiated the Washington and Albequerque codes based on the costs imposed on the builder for not using high efficiency HVAC equipment, not to the difference between a prescriptive and a performance standard.  The court reasoned:

Albuquerque’s ordinance imposed costs, as a matter of law, on builders who installed certain covered products meeting federal standards, by requiring the builder to install additional products that would compensate for not using a higher efficiency product. As the [Albequerque] court explained, “if products at the federal efficiency standard are used, a building owner must make other modifications to the home to increase its energy efficiency.” The Albuquerque ordinance thus effectively required use of higher efficiency products by imposing a penalty through the code itself.

Here, by contrast, the Washington Building Code itself imposes no additional costs on builders. The district court noted that there are “substantial differences” between the Washington Building Code and Albuquerque’s ordinance. It correctly rejected the Plaintiffs’ argument concerning subsection (B), explaining that the Washington Building Code created no penalties, and did not require higher efficiency products as the “only way to comply with the code.”

In the Washington code, however, it appears that the same costs are imposed on the builders.  If a builder chooses to use a standard HVAC system, the builder must make other changes to acheive the required points.  Later in the opinion, the Court acknowledged that the cost of adopting the other changes (and not installing more efficient HVAC equipment) could be higher. 

Unfortunately, I do not see how the Washington court's analysis works to differentiate the Albuquerque code from the Washington code.  As a result, it does not make clear what type of structure is "safe" for local governments to adopt, and not risk a preemption fight. 

 

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        A lawsuit was filed on Friday in the United States District Court for the Northern District of Ohio on behalf of nationwide and Ohio-only classes of consumers who purchased three models of Maytag Centennial washing machines whose ENERGY STAR status was later revoked. 

          The plaintiffs allege that Whirlpool and Home Depot are in violation of Ohio’s Consumer Sales Practices Act, Ohio’s Deceptive Trade Practices Act, unjust enrichment under Ohio law, Ohio common law fraud, and breach of contract because they paid more up front for an energy efficient appliance which turned out not to be energy efficient.  The complaint is available here.      

           In November 2009, Adam Savett purchased a Maytag Centennial washing machine from a Home Depot retail store in Ohio. The machine he chose bore the now-familiar ENERGY STAR label, which is issued under a program jointly administered by the Environmental Protection Agency and the Department of Energy. While ENERGY STAR-qualified washing machines typically demand higher retail prices than standard models, consumers are projected to come out ahead due to the long-term operating savings that result from the more efficient use of both water and energy. 

            However, less than 10 months after Savett purchased his machine, an independent laboratory completed a DOE efficiency test of that model, revealing that the unit did not meet ENERGY STAR standards. In order to qualify for the ENERGY STAR label, the Maytag machine would have had to have been at least 37% more energy efficient than the minimum energy efficiency standards mandated by law.

            Now, Whirlpool Corporation, which acquired Maytag in 2006 and continues to sell appliances under the Maytag name, and Home Depot, are facing a nationwide class action lawsuit for fraud.

           Many green legal prognosticators, including me, anticipated that a suit of this type would be forthcoming.  The increased interest in green and energy efficiency has also led to a rise in "greenwashing"--making claims of environmental friendliness or energy efficiency simply for marketing purposes.  This suit echoes the allegations in Henry Gifford's ill-fated lawsuit against the United States Green Building Council that their buildings were not as energy efficient as promised. 

         It remains to be seen whether actual fraud, which requires the intent to deceive, was committed in this case.  Nonetheless, it is significant that this type of suit has been filed. 

More analysis to come….

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AHRI vs. City of Albuquerque, a case that I first posted on in 2008, finally reached its conclusion last week.  In line with the preliminary injunction she ordered on October 3, 2008, Judge Martha Vazquez of the District of New Mexico decided that Albuquerque's energy code was preempted by Federal law mandating the energy efficiency of HVAC equipment. 

Appliance Magazine reported:

In the latest opinion, Judge Vazquez confirmed her Sept. 10, 2010, rulings:
(1) The prescriptive energy efficiency standards in the 2007 Albuquerque code that are more stringent than federal minimum efficiency standards are preempted and cannot be saved from federal preemption by the availability of alternative code compliance paths.
(2) A particular performance-based code compliance option is preempted because it is based on a standard reference design that uses efficiency levels that exceed federal efficiency standards. Responding to a summary judgment motion filed by the city that essentially asked Judge Vazquez to reconsider her earlier rulings, she declined to do so and denied the city’s motion.

A similar suit was filed by the Building Industry Association in 2010 to enjoin (or, in regular english, stop) the Washington State Energy Code from taking effect. 

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, here the Federal regulations governing the efficiency of HVAC equipment preempted state and local energy efficiency laws.

Interestingly, in the Washington case, the court found that the Washington State energy code was not preempted.   This creates a split between the District of New Mexico and the Western District of Washington.  In my next post, I will give more detail on the difference between the two cases.  It will make it more difficult for local governments to know the extent to which they can regulate HVAC energy efficiency, which may make local governments shy away from doing so.

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Yesterday, Judge Sands dismissed Henry Gifford's suit against the USGBC.  A copy of the Order is available here.  In a major win for the USGBC, Judge Sands dismissed Gifford, et al's Federal claims with prejudice, which means they cannot be brought again, Because the Federal claims were dismissed, the Judge also dismissed Gifford, et al's state claims for lack of jurisdiction. 

Particularly gratifying for me is that Judge Sands dismissed the case for exactly the reason I anticipated in my prior posts on the case that the plaintiff in this case lacked standing to bring the case.  The posts are available here and here.

In summary:

To the best of my research, Mr. Gifford is not a LEED AP, and indeed, from his website and publications, he has outspokenly denounced the USGBC and LEED.  Mr. Gifford does not appear to own any property certified LEED.  In short--the USGBC's actions have not harmed him or his career, if anything, has been enhanced by the USGBC's position.

Similarly Judge Sands held:

With the exception of Gifford,  each Plaintiff designs and consults on specific elements of individual buildings, including heating and cooling systems, moisture and mold remediation, and architectural design. Plaintiffs do not allege that LEED certified buildings do not require such services or that those services must be provided by a LEED-accredited professional in order to attain certification. Because there is no requirement that a builder hire LEED-accredited professionals at any level, let alone every level, to attain LEED certification, it is not plausible that each customer who opts for LEED certification is a customer lost to Plaintiffs.

With respect to Gifford's Lanham Act "False Advertising" claim, I wrote:

In alleging a violation of the Lanham Act, the Federal act prohibiting false advertising, the Amended Complaint states: USGBC's misrepresentations have an will continue to deceive consumers, voters, taxpayers, developers, municipalities and legislators at the local, state and federal levels. However, fraud requires "reasonable reliance" on the false statements. The difficulty here is that, although more plaintiffs have been added, they are still not plaintiffs that were "duped" by the USGBC's representations. Judge Sands concluded that the USGBC and Gifford, et al are not competitors:

 Judge Sands similarly held that Gifford, et al cannot prove reliance:

Even if Plaintiffs were to amend the [First Amended Complaint]  to include the proffered allegation that a single developer, Steve Bluestone, chose a LEED certified consultant rather than Gifford, Plaintiffs would not establish the required causal nexus: that Bluestone did so in reliance on the alleged false statement contained in a 2008 press release.

This order may not be the end of the Gifford v. USGBC story.  Gifford may appeal, and he retains the opportunity to file his state claims in New York state court.  Moreover, since the Judge did not resolve the merits of the claims, the debate over whether LEED buildings save energy is likely to rage on.

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On Friday, the USGBC responded to Henry Gifford's amended complaint with a Motion To Dismiss for failure to state a legal claim (Federal Rule of Civil Procedure 12(b)(6)) and for lack of subject matter jurisdiction (Federal Rule of Civil Procedure 12(b)(1)).

In essence, the USGBC's response has two prongs: 1) the Plaintiffs lack standing, as I predicted here; and 2) that the Plaintiffs could not demonstrate that they had been harmed by the USGBC's allegedly illegal conduct. Stephen Del Percio does a nice job of outlining the standing arguments here. 

In the back of the Memorandum of Law is an interesting discussion of the USGBC's marketing.  In the context of arguing that the New York Consumer Fraud Statute does not apply, the USGBC argues:

USGBC's marketing--which is before this Court on this motion--is directed at businesses and professionals.  The website, which is how USGBC advertises, defines the audience for USGBC's marketing.  LEED users are 'architects, real estate professionals, facility managers engineers, interior designers, landscape architects, construction managers, lenders and government officials...

I think this is a difficult argument, and not one with a lot of factual merit. 

The USGBC website has a link to a website entitled:

U.S. Green Building Council's Green Home Guide Connecting you to ideas, advice and green home professionals.

The purpose of the site is clearly to communicate information about LEED and green building directly to consumer homeowners. The Green Home Guide website offers a tool for homeowners to become acquainted with the LEED for Homes system:

LEED FOR HOMES SCORING TOOL
It's FREE.NEW – The LEED for Homes Scoring Tool

Q: How close is your project to earning
LEED for Homes certification?

A: Probably much closer than you think.

As the building industry evolves, more residential projects already include sustainable features that contribute to certification. The LEED for Homes Scoring Tool will help you assess your project. By answering a few simple questions, you’ll not only learn just how close you are to earning certification, but also various steps you might take to get there. Plus you’ll gain important insight on the LEED for Homes rating system.
 

The USGBC even publishes a brochure for LEED® for Homes™ FAQ for Homeowners available here.

So, it's pretty clear that the USGBC is marketing directly to consumers, contrary to the Memorandum of Law in support of the USGBC's Motion to Dismiss.

The worst part is that there was no need for the USGBC to make this factually unsupported argument. Even if the USGBC advertises to consumers, the consumers that might have been harmed by the advertisement are not included amongst the plaintiffs, and are not represented by the factual misstatements alleged in the Amended Complaint. Making factually unsupported arguments may weaken the punch of the USGBC's clearer grounds for dismissal, and provide a toe hold for the Plaintiffs to plant seeds of doubt about the rest of the USGBC's arguments.

 

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The foundation for a rash of legal actions arising out of a failed green project have been laid. 

According to the Syracuse Post-Standard, the Carousel Center shopping mall was supposed to be a showcase of green features. To fund the project, the Carousel Center developers secured:

$228 million in federally authorized, tax-exempt “green bonds” to help finance the first phase of Congel’s expansion of the mall into an entertainment and tourism center to be called Destiny USA.

Unfortunately, six years later, those green features are no where to be found:

There is no 45-megawatt electricity generating plant running on “biofuel” made from soybean oil and recycled cooking grease. If there were, it would be the largest such plant in the nation and consume more than one-third of the total U.S. biodiesel supply.

Nor are there 290,000 square feet of solar panels on the mall’s roofs and other surfaces, enough to blanket six football fields.

The fuel cells that were to make 7 megawatts of electricity, five times more than the nation’s largest existing commercial fuel-cell installation? Nowhere to be seen.
 

The construction landscape is littered with the bodies of failed projects, grandly envisioned in 2005 and all but abandoned in 2011.  The question--What becomes of the tax exempt status of the bonds? 

Loss of the tax exemption would require Congel to pay higher interest rates on the bonds to compensate investors, who would suddenly be required to pay income taxes on the interest they earned. The increased cost would depend on the interest rate spread between taxable and tax-exempt bonds at the time of the IRS ruling. In 2005, a Destiny USA executive estimated the tax exemption would save the developer about $120 million over the 30-year term of the bonds.

If the IRS chooses to rescind the tax exempt status of the bonds, there could be a flood of legal fallout.  A few possibilities: 

1. Investors, particularly institutional investors, now forced to pay taxes on their previously exempt bonds could sue Congel. 
2. Government entities, like the Syracuse Industrial Development Authority, could pursue Congel. Although the SIDA did not put up any money outright, it gave the project a 30 year tax abatement, presumably on the premise that completion of the project would bring economic development.  If the project would not have gone forward without the $228 million in green bonds, SIDA might have grounds for seeking its property taxes.
3. Citibank and Congel entered into a settlement under which Citibank agreed to disburse the remainder of the $$155 million construction loan on the project.  If the project is devalued by the impact of the tax issue, Congel may be in breach of whatever settlement he came to with Citibank.
4. According to the Post-Standard, the developer’s attorneys now say the promised conservation and technology goals will not be achieved with the current expansion and may never be achieved, even if future phases of Destiny are built. if the Federal government can prove that Congel fraudulently represented that the project would have the green features, this may be additional grounds for a suit.
   

However, Congel almost certainly protected himself and his development company behind a single purpose entity to develop the Carousel Center.  If, at the end of the day, the only asset the single purpose entity has is the partially completed Carousel/Destiny USA Center, investors, the government and the people of Syracuse may have been taken for a ride.

 

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NOTE: The opinions expressed in this post are entirely those of the author, and do not represent the position of the USGBC or the Delaware Valley Green Building Council.

Yesterday, I discussed the fact that Henry Gifford filed an Amended Complaint in his suit against the USGBC for fraudulently claiming that LEED buildings save energy.  The post, as well as the Amended Complaint are available here. I also noted that Mr. Gifford and the other plaintiffs probably do not have standing to bring the suit because they were not harmed by the allegedly fraudulent advertising of the LEED system. 

Mr. Gifford alleges that the people and entities that have been and will be harmed include:

USGBC's misrepresentations have and will continue to deceive consumers and voters, taxpayers, developers, municipalities, and legislators at the local, state and federal levels.

Amended Complaint at Paragraph 57.

This brings up critical questions about the legitimacy of Mr. Gifford's claims:

If developers were really experiencing energy performance vastly out of proportion to their expectations, wouldn't there be suits by developers against their design professionals and/or the USGBC? 

If the Federal government, with one of the largest portfolios of LEED buildings, were really disappointed by their performance, wouldn't they stop using the system? 

If design professionals were spending money to obtain worthless credentials, then wouldn't architects (whose profession is down something like 50%) be lining up to demand their money back? 

If the problems that Gifford alleges are so fundamental, why is it that Henry Gifford and a few other plaintiffs who have rejected the LEED paradigm seem to be the only ones suing? 

The concept of abstract “rightness” does not play a very large role in the American judicial system.  With few exceptions, only a person harmed can bring suit to right the wrong done to him or her. So, even if you or I see something terribly “wrong” happening, if we are not harmed by it, we have no standing to bring suit. 

For example, a man stops by a street hustler and plays a shell game.  You are standing on the corner.  You see the street hustler take his money and bilk him.  The man sees it too, but shrugs his shoulders and walks away.  You cannot sue to get the guy’s money back—only he can (or press charges, etc). 

If there are no victims of the USGBC's "fraud", then Mr. Gifford's is really just a gadfly who is calling attention to himself by suing the USGBC.  If there is fraud, then we should see a rash of suits by plaintiffs who have actually been harmed--consumers and voters, taxpayers, developers, municipalities, and legislators at the local, state and federal levels.

NOTE: The opinions expressed in this post are entirely those of the author, and do not represent the position of the USGBC or the Delaware Valley Green Building Council.

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NOTE: The opinions expressed in this post are entirely those of the author, and do not represent the position of the USGBC or the Delaware Valley Green Building Council.

In October 2010, Henry Gifford filed a lawsuit against the United States Green Building Council alleging, essentially, that the USGBC had fraudulently represented the performance of LEED buildings, and doctored study results to support their claim that LEED buildings performed more efficiently than standard construction. Yesterday, Henry Gifford filed an amended complaint (you can download the amended complaint here). 

The original suit was filed as a class action, and included claims against the USGBC for illegal monopolization and false advertising.  I posted that these issues would probably not pass legal muster.  The class action could not be certified (see my post here) and the suit did not establish that the USGBC was a monopoly (see my post here).

 There are several changes to the new complaint:

1. It has been boiled down to essentially a False Advertising and Consumer Fraud Act case under Federal and New York State law.
2. It is not a class action.
3. The monopolization claim has been eliminated.
4. Several new plaintiffs have been added, including an architect, an engineer, and a "speciali[ist] in moisture barrier design and mold remediation."

The essential claims as alleged in the factual section of the Amended Complaint are that the USGBC has misrepresented the energy efficiency of LEED buildings, and that the LEED certification is not a verification of the actual energy performance of the building. 

From a legal perspective, I believe that the Amended Complaint is still riddled with a fatal flaw--the plaintiffs probably do not have standing. 

In alleging a violation of the Lanham Act, the Federal act prohibiting false advertising, the Amended Complaint states:

USGBC's misrepresentations have an will continue to deceive consumers, voters, taxpayers, developers, municipalities and legislators at the local, state and federal levels.

However, fraud requires "reasonable reliance" on the false statements. The difficulty here is that, although more plaintiffs have been added, they are still not plaintiffs that were "duped" by the USGBC's representations.  The claims alleged by Gifford are really claims rightfully brought by people who have been harmed by spending too much on LEED buildings, or LEED accreditation.  In essence, Gifford has not eliminated the standing problem that doomed his class action. 

The Amended Complaint is also rife with hyperbole, which diminishes its credibility.  For example, with respect to a study on the performance of LEED buildings:

The self-selection bias is so obvious, it's about as reliable as using breathalyzer tests of drivers who volunteer to be tested as a gauge of how many people drink and drive.

See Amended Complaint at Paragraph 32(b).

Despite the fact that Gifford's lawsuit is probably flawed by reason of lack of standing, as revised the Amended Complaint may be enough to survive a Motion to Dismiss.  In that case, discovery will proceed, which will open the internal communications of the USGBC to public scrutiny. 

As with the kerfuffle over the emails among scientists studying global warming, this may muddy the waters and slow the progress of green building, even if the claims against the USGBC are eventually proven to be unfounded.   

NOTE: The opinions expressed in this post are entirely those of the author, and do not represent the position of the USGBC or the Delaware Valley Green Building Council.

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Although most of you are probably in St. Martin enjoying fruity cocktails on the beach, we here at GBLB are hard at work.  So take a break from your mai-tai to read about a very interesting appellate decision out of California on weighing the relative priorities of green development.  The case, brought to our attention by a loyal reader, is Sven Toorvald v. City of West Hollywood, and the decision is available here.

A quick summary of the case is as follows:

Mr. Toorvald installed a small solar panel to power his halogen security lights, presumably like the one available here from Amazon.com.  Importantly, the Court notes:

The opening brief describes plaintiff's system, "an industry standard collector (one foot by one-foot comparable in size to a solar panel on a freeway call box), separate inverter and storage battery, [which] collects, stores and distributes solar energy for electrical generation."

Next door, a developer sought to build a four-story, nine-unit courtyard condo building with subterranean parking.  The development was a "green" development in that it complied with the West Hollywood green building regulations, was a "high achieving" green building project that qualified for an additional unit density bonus and had solar panels.  In addition, the project was an urban in-fill project.  

The controversy emerged because the green development was going to "cause an obstruction to his solar absorption for eight months of the year."  Mr. Toorvald alleged that this violated Municipal Code Section 19.20.170(A) which  mandates:

A structure, fence, or wall shall not be constructed or modified in a residential zoning district, and vegetation may not be placed or allowed to grow, so as to obstruct more than 10 percent of the absorption area of a solar energy system on a neighboring parcel at any time.
 

The trial court determined that Mr. Toorvald's solar lighting installation was not a "solar energy system," and therefore its obstruction did not violate Section 19.20.170(A). 

To justify this conclusion, the trial court and the appellate court go through a convoluted set of contortions to conclude that a solar panel that produces electricity for a lighting system is not "Any solar collector or other solar energy device whose primary purpose is to provide for the collection, storage and distribution of solar energy for...electricity generation..."

If that sounds like a silly argument, it is. What the courts were really trying to resolve is whether a high-value green development project was "worth" more than a tiny solar light.  The problem was not in the decision--I believe that the court and the city council rightly decided that an appropriate, in-fill green development should be approved.  The problem was in the justification, and the clumsy regulatory drafting which it uncovered.  "Solar energy system" was not defined in the Municipal Code.  The definitions that the Court refers to in state legislation were equally broad. 

Now that green buildings and renewable energy installations are becoming more commonplace,  city councils and planning commissions will be forced to weigh the environmental impact of competing development.  Is an in-fill development more environmentally worthwhile than a tiny solar installation? Just like health and safety regulations, these regulatory bodies will need to have discretion and guidelines to weigh the relative factors on environmental impact.

Because if it looks like a solar energy system and it quacks like a solar energy system, it probably is a solar energy system.

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 Ahhh holiday time, when the sound of the clerk's stamp on green litigation rings merrily in my ears.  On December 9, 2010, the Builders' Association of the Twin Cities (BATC) sued Minnesota Green Star (GreenStar).  The Complaint and Motion for a temporary restraining order is available here. 

Most states and local governments have incorporated third party standards, like LEED, into their green regulations, and that has caused no little amount of controversy.  Minnesota, by contrast, created its own green building certification standard for homes.

According to the Star-Tribune:

The program, funded in part with a grant from the MPCA, is voluntary and will have different criteria depending on the type of project. The standards for new construction, for example, will be different from those for a remodeling project. And the standards for an addition will be different from those for a simple kitchen remodel.

GreenStar was the non-profit formed to create the standards and program, and was originally a partnership of the BATC, the Minnesota chapter of the National Association of the Remodeling Industry and the Minneapolis-based Green Institute. 

 With the advent of the downturn in the economy, the partnership fractured into a controversy of green versus green, and the BATC withdrew from the organization.  Again, from the Star-Tribune:

But with the construction market so fragile, any additional costs for green certification can be detrimental, especially when many buyers are wondering whether their home values have hit bottom, said Mike Otto, a home builder and remodeler.

That's the sentiment that was driving the Builders Association to develop a broader range of standards that would allow builders and consumers more choices to earn the GreenStar certification. Dave Siegel, BATC's executive director, said that members want to embrace an "incremental approach" and create various standards, including some low-level certification that doesn't require more-expensive third-party verification.

At the time, the parties said the divorce was "amicable."  Like many families know, divorce is always amicable right up to the courthouse steps. 

In the spirit of "live and let live," the Builders' Association of the Twin Cities (BATC) sued Minnesota Green Star (GreenStar)  claiming that it developed and owns the intellectual property to "Green Homebuilding Guidelines," and Green Star was granted the right to use the Guidelines to further its mission, but did not own the rights to the materials. The BATC also loaned of $306,418.19, and the BATC claims Green Star cannot pay its debts, and therefore the loan is due and payable immediately.

In addition to filing the Complaint, the BATC filed for a temporary restraining order enjoining Green Star from:

[U]sing, in any way altering or damaging, and/or making or attempting to make any transfer, sale, assignment, license, sublicense or grant of rights or interests to any other person or organization with respect to all or any part of the Green Homebuilding Guidelines, including both the New Home User Manual and the Now Homes Checklist.

This week, Judge Gregg E. Johnson of the District Court of Minnesota granted the TRO, but limited its scope to "alteration, destruction, sale or licensing of the new home certification manual and checklist", and excluded the Green Remodeling Guidelines.  The Court also required BATC to post a $150,000 bond by Monday.  Green Star can still use the New Home materials in its ongoing work of certifying new projects.

The withdrawal of funding, participation and, potentially the new home checklist and manual undoubtedly threatens Green Star's existence.  The inititative was partially funded by the State of Minnesota, and so they may have a stake in the ownership and continued existence of Green Star, and may be brought into the matter.  Stay tuned, a temporary injunction hearing is scheduled for January 24, 2011.

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I have curly hair. More heat and humidity = bad hair days.  Thus, from a purely personal perspective, climate change-caused increases in temperature and intensity of storms will be, for me, a nuisance. 

Apparently, my perspective on this does not count as much as that of the Supreme Court.  Fortunately, the nine justices (well, actually, eight because Sonya Sotomayor recused herself) will be deciding whether climate change actually is a nuisance.  Today the high court announced that it will hear American Electric Power v. Connecticut. 

In the original suit, a coalition of eight states, local governments and non-profit land trusts sued major power producers alleging that the power producers had created a common-law nuisance by adding 650 million tons of carbon into the atmosphere. 

The main issue is one of my perennial favorites in the green regulation arena--federalism.  The district court determined that the case could not go forward because the suit raised political questions which were not justiciable by the courts.  The Second Circuit reversed, arguing that, while complex, the issues boiled down to basic environmental torts which had been handled by the courts in the past. The Second Circuit decision is available here.

Many Republicans have been trying to restrict the EPA's ability to regulate greenhouse gas emissions pursuant to the Clean Air Act, and Harry Reid has already announced that comprehensive energy legislation, including cap-and-trade is off the table indefinitely.

Thus, If the Supreme Court rules that regulating greenhouse gas emissions is a political question, that question has already been answered.  But if the Court decides that carbon emission is a nuisance, and capping of carbon emissions is an available remedy, the politicians will be left with little choice other than to create a compromise on how to cap carbon emissions comprehensively.  If they do not, it leaves open the opportunity for copy-cat litigation in every state and municipality across the country, with potentially differing mechanisms for capping greenhouse gas emissions.

The showdown is likely to happen in the spring, and be on the lookout for an 4-4 split, since Justice Sotomayor recused herself.   

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NOTE: The opinions expressed in this post are entirely those of the author, and do not represent the position of the USGBC or the Delaware Valley Green Building Council.

As almost anyone in the green community knows, last week LEED Critic Henry Gifford sued the USGBC for, essentially, a few different flavors of fraud.  Mr. Gifford sued the USGBC as an alleged representative of a class of people who had been duped by the USGBC.  I posted last week that I did not think that the class action would survive class certification.  In that post, I provided a 30-second manager version of Advanced Civil Procedure.  Today, it is Anti-Trust 101.

 The causes of action Mr. Gifford brought against the USGBC are the following:

1. Monopolization through Fraud--Sherman Anti-Trust Act 15 USC Sec. 2
2. Unfair Competition--Lanham Act 15 U.S.C. Sec. 1125(a)(1)(B)
3. Deceptive Trade Practices--New York General Business Law Sec. 349 (a) and (h)
4. False Advertising--New York State General Business Law Sec. 350-a(1) and Sec. 350-a(3)
5. Wire Fraud--RICO--18 USC Sec. 1962(C)
6. Unjust Enrichment

[To avoid confusion, I will note here that the Complaint has two Fourth Causes Of Action.]

I will address the various causes of action in different posts this week, starting with Monopolization.

The Sherman Act  is intended to prevent the combination of entities that could potentially harm competition, such as monopolies or cartels.

Section 2 of the Sherman Act, 26 Stat. 209, as amended, 15 U. S. C. § 2, makes it an offense for any person to “monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States . . . .”

To prove monoplization, the plaintiff must show  “(1) the possession of monopoly power in the
relevant market and (2) the willful acquisition or maintenance of that power as distinguished
from growth or development as a consequence of a superior product, business acumen, or
historic accident.” United States v. Grinnell Corp., 384 U.S. 563, 570-71 (1966).

First, it is not entirely clear what market  the plaintiffs are alleging USGBC has a monopoly.  

A monopoly is a form of market structure where only one or very few companies dominate the total sales of a particular product or service. Monopoly power is defined as the ability to control price or to exclude competitors from the marketplace. The courts look to several criteria in determining market power but primarily focus on market share (the company's fractional share of the total relevant product and geographic market). A market share greater than 75 percent indicates monopoly power, a share less than 50 percent does not, and shares between 50 and 75 percent are inconclusive in and of themselves. In focusing on market shares, courts will include not only products that are exactly the same but also those that may be substituted for the company's product based on price, quality, and adaptability for other purposes. For example, an oat-based, round-shaped breakfast cereal may be considered a substitutable product for a rice-based, square-shaped breakfast cereal, or possibly even a granola breakfast bar.

Green Globes, Energy Star, Passive Haus, BREEM, and others exist in the realm of green building evaluation, but LEED certainly has the dominant market share.  But is this really the market? If building evaluation in general is the market, than surely the International Construction Code, which is the model code for most states and municipalities, has a broader market share and usage than LEED.  If energy performance is the market, then the ASHRAE codes which provide standards for energy performance and are used almost universally have a far more dominant market share.

 If professional certification of builders and design professionals is the market, than certifying to become a Registered Architect or a Professional Engineer must also compete with becoming a LEED accredited professional. 

Second, even assuming that LEED has a "monopoly" on some undefined market, Mr. Gifford must prove specific intent to acquire or maintain the monopoly position.  Mr. Gifford alleges a significant number of bad acts on the part of the USGBC, mostly centering around the USGBC's alleged misrepresentation of the energy performance of LEED buildings.  In the recitation of the claim, Mr. Gifford states that misrepresentation of energy performance of LEED buildings "is false and intended to mislead the consumer and monopolize the market for energy-efficient building design." 

The problem is, Mr. Gifford does not demonstrate how this false representation is conspiratorial or predatory.  The USGBC's actions, even if fraudulent, are not  intentionally prohibiting other rating systems from coming into existence or preventing other systems from proving they result in more energy efficient buildings. 

 So, Mr. Gifford's Anti-Trust Claim should go directly to jail--what a court may actually do is another matter entirely.

NOTE: The opinions expressed in this post are entirely those of the author, and do not represent the position of the USGBC or the Delaware Valley Green Building Council.

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NOTE: The opinions expressed in this post are entirely those of the author, and do not represent the position of the USGBC or the Delaware Valley Green Building Council.

You had to know this was coming. I even predicted a Lanham Act and Consumer Fraud Act claim would be part of a good green litigation.

Yesterday, Henry Gifford, public critic of LEED (you may have read his Op-Eds in the New York Times) filed a class action law suit against the USGBC and its founders personally on behalf of "consumers, taxpayers, building design and construction professionals."  The allegations are essentially fraud and false advertising, an anti-trust claim and a RICO claim thrown in for good measure.  His theory is that the USGBC has falsely claimed that its rating system makes buildings save energy, and that building owners have spent more money to have their buildings certified, that professionals have gotten worthless professional credentials and people in general have been duped into thinking LEED has meaning. The Complaint can be downloaded here.

There will be a lot written on this suit--blog posts, client alerts, articles will dissect the wrongness or the rightness of the claims. Real estate and construction lawyers, including me, lit up at the sound of the stamp of the clerk in the Southern District of New York where the case was filed.

My initial take (hey--I have to get in my fair share of the follow-on publication) is that the case may have merit, but it has a bad plaintiff.  Rosa Parks was not the only person to object to segregated buses by refusing to give up their seat. She was chosen by the NAACP because she made a good plaintiff.

The plaintiffs in this case are Mr. Gifford, his company, and a resident of the state of Arizona, presumably representing the taxpayer, as nothing is stated in the Complaint about his occupation or other way he might have been harmed personally. 

I don't think that, as alleged, this suit will survive class certification.  In a class action suit, you must consider (among other things) whether the plaintiffs are enough alike so that their claims can be adjudicated together, whether the questions of fact and law are sufficiently similar, and whether the lead plaintiffs adquately represent members of the class.

Here, the Plaintiffs are purporting to file suit on behalf of a whole range of plaintiffs with all different harms--harms to building and design professionals who sought educational certifications, building owners who paid additional money to have their buildings certified and other unspecified "consumers", and taxpayers.

Let's put aside the fact that, as a general proposition, taxpayers do not have standing to sue.  There is a commonality problem and a causation problem for the class--did the USGBC's false statements cause the same type of harm to the same type of plaintiff.  Indeed, did the false statements cause any harm at all to these plaintiffs.

Why go through this academic class certification exercise, except to prove to Professor Burbank, the professor of my Advance Civil Procedure Class on Class Actions at the University of Pennsylvania that, despite the fact that I rarely got up for his 8 am class, I did, in fact, learn something?

It matters because the allegations in the suit matter.  Is the USGBC engaging in intentional, fraudulent actions? Or was it a good organization seeking to benefit the world by promoting more ecologically friendly building practices? Or a little from column A and a little from Column B.

A good lawsuit would elucidate this--through the discovery process, emails might come to light showing that the USGBC did or did not intentionally defraud its constituent groups.  But if the class is not certified, it will be Mr. Gifford, suing on his own behalf.  Was Mr. Gifford harmed by USGBC's actions? Probably not.

To the best of my research, Mr. Gifford is not a LEED AP, and indeed, from his website and publications, he has outspokenly denounced the USGBC and LEED.  Mr. Gifford does not appear to own any property certified LEED.  In short--the USGBC's actions have not harmed him His career, if anything, has been enhanced by the USGBC's position.

Mr. Gifford is a self-proclaimed energy efficiency guru, his website does not provide any case studies on the buildings he has done, and a quick google search reveals Mr. Gifford is inolved in a number of PassiveHouse projects (passivhaus is a competing system for energy efficient buildings).  If Mr. Gifford is the last plaintiff left standing, it will be a much harder lawsuit to bring, let alone win.

It does beg the question, though, even if this law suit fails, are there other plaintiffs waiting in the wings?  For my next post--assuming the class is certified, do the claims have any merit?

 NOTE: The opinions expressed in this post are entirely those of the author, and do not represent the position of the USGBC or the Delaware Valley Green Building Council.

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The Natural Resources Defense Council (NRDC) sued the Feds today to reinstate the PACE program.  The PACE program was a component of ARRA (the Stimulus Bill for those of you non-lawyer geeky types who still choose to read my blog) which allowed the upfront costs of property owners’ clean energy and energy efficiency projects to be financed by local governments, and paid back by homeowners as an increase in  their property taxes. 

The concept behind the PACE program is that the energy savings from energy efficiency and clean energy projects would outstrip the costs over time, but that the upfront costs were a barrier to many people in implementing the badly needed changes. 

Several municipalities and states had implemented these programs, and it sounded like such a good idea that $150 million in the ARRA was dedicated to support them.

Homeowners are able to do the energy upgrades, local governments can take action to ameliorate climate change and the Federal government will help with the financing.  Everybody's happy, right?

Not so fast. The Federal Housing Finance Agency, which regulates government sponsored mortgage buyers Fannie Mae and Freddie Mac, and the Office of the Comptroller of the Currency, which regulates national banks stopped the PACE programs in their tracks.  According to the NRDC's complaint, available here, the Defendants refused to issue mortgages that had a PACE loan in first priority. 

According to the NRDC press release summary of the claims:

NRDC is suing the agencies for halting the programs without justification, and for doing so without following the proper protocol as required by law. This includes failing to conduct a review of the environmental impacts and to provide the public an opportunity to comment before taking this action.

The objections to the actions on PACE have mainly to do with statutory procedural requirements for administrative agency action, the suit serves to shed a light on what is essentially "greenlining"--a modern day equivalent of "redlining."    

 In 1935, the Federal Home Loan Bank Board (FHLBB) asked Home Owners' Loan Corporation (HOLC) to look at 239 cities and create "residential security maps" to indicate the level of security for real-estate investments in each surveyed city. Such maps defined many minority neighborhoods in cities as ineligible to receive financing. The maps were based on assumptions about the community, not accurate assessments of an individual's or household's ability to satisfy standard lending criteria. Since African-Americans were unwelcome in white neighborhoods, which frequently instituted racial restrictive covenants to keep them out, the policy effectively meant that blacks could not secure mortgage loans at all.

The foreclosure crisis that stemmed from complicated financial instruments legitimately scared the wits out of the Federally backed mortgage entities.  But now they are too scared to even do the right thing and support a new financial model that has the possibility of allowing millons of homeowners to make their homes more energy efficient--which will, in turn, create demand for green products and people to manufacture them and install them, which will enable those people to...pay their mortgages.

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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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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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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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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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By: Patrick J. Bello, LEED AP, Drexel University Earle Mack School of Law, Class of 2012

As previously posted, on October 3, 2008 in AHRI v. City of Albuquerque, District Court Judge Martha Vazquez issued a preliminary injunction against the City of Albuquerque prohibiting the city from implementing its initial green building regulations because it would require more stringent HVAC energy efficiency regulations than those currently set forth in the Energy Policy and Conservation Act of 1975 (EPCA).

In essence, Judge Vazquez determined that accepting the AECC would mean that builders could be penalized for using federally acceptable standards, and thus the federal EPCA requirements were found to preempt the new State regulations.

In response to and in compliance with the injunction, the City of Albuquerque has since passed the 2009 Interim Albuquerque Energy Conservation Code (IAECC). Led by the Sierra Club and the Southwest Energy Efficiency Project (SWEEP), the IAECC was passed and took effect in December 2009. The Code was drafted so that the areas of regulation at issue in AHRI v. City of Albuquerque remain unchanged at the federal minimums, but maintains other previously enacted energy-reduction legislation and raises standards for additional energy efficiency components such as the building envelope, windows, and lighting in order to stay on track with the City’s energy reduction goals. The IAECC meets the current “Architecture 2030 Challenge” to achieve a 30% overall improvement above and beyond the 2006 International Energy Conservation Code (IECC) baseline.

 In a brief telephone interview with the City of Albuquerque Attorney John Dubois, much light has been shed on the present situation. To date the IAECC has been met with success. The City does in fact meet their planned efficiency goals for attaining the projected 30% energy savings, and they have done so without making any changes to HVAC standards. However, according to Mr. Dubois, without the ability to incorporate restrictions and regulations on HVAC components the IAECC is a “dead end.”

In other words, the City has “squeezed” most of the possible additional energy reductions from various aspects of the building, including lighting, roof reflection and windows, but given the fact that HVAC energy usage encompasses a major component of the energy consumption of any building (whether new construction or renovation) the City will not likely be able to move beyond that 30%, thus putting a stoppage to continued energy reductions in the future.

The IAECC is meant only to be a temporary fix while litigation continues. The City has complied with Judge Vasquez’ preliminary injunction, but upon resolution of the case the IAECC will automatically end. If the City of Albuquerque is to prevail, the original Energy Conservation Code will be reinstated. If AHRI is to prevail, the IAECC will still be taken out of effect, and new standards in further compliance with the decision will be reexamined and implemented.

At present, the litigation is on hold pending Judge Vasquez’ decision to either grant AHRI’s motion for summary judgment, or to allow the case to proceed. Everything is fully briefed and ready to go, and according to Mr. Dubois the decision could come in “any day.” The City is hoping to get the opportunity for discovery and a trial because it still fervently believes that the regulations under litigation are not in fact preempted by the federal standards.

Just to clarify one last commonly misconstrued point following this case, is that the oft quoted idea that the City was “unaware” of federal preemption issues upon the passage of its Energy Conservation Code is actually inaccurate. By the time of the final bill, the City had in fact already made certain changes to address the preemption issues. The Code that is actually under litigation was initially passed with some inconsistencies and points requiring clarification, but the City gave itself a wide berth before the Code would take effect. The drafters gave themselves the time to review the Code and were in fact aware of the preemption argument when they chose to move forward. The reason for doing so is because all standards and requirements in the original Code are “performance based.” Buildings need only meet certain levels of energy efficiency, the manner in which these standards are achieved is not prescribed by the Code. Specific equipment is not mandated, and there are various different ways of achieving the goals. At the time the Code was passed, and still today, the City of Albuquerque strongly believes that the Code is not preempted by federal law and it is sticking by this belief.
 

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Fans of Green Law will recall that the Heating and Air Conditioning industry associations (AHRI, et al) sued the City of Albuquerque to enjoin Albuquerque's green building regulations in 2008.

These industry groups relied upon an argument that the regulations adopted by Albuquerque exceeded the energy efficiency requirements for air conditioners, furnaces, heat pumps and water heaters established at the federal level by the Department of Energy.   

Now, two years later, the Department of Energy is holding a public meeting to discuss updating those standards.  The meeting will be held on May 5, 2010 from 9 a.m. to 5 p.m. in Washington DC at the US Department of Energy, Forrestal Building, Room GE-086, 1000 Independence Avenue SW, Washington, DC 20585. Written comments are also accepted by email to Brenda.Edwards@ee.doe.gov (include EERE-2008-BT-STD-0006 in the subject line).

In advance of the meeting, the DOE has issued the results of the preliminary analysis and potential energy conservation standard levels the DOE "could consider" for the regulated products, and a preliminary technical support document outlining its efforts. 

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Earth2Tech ran two stories recently on backlash by customers against utility companies for unusually high electricity bills after smart meters were installed. 

In Bakersfield, California, a homeowner actually sued Pacific Gas and Electric on behalf of himself and a class of smart meter recipients:

The original plaintiff, Bakersfield resident Pete Flores, filed the suit after his electric bill tripled fro $200 to $600 a month — right after having a new smart meter installed in his home. Objecting that PG&E described the meter as a money-saving device, he decided to sue for fraudulent advertising, negligence and unjust enrichment

The complaint is available here.

The only evidence of the alleged fraudulent, negligent and unjust failure to accurtately measure Mr. Flores' electricity was an increase in his bills, with "no change in usage pattern on the part of Plantiff."  Complaint at 5.  Evidence of complaints of fellow class members comes from:

countless complaints on the internet, over 100 complaints to activist group TURN (The Utility Reform Network) and a special meeting led by State Assemblyman Dean Florez...

Complaint at 5.

After reading the Complaint, I have a few questions:

1.  What evidence is there that Mr. Flores did not change his usage patterns other than his electricity meter reading?

2. Is it possible, that, as compared to the meter maid stopping by and checking your traditional meter, a smart meter is actually accurately measuring electricity usage, and Mr. Flores was actually being poorly measured, BEFORE, not after the installation of smart meters? 

3. What is the misreading rate of meter maids? More than 100 complaints across the state of California for the same time period? 

Smart grid technology, and smart meters are grassroots level green building technologies which are likely to effect millions of homeowners nationwide.  It is likely that we will see more lawsuits like Mr. Flores'. 

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Today's guest post was contributed by E. Mitchell Swann, P.E., LEED AP, a partner at MDC Systems

 

As a strong component of the sustainability initiative in buildings, energy use is rightfully taking its place as a leading metric in evaluating a building’s performance. Further emphasizing the importance of performance measurement is the expected roll out of an industry wide “Building Energy Performance” label which is intended to provide an objective comparison of energy use between buildings. Rating systems like Energy Star along with model energy codes look at both predictive energy use models and actual usage as crucial to determining a building’s true performance and rating. The USGBC’s newly issued LEED v3.0 rating system requires the initial certification, recertification and by extension the possibility of decertification of LEED buildings to be tied closely to comparisons of modeled and measured energy use over time.

 

In those rating systems where a project’s “end game” performance is evaluated against their ‘promise’ as presented in a predictive model developed during design, the quality of the prediction greatly influences the quality perception of the results.

 

On many projects energy modeling work is performed by a subconsultant to the design team or possibly as an independent member of the project team. The results of the modeling effort are extremely influential in making design decisions from site orientation to building envelope options to HVAC systems to control strategies. Clearly an error during the modeling stage can lead to major problems downstream especially with respect to energy use comparisons and possibly maintaining certification downstream.

 

But if an error is made, who do you turn to for redress? Obviously the first stop is at the door of the energy modeler. This might work in the independent team member scenario but not so well in the subconsultant situation. Dealing with a subconsultant to a member of the design team may require a ‘two stop’ stop. But what happens if the modeling consultant doesn’t have the liability insurance that design firms typically have? What if the error is not ‘caught’ until Year Two of operation and we discover that the system that was installed will never perform as modeled and the actual energy costs are expected to 15% higher than initially thought for the life of the building? What are the ‘damages’ incurred by the Owner? The cost of a building or system retrofit? The energy cost penalty for the life of the system? What about the engineer who reasonably relied upon the analysis provided by the energy modeler? If the initial model output is used to guide engineering and/or architectural designs on the project, is a ‘third party modeler’ providing design services? Do they need to be licensed as an architect or engineer?

 

These are just a few of the issues that can arise and while energy modeling has a fairly long history, it is common in the industry to consider models as a comparative tool used to evaluate design options, not to ascertain the precise amount of energy a building would consume in a year. The newly ‘codified’ need to compare prediction to reality would seem to introduce a new level of expected accuracy and with it potential exposure. Is this effectively a prediction (and promise?) of performance which traditional E&O insurance does not cover? Will insurance products need to be revised to accommodate this new potential risk?

 

Design professionals would do well to clearly define performance expectations and potential limitations on their design as well as key parameters and assumptions used in modeling facility operations. On evaluating performance downstream, there may need to be an ‘audit clause’ to allow the designers a chance to evaluate how the facility was maintained or operated and the impact on energy if there is a divergence between predicted and actual usage.

 

The importance of energy modeling and the importance of accuracy in modeling is growing especially if building ratings or certifications are linked to correlations between predicted an actual performance. Is this a good thing? Well, at one level it seems reasonable to require actual performance to be at or near what was “promised”. But it is also important to remember that construction is a complicated and multi-variable process with many inputs, pieces and actors. So a lot can happen that can impact final performance and it may be difficult to determine exactly all of the “whys”, “hows” and who if something doesn’t perform exactly as expected. And of course we all know how fickle the weather can be.

 

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Stephen Del Percio does a great job of analyzing the current state of green litigation, or lack thereof, in response to my piece on the same subject from last week on the Green Real Estate Law Journal. 

He makes a particularly interesting point about the statute of limitations:

In my experience, plaintiffs will typically wait until they are up against the controlling statute of limitations before commencing a lawsuit. Here in New York, the applicable statutes of limitation for many of the causes of action under which green building liability may arise (such as negligence and breach of contract) range from three to six years. When you consider that LEED Version 2.2 only went live on January 1, 2006, many of the LEED-related green building claims that have been suggested to date remain well within the statute. This could be a significant reason why both LEED- and green building-related litigation will remain on the horizon for the near future.

Many thanks to Mr. Del Percio and Mr. Cheatham for their insightful thoughts sparked by my piece. 

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My friend Chris Cheatham over at Green Building Law Update has an interesting followup piece to my piece from last week on Whither The Green Building Litigation. He also has a picture of pinnochio. 

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Non-unionized workers on a green roof project in Minneapolis have filed a claim with the NLRB, arguing that they are being paid as landscapers, not roofers, making $20 less an hour than their roofing counterparts.  Moreover, they claim that proper safety precautions are not being taken. 

An attorney for the workers this month filed complaints with the National Labor Relations Board (NLRB), alleging that Stock retaliated after they complained and tried to unionize.

The president of the Frindley Company, according to  the Minneapolis Star Tribune:

He defends paying them landscapers' wages, saying a lot of green roof work is landscaping.

Like unions refusing to install waterless urinals, there are a lot of potential labor relations questions which emerge with new green building techniques.

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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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1.  Have a clear intent

In Going by the Book, authors Eugene Bardach and Robert Kagan state, “A regulation requirement is unreasonable if compliance would not yield the intended benefits…” In other words, a regulation should have a clear intent--like increasing the number of high performance buildings or reducing greenhouse gas emissions or improving indoor air quality--and compliance with the regulation should acheive the intent. 

2. Evaluate extreme outcomes

Las Vegas instituted a tax cut for green buildings so sweeping and easy to qualify for that it threatened to cut a giant hole in the state's budget.  In planning regulatory mechanisms, regulators must look at a likely scenario of compliance and an extreme case to ensure that all outcomes are considered, and the extreme case is prevented. 

3. Carefully analyze utilizing third party green building criteria and certification systems

Many local governments incorporate third party green building criteria (and in some cases, certification) like LEED, NAHB-Green, Green Globes, etc. as the core of their green building regulations.  I will do a full post on this topic as part of this series, but regulators need to examine the pros and cons of choosing a third party system as a component of their regulations.  

4. Create measurement and verfication mechanisms

In conjunction with point number 1 above, compliance with the regulations should be measurable and verifiable.  Looking to decrease greenhouse gas production? Require reporting on energy usage.  Looking to increase green buildings in your municipality? Require receipients of tax credits to indicate what green components the credit enables them to add that they would not have done in the absence of the credit. 

5. Develop valid enforcement mechanisms

Washington DC has come under major criticism for requiring a performance bond which is forfeited in the event that a building fails to comply with the green requirements of the DC green building act.  Essentially, this is not what a performance bond has traditionally been used for, and the surety industry has expressed significant concerns over providing bonds for this purpose.  Another mechanism DC could have used was to levy fines, or withdraw (or refuse to issue) occupancy permits, if the project did not meet its green requirements.  

6. Check for state and federal preemption 

Last year, the HVAC industry associations sued the City of Albuquerque to prevent the city's green building code from taking effect.  They argued that the energy efficiency requirements in the green building code was preempted by federal standards for HVAC equipment.  In the course of the litigation, it came out that the city attorney had not checked for federal preemption. 

In addition to federal standards, many states have state-wide building codes which may preempt local municipalities' ability to require construction to conform to more stringent standards.

7. Anticipate litigation

The first envrionmental legislation was passed in the early 1970s. There is still litigation on the interpretation of sections of the Clean Water Act and the Clean Air Act.  The purpose of the judiciary is to interpret and clarify regulations, and this process is a normal part of new regulatory schemes.

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Bankruptcy and forclosures pose a few unique risks for green building. 

One complication is the significant tax credits and other public financing involved in green construction. This week, Shaw Development LLC, the developer of Captain's Galley development  in Maryland and the plaintiff in what has been termed the first green construction litigation, declared Chapter 11 bankruptcy.  Stephen DelPercio at Green Real Estate Law Journal argues that the contractor responsible for lost tax credits (if they could be shown to have led to the bankruptcy) could be responsible for significant consequential damages including

decrease in sales prices during the course of the automatic stay that is imposed over the property, any other sales that were lost due to the bankruptcy reorganization, and associated professional fees and other carrying costs that the owner/trustee incurred during the course of the stay.

In addition to this risk, bankruptcy of green projects may be complicated by their connection to the renewable energy markets.  For example, a development installs a solar array and arranges to sell its renewable energy credits (RECs) to a utility. The utility uses the REC purchase to fulfill its mandatory obligation to purchase alternative power. If the development goes bust and no power is produced, the utility and/or state/local government may come calling.

Finally, green projects often involve the utilization of high maintenance components, like vegetated roofs.  If these facilities are not properly maintained due to bankruptcy or foreclosure, third parties harmed by poor maintenance (collapsing roofs, for example) may have nothing but an insolvent party for recourse.

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Washington DC has one of the most progressive green building laws in the country.  Passed in December 2006, Washington mandates, among other things, that private buildings above 50,000 square feet submit a checklist of green features by 2009, and meet LEED NC 2.2 standards by 2012. To enforce the law, there is a bonding requirement for each project. 

Today's Washington Business Journal [subscription required, but you can get a synopsis of article here] reported that the surety industry is complaining that the enforcement mechanism is flawed: 

Under the new law, if a project does not meet the strict green requirements, the city would receive money from a performance bond that has to be posted for the project in an amount of up to 4 percent of the building costs, or $3 million. Those dollars would be paid into a new city green building fund aimed at helping implement the legislation.

But the bonding mandate has surety companies wondering which party in the project — whether the building owners, the contractors or the designers — must shell out for the performance bond, therefore bearing the risk of noncompliance.

Without support from the sureties, which finance bonds, it will be difficult for Washington to enforce its law because construction projects won't be able to acquire the required bonds.  If there is bond default, litigation will surely follow, funded either by the parties involved, or the surety guaranteeing the bond.  Alternatively, the surety industry may choose to sue Washington, as the HVAC industry associations did to Albuquerque in AHRI v. City of Albuquerque, to enjoin the legislation from taking effect due to the poor drafting of the legislation. 

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Recently, I wrote at Greenerbuildings.com about how legal issues have largly been ignored by the USGBC.  I first posted an article about the legal considerations for green buildings in July 2007.  Below is an update to that article.

Green building has hit the real estate scene remarkably quickly, but little attention has been paid to the legal implications of this new area. As green building and ecological sustainability considerations are becoming more prevalent, new regulations are being enacted by local governments around the country and old regulations are being adapted to embrace green building practices. State, local and federal dollars are being made available for green building projects through tax incentives and grants. Insurance companies and financiers are making products and instruments for green building projects available. As a result, there are new legal issues to consider when embarking on a green building project, including: drafting construction and design contracts that incorporate green building standards; navigating the local building and zoning approvals processes and securing public financing; negotiating with insurance and financial institutions and resolving disputes over green building projects that fail to achieve their sustainability goals.

Green building projects large and small must obtain permits from local governments, but the regulatory environment is in flux. In many places the zoning and building codes were developed in response to the health and safety issues of a century ago, and certainly not developed with green building in mind. In others, due to lack of action on the federal level, local governments are creating new regulations to encourage sustainable development. As old regulations are being adapted to new technologies and new regulations are developed, attorneys can provide critical guidance on the local regulatory landscape as part of the planning for a green project.

Furthermore, private and government entities are providing significant financial incentives to encourage green building. For example, Gov. Edward G. Rendell's newly released energy independence strategy earmarks $150 million ($50 million for grants; $100 million for loans) for green building projects. Fireman's Fund offers discounted pricing for building owners who commit to greens standards, and provides specialized insurance to allow for repair or replacement of green building projects in the event of a loss. Lawyers have a unique role in identifying and securing access to financial incentives and risk management tools.

Participants in the development process will require new contracts to ensure compliance with green building goals. Most of the entities establishing criteria for the performance of green building are private, nonprofit organizations like the United States Green Building Council (USGBC). Many local regulations and incentives for green building are directly linked to these certifying criteria, particularly USGBC's Leadership in Energy and Environmental Design (LEED) standard. If a project must achieve a certain LEED or similar rating to qualify for funding or approval, the construction and design contracts should reflect that ambition.

Finally, although the green building movement is in its halcyon days, new expectations will inevitably lead to conflict. A multimillion-dollar development project will fail to gain the LEED credits required to secure a government grant, and litigation will doubtless ensue.

These are some of the legal considerations in building green. Considering the legal issues should not be seen as an impediment to green building, but rather as a way to manage risk and to proceed with a smooth development process.

Parts of this post were previously published in the Legal Intelligencer.

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The LA Times had a story about a neighborly spat over shade trees v. solar panels. Apparently, the Shade Control Act in California prevents shade trees from blocking more than 10% of sunlight from a solar array:

It protects homeowners' investments in solar panels, which can cost tens of thousands of dollars. Property owners whose trees block the sun from more than 10% of their neighbors' panels can be fined as much as $1,000 a day if they refuse to trim them.

Although GBL has not heard of this particular strain of litigation before, NIMBY issues are not new to solar installations. See here for a story on local zonign laws which originally prevented Al Gore from installing solar panels on his Tennessee home.

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I've been working too hard lately on other projects, and Steve Del Percio over at Green Buildings NYC did a nice post on the decision in AHRI v. City of Albequerque. Bad news for green building legislating municipalities.

Steve's post is here--http://www.greenbuildingsnyc.com/2008/10/08/district-court-judge-grants-injunction-barring-enforcement-of-albuquerque-green-building-code-legislators-unaware-of-preemptive-federal-statutes/

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In July, I first wrote about the HVAC indistry associations suing the City of Albuquerque to invalidate Albuquerque's green building codes in one of the first instances of green building litigation. The HVAC plaintiffs filed a Motion for a Preliminary Injunction to prevent the City from enforcing the green building codes, and a hearing was held yesterday. I spoke with Doug Baker, attorney for the HVAC plaintiffs, who felt the hearing went well. His team of attorneys argued that Albuquerque should be preliminarily enjoined from enforcing the codes because they were preempted by Federal law, and that Albuquerque's attempts to amend the code to circumvent preemption were unsuccessful. Mr. Baker told me that the judge expects to rule on the preliminary injunction motion tomorrow. Stat tuned.

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I wrote an extended column on the Albuquerque green building litigation which was published by our friends at greenerbuildings.com.

Please read it here--http://greenerbuildings.com/column/2008/07/11/open-floodgates-the-era-green-building-litigation

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Well, I've been writing for a while that the green building litigation wave would hit, and it has. A coalitiion of industry groups and local companies has filed a federal lawsuit claiming that Albuquerque's green building code is pre-empted by federal law. The suit claims, in essence, that Albuquerque's code has set energy requirements for certain appliances like air conditioners "that are already covered in federal law and Energy Department regulations". http://www.abqjournal.com/news/metro/080732metro07-08-08.htm

I am currently gathering intel on the suit and will post more later.

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An interesting article on the Washington Policy Center Blog about a green school that has failed to live up to its promises of reduced absenteeism and higher test scores. http://washingtonpolicyblog.typepad.com/washington_policy_center_/2008/06/another-green-s.html

This is exactly the type of situation which may lead to liability for the professionals involved in the project. Were representations and warranties made regarding the benefits of the green building? By whom? Who is responsible if the building fails to live up to those warranties of performance?

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As I sit here today, I will guarantee that the next year will bring the first wave of green litigation--litigation over buildings that fail to live up to their green billing. For example, in Australia, the Melbourne City Council's new state-of-the-art office building, which was "green star" certifiied, many of the green features do not work. http://www.theage.com.au/news/national/civic-showpiece-failing-to-deliver/2007/08/28/1188067111145.html The daylighting proved too dim for the workers' needs, a greywater system was not operational. Worse still, some are causing active issues, like allowing legionella into the cooling system.

Who is to blame when the green features fail? Will the contracts among the relevant players--architect, general contractor, developer, commissioner--be robust enough to allocate the liability? I doubt it--and lawyers, judges and juries will be introduced into a brave new world of environmental litigation. With new technology and lots of hype comes broken promises--and with them, litigation.

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