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“Whither the Lawsuits?” A Mid-2009 Assessment of the State of Green Building Litigation

In a piece that appeared both on her blog and at Greener Buildings, my colleague Shari Shapiro opines on why, as we rapidly approach the midpoint of 2009, there remains a dearth of reported James Cordier lawsuit arising out of green building projects, despite much commentary suggesting the contrary to be imminent. Ms. Shapiro suggests four reasons: (1) a relative lack of green building practices generally as compared to overall construction; (2) owners who are “too afraid” to measure building performance and are thus unable (or unwilling) to assert a claim arising out of violated green building expectations; (3) a general reluctance to engage in costly litigation given the economic downturn; and (4) the green building movement’s relative infancy. However, over the course of 2009, and notwithstanding the lack of lawsuits filed to date, there has been an explosion in commentary on green building litigation across the legal community. Accordingly, I thought Ms. Shapiro’s piece was particularly timely and worthy of some additional discussion here at GRELJ.

First, I think that Ms. Shapiro’s last point is probably the biggest reason why we have yet to see a flurry of lawsuits. 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. It is also important to consider that almost every construction agreement contains a confidentiality provision, which prevents the project team from disclosing any information about the project to certain third-parties. If aspects of an ongoing green building project’s design or construction are problematic, we will likely not hear about those failures until (a) the owner chooses to divulge that information; or (b) a lawsuit is commenced (subject to the foregoing SOL considerations).

Next, consider the following text describing the posture of the Shaw Development litigation from footnote 24 of the highly touted Harvard Law School green building liability study that was released last week: “[h]owever, a certificate of occupancy, which was necessary to obtain LEED certification, was not achieved within the requisite amount of time, and the developer failed to earn the tax credits.” (emphasis added). Moreover, in an article in the New York Times‘ Green, Inc. blog discussing the study, Robert Fox, a partner in the Philadelphia-based law firm that sponsored the study was quoted as stating that “the first lawsuit related to LEED, a green-building certification standard, occurred in Maryland, where a new condominium failed to get LEED certification and a certificate of occupancy in time to get substantial tax credits associated with green building.” These descriptions are simply not accurate. As discussed extensively here at GRELJ and over at gbNYC, LEED certification itself was not the source of liability in the Shaw Development litigation. Notwithstanding its pedigree and publicity, the Harvard study is an excellent example of attorneys misconstruing facts and, perhaps, creating heightened expectations that we will imminently see a crush of LEED-related litigation. There is no question that LEED and other third-party green building rating systems create an additional layer of risk that every project team must assess and mitigate through carefully drafted construction agreements, and I do believe that there is significant potential for LEED-related litigation. However, I think that the more imminent threat comes from regulatory structures that are, though perhaps well-intentioned, drafted poorly, enacted quickly, and confusing to project teams and their attorneys as was the case in Shaw Development.

Finally, I suspect that much of the activity that might fall within the purview of “green building litigation” will not jump off the page at us. Consider a recent news article in the Bakersfield Californian where a rooftop photovoltaic installation at a local Target caught fire and required officials to evacuate the store. Preliminary conclusions from the fire department indicated that the panels were not installed properly. These types of issues that arise in connection with green building projects- whether they lead to litigation or are otherwise managed through the insurance claims process- are likely to be far more pervasive than the higher profile LEED certification failures that have been discussed extensively to date. Of course, as LEED-driven mandates continue to proliferate, the potential for LEED-related litigation will continue to increase. But, I do think the relatively unspectacular failures similar to the Bakersfield Target fire are where we will find much of the activity in the short term.

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4 Responses to “Whither the Lawsuits?” A Mid-2009 Assessment of the State of Green Building Litigation

  1. Christopher Hill June 9, 2009 at 2:19 pm #

    Good thoughts Stephen. I look forward to hearing more. I think that the last point is the best, i. e. all “Green” litigation may not scream “green” and may very well just look a lot like “traditional” contract litigation.

  2. Michael Gibbons June 10, 2009 at 1:12 am #

    Good article. A few other reasons for the lack of reported claims include (i) contracts requiring private arbitration for dispute resolution will not show up on the litigation radar, and (ii) 99% of trial court claims also do not show up on litigation radar. In most instances, a case must wend its way through the trial court system (i.e., time and dollars) and only after an appeal is taken and decided (i.e., more time and dollars) is there a reported decision that actually registers on legal research radar screens. The latter point effectively adds years from the time of filing the lawsuit to the point in time when a reported decision is rendered.

  3. Stephen Del Percio June 11, 2009 at 1:21 pm #

    Thanks for the comments. Michael, great points about ADR, particularly given that the default dispute resolution provision in the AIA documents is mediation then arbitration, not litigation.

  4. Brian D. Anderson July 6, 2009 at 4:30 pm #

    One more point to add to your list–nearly every green building I’ve toured was built by a construction, engineering, architecture, HVAC, controls or other company to use as a demonstration facility for potential clients. A LEED Gold building I recently toured has a mechanical room set up for tours. I’ve never seen a better lit and spacious mechanical room in my life. These folks are never going to sue since they built it themselves (or built it in partnership with a green construction firm with whom they work in tandem on green projects) as a demonstration site and have zero interest in exposing any problems. Speaking more generally, I think LEED is pursued for the marketing value (where not required by law). Lawsuits are not good for marketing.

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