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

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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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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Happy New Year and welcome to GBLB 2011.  When the clocked struck 12:01 on New Year's, two important green regulations went into effect that may have a long term influence on green building and renewable energy.  If successful, either of these regulations would do more to change the green industry than any legal challenge to LEED's legitimacy (see the continued coverage of the Gifford v. USGBC case here and here): 

1. CALGREEN

As I have said before, green building practices are becoming code, and California has (as usual) taken the lead.  California is the only state to have a state-wide green building code, CALGREEN, which went into effect on January 1, 2011.  If California successfully implements this mandatory green building code without siginificant impact on building rates or building costs, look to other states and municipalities to follow.  Implementing green via building code is being made significantly easier throught the creation of the International Green Construction Code (IGCC) which integrates with the ICC construction codes already in place in most jurisdictions. 

An interesting question that has been bandied about is what a green construction code will do to LEED.  California will be an interesting laboratory.  Will developers still seek LEED certification for their buildings when all new construction must be green?  How sensitive is the customer base to "green" vs. "more green?"

      2.     EPA Regulation Of GHG Under the Clean Air Act

EPA limits on greenhouse gases for power plants which also went into effect January 1 (a quick fact sheet from the EPA is available here).   When cap-and-trade or cap-and-tax died in Congress last year, the EPA continued its plan to regulate GHG via the Clean Air Act. There is significant controversy over these limitations, and legal challenges have been filed.  On Wednesday, December 29, 2010, the Fifth Circuit Court refused to stay the regulations, and on Thursday December 30, 2010, Texas filed a petition to the Court of Appeals in the Federal Circuit to stay the regulations.  If the EPA regulations on power plants remain in place, more GHG regulation of other categories will follow, creating the same massive shift in the priority of green tactics to manage GHG emissions that cap-and-trade would have had.

The reason I started this post by saying that these regulatory efforts may (not will) shift the green building and renewable energy industries is because of the massive efforts being undertaken to derail the regulatory efforts. 

According to the Center for American Progress: 

The 20 biggest-spending oil, mining, and electric utility companies shelled out $242 million on lobbying from January 2009 to June 2010. Trade associations that generally oppose clean energy policies spent another $290 million during this time. This is over $1,800 in lobby expenditures a day for every single senator and representative.

Opponents of GHG regulations were successful in killing cap-and-trade legislation in Congress.  In California, a referendum seeking to overturn California's cap-and-trade regulations was on the ballot in the November election, although it was defeated handily.

In the tug of war over between proponents and opponents of environmental regulations, watch these two hotspots in 2011. 

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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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