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Green Construction Claims Demonstrate Need for Design Professional Due Diligence

Yesterday, I gave a presentation to a local architecture and interior design firm on current trends in green construction law, some advice that the dsinteriorsolutions.com had provided me before. I was impressed at how willing the firm’s design professsionals were to listen to my thoughts on the emerging risks associated with green design. In addition to suggesting a number of other legal issues, I selected a handful of claims reported by Maryland-based attorney Frank Musica at the 2007 AIA National Convention in San Antonio to open up a discussion on form contract language – particularly from the AIA documents – and suggested how certain applicable provisions might be amended to reduce the architect’s risk when rendering green design services.

The claim that made the biggest splash with my audience yesterday was where Musica reported how an architect failed to perform sufficient due diligence in crafting green building specifications for a particular project and specified what turned out to be a patented solar shading system. After the project was complete, the patent holder approached the owner and demanded a licensing fee for its use of the system. The owner pointed a finger at the architect and sought indemnification under the terms of the parties’ agreement. In my slide detailing this particular claim, I set forth the standard form intellectual property infringement indemnification provision that I use in my owner – architect agreements:

The Architect shall indemnify and hold the Owner and the Additional Insureds, as set forth in Exhibit X, harmless from any and all claims for infringement by reason of the use of any design or elements of the design of the Architect which the Architect knew, or with the exercise of due care, should have known, to be protected by one or more copyrights or patents.”

The key points to take out of this discussion are the following. First, design profesionals must use heightened scrutiny on green building projects in selecting products, materials, and building systems. Their inquiry should not only be limited to whether such items are covered by a patent, but also whether they are (1) readily available from the manufacturer and (2) provide the level of performance that the architect’s client is expecting. Second, and perhaps most critically, each contract provision in a green construction contract must be vetted with that same degree of rigor. Form contract language, as we saw in the Shaw Development case, can be a recipe for disaster. Here, although the architect may not have enjoyed sufficient bargaining power to delete this particular indemnification out of its agreement with the owner, its counsel ought to have identified such a provision and stressed the importance of reviewing any intellectual property protections as the architect selected various building systems and components.

Finally, I will be giving this same presentation, tomorrow, January 30, at the William & Mary Law School’s Environmental Law & Policy Review Symposium, It’s Not Easy Being Green. You can access additional details about the Symposium through the link below. The entire Symposium will be videotaped – details on how you might be able to access it will be forthcoming. I have also provided a link back to our post at gbNYC discussing Mr. Musica’s presentation and a link to his PowerPoint slides.

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10 Responses to Green Construction Claims Demonstrate Need for Design Professional Due Diligence

  1. Geoff White January 29, 2009 at 6:36 pm #

    Stephen, good article and that 2007 convention power point is a great resource, as it is also helpful in considering issues in connection with green leases, especially with government entities or contractors that pose unique security risks.

  2. Mark Rabkin January 29, 2009 at 9:31 pm #

    The Shaw case will be the cornerstone of green building risk management for eons to come. It stresses the importance of addressing the unique elements of a green construction project compared to a traditional one. The goals of the project and contract language need to be addressed with all stakeholders as early as possible in the design and construction process.

  3. Stephen Del Percio February 2, 2009 at 4:19 pm #

    Thanks to you both for your comments. The claim that Geoff is referencing from Musica’s presentation is where an architect designed office space with daylighting and other glass-intensive green design features for a government contractor that had access to a variety of confidential information. Once the project was complete, the federal government threatened to revoke the contractor’s security rating and terminate its existing contracts on the basis that it was putting such confidential information at risk. The contractor, in turn, sued the architect, claiming that it should have accounted for the unique nature of the contractor’s business in its design. Again, I think this claim stresses the point that green design, construction, leasing, and even the crafting of state- and local-level legislation cannot be performed in a vacuum. In addition, as Mark suggests, I think it also makes the very important point that each green construction project is unique and requires case-by-case risk management.

  4. Ujjval Vyas February 3, 2009 at 5:40 am #

    Stephen,

    Keep up the good work.

    One of the main issues to consider in dealing with the delivery of services by design professionals, especially architects, invovles their professional duties to their clients. Clients rely on licensed professionals of all types to provide them with advice based on adequate due diligence recognizing full well that the advice so provided will be relied upon by the client in making decisions that will have monetary or legal consequences. In the arena of green design professionals, it is very important to realize that a licensed design professional has a duty to a client to provide him with adequate due diligence, objective and transparent information, and serve the client’s needs not his own (or his professional association’s) advocacy goals.

    It is not a part of a design professionals duty to advocate for options without doing serious due diligence. In my experince and practice dealing with green buildngs, I have too often seen design professionals (often LEED APs and/or consultants) lack the training or background to do the kind of research necessary to fulfill due diligence expectations of owners and required by their professional repsonsibility. They often rely on anecdotal information or studies conducted by highly biased or self-serving entities and then pass of this information to the client as though it consituted “best practice” or defintive in the field (Greg Kats surveys are a prime example).

    The lack of due diligence (and often this will mean tracking down footnotes or skeptically engaging information sources) leads to a lack of objectivity and/or transparency in the recommendations or advice to the client. The AIA itself helps to foster this confusion of professional responsibility in its current AIA 2007 documents and in its newly promulgated Ethics Codes by placing the design professional in the role of an “advocate” for green design. Professionals are not ordinarily hired to be advocates, but rather for their knowledge and competency in providing reliable advice to the client. An E & O policy does not cover damages resulting from advocacy, only the rendering of professional services either under the contract or more generally to provide non-negligent services.

    All clients expect that a professional will reveal any pertinent conflicts of interest or personal views that would have a material impact on the client’s decision-making. That is to say, a professional must provide transparent information to the client rather than use his licensed professional role to advocate for personal agendas or inappropriate personal gain. Advocating strenuously to a client for a green roof while ommitting to mention (or even consider)that the payback will be a 100 years; suggesting that it is common to acheive 30% reductions in energy consumption while remaining silent on the substantial difficulties and vagaries in obtaining such a result; or, as is very common currently, to suggest that LEED certification is a proxy for building performance without discussing the current lack of meaingful data in this regard are all good examples.

    If architects want to be advocates for a cause, then they should be explicit about these views with the client. Otherwise the client has every expectation that the recommendations made were the result of non-neglignet professional judgment and to rely on these represetations by the design professional in subsequent decisions. Should the outcomes of this reliance prove detrimental to the client, it would be natural to seek recourse from those that provided the material information/advice.

    Architects as licensed professionals have an important role to play in the delivery of green buildngs, but advocacy should be left to the lobbyists .

  5. Mark Rabkin February 5, 2009 at 8:27 pm #

    Ujjval –

    I wholeheartedly agree with 100% of your comments. It is obvious (and Stephen mentioned this in the recent ABA article (http://www.abajournal.com/magazine/green_grow_the_lawsuits/) that “no one in this space is trying to cause trouble.” All of the stakeholders in a construction project, including the owner, construction team, occupant(s), the surrounding community members, the environment, future generations and local government entities are motivated to build green because they see it as the right thing to do. Our role as professional counselors and advisers should be to assist them in achieving their collective vision.

    Your final comment intrigues me due to the recent work I have been doing related to advocacy. Many local, state, and even federal building practices have incorporated LEED or other “green” incentives and stipulations. However, as you well know, laws are created by the legislative branch and then interpreted by the judicial community. It benefits no one to draft laws or create incentives that are unattainable or usurious in nature.

    For example, on Chris Cheatham’s blog (http://www.greenbuildinglawupdate.com/2009/02/articles/codes-and-regulations/how-to-regulate-green-in-virginia/) he comments on how Arlington County, VA has offered a density bonus for projects that want to go green. This is a volunteer program that gives developers the ability to build more if they build to a LEED-Certified or higher level. In order to achieve such incentive, the county requires the owner to post a bond or ILOC to guarantee certification by the USGBC. The surety bond does not exist (similar to the DC Green Building Act) as no surety underwriter will post a bond to guarantee certification by a third party. In addition, no contractor wants to put up their own money via an ILOC in the absence of the bond. So the result is that you are back to square one.

    The risk management community (attorneys, risk managers, accountants, etc.) is uniquely positioned to ASSIST in the shaping of legislation that can actually achieve sustainable development in a feasible manner. I will contact you directly to speak more about this.

    Thanks!

  6. Stephen Del Percio February 6, 2009 at 3:55 pm #

    Great discussion here, folks, thanks. Just to pick up on Ujjval’s point about design professionals as advocates- what about attorneys? So many lawyers are sticking “LEED AP” after their name (including myself) and representing that they are, in effect, experts in this space- doesn’t that implicate some of the same sorts of ethical responsibilities that he’s referencing? It’s an interesting problem that I think we’ll continue to wrestle with, particularly as the GBCI rolls out the various levels of LEED accreditation later on this year.

  7. Ujjval Vyas February 10, 2009 at 6:36 am #

    Mark,

    Glad that you and Steve are in agreement with my initial attempt to flag some of the problems for design professionals and attorneys in becoming advocates for the cause. It is important, as you have suggested that the risk management community should be called on to help with meaningful legislation–that is legislation that can actually be implemented and provide a measurable and verifiable benefit to the aggregate good. Unfortunately, my experience has been that there are plenty of attorneys, architects, engineers and even insurance folks who are looking to the green wave as a way to advocate for views consonant with their own persoanl views and/or make a buck. Certainly, all this legislative activity has been backed and abetted by “green” or “sustainability” experts, and often enough the association representatives from the major entities in the construction and real estate process. So although I agree fully that the risk management community is positioned to assist, the question remains, are we getting the right folks from the risk management community to participate.

    I look forward to a second wave of participation that is characterized by genuine objective and transparent analysis combined with recommendations that make technical, economic and legal sense rather than make the participants feel warm and fuzzy all over.

    If the problem of sustainability is to be taken seriosly it requires more, rather than less, intense and careful examination combined with a healthy skepticism.

  8. Brian Anderson February 16, 2009 at 10:56 pm #

    I think that Ujjval’s comments regarding advocacy are extremely insightful–particularly as architects begin the scramble for obtaining and maintaining their LEED-AP, AP+ and Fellow designations. I wonder how much of the arch’s limited continuing education budget/time will be allocated to LEED-based vs. AIA-based educ. Will the LEED AP designations begun to outweigh the prestige and marketing value of AIA and other designations?

  9. Stephen Del Percio February 17, 2009 at 1:26 pm #

    Just wanted to toss out an interesting statistic that plays in here- I think one of Fred Butters’ recent papers notes that there are currently more LEED APs than registered architects in the U.S.

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