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Breaking: Henry Gifford Leads Class Action Lawsuit Against USGBC in Southern District of New York

*Earlier today Last Friday, October 8, a group of plaintiffs led by Henry Gifford filed a class action lawsuit against USGBC in United States District Court for the Southern District of New York. The suit alleges violations of the Sherman and Lanham Acts for “deceiving users” of the LEED system about “whether LEED buildings use less energy than conventionally-built buildings.” We will have much more to say about the suit here at GRELJ as further details emerge, but in the interim here’s a copy of the complaint. The Southern District’s docket numer is 1:10 CV-7747.

Some reactions are already beginning to trickle in:

From Tristan Robert’s piece at Building Green.com:

Why Sue?

Asked by EBN why he was motivated to go to court, Gifford said, “I’m afraid that in a few years somebody really evil will publicize the fact that green buildings don’t save energy and argue that the only solution [to resource constraints] is more guns to shoot at the people who have oil underneath their sand.” In other words, he says he’s hoping to make the green building movement more honest so that it’s not embarrassed down the road.

USGBC told EBN that it was reviewing the litigation and would respond in due course. In addition to USGBC, other named defendants are David Gottfried, a USGBC founder; Rob Watson, who helped start LEED in the 1990s while working for the Natural Resources Defense Council; and Rick Fedrizzi, a co-founder and currently CEO. Responding to EBN’s request for comment, Watson said, “I can’t comment on ongoing litigation except to say that USGBC is examining the complaint. USGBC has confidence in LEED and in our role in stimulating positive market change.”

Michael Italiano, the only key USGBC founder not named as a defendant, told EBN that while he hadn’t reviewed the case, “To me it sounds frivolous and it doesn’t have much chance.” He noted, “LEED doesn’t guarantee anything, and I think LEED gives people the tools to understand that.” Owners who want to verify performance can enroll in LEED for Existing Buildings, monitor their energy bills, and take other actions, he noted. A lawyer and currently CEO of Market Transformation to Sustainability, a nonprofit behind green standards, Italiano said that lawsuits targeting standards that have allegedly constrained trade typically focus on lack of a bona fide consensus process of standard-setting. In the case of LEED, he said, a broad array of stakeholders has been involved in writing and reviewing LEED standards.

*Updated Thursday, October 14

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41 Responses to Breaking: Henry Gifford Leads Class Action Lawsuit Against USGBC in Southern District of New York

  1. Norah Hart October 12, 2010 at 6:29 pm #

    L.E.E.D.® is supplanting building codes, undermining marketplace competition and edging out other building standards that are proven—unlike L.E.E.D.®—to reduce energy use and carbon emissions

  2. Brian D. Anderson October 12, 2010 at 11:12 pm #

    The plaintiff’s attorney looks to be a frequent visitor to your site and has clearly been taking copious notes from Mr. Gifford. So many of the allegations in the complaint might as well have been cut and pasted into the complaint from your past articles and those of a few other attorneys in this area, most notably of Ujjval Vyas. Without weighing in on the merits of her complaint, congratulations are due to Attorney Hart for some innovative and entrepreneurial lawyering here. Her complaint is a fascinating coalescensce of issues familiar to those of us who’ve spent too much non-billable time paying attention to these issues over the years, with nearly every one of the counts centered on various permutations of fraud. Finally, it’s interesting that the damages/remedies sought include an injunction against the USGBC from claimign that, among other things, the energy performance of LEED certified buildings is 25-30% better than non-certified buildings. I suspect that this is the “justice” that’s chiefly sought by Mr. Gifford.

    I’d be curious whether you and your readers think that this action will be able to get its class certified and then survive summary judgement. I’d also be curious to know whether your readers think that any major players in the construction/development world would be interested in joining the class and helping to finance the action.

  3. Steve Sacks October 13, 2010 at 1:33 am #

    Great post, Steve. Thanks for breaking this news (at least to me) I published a post on it with big kudos to you.

    Regarding the complaint, I find it a bit over-dramatic. A number of the facts regarding USGBC and LEED seem to pull from LEED 2.0 (e.g. Some LEED APs have no experience in building). Plaintiff is going to have a tough time showing how LEED 3.0 doesn’t address the post-occupancy performance issues.

    Nice work (as always!)
    Steve

    • Brian D. Anderson October 13, 2010 at 2:36 pm #

      Steve,

      I agree with you that the complaint is somewhat dramatically phrased. But I have read numerous (ultimately “successful”) complaints that at first blush appear histrionic or melodramatic. I may be entirely wrong, but my impression is that the plaintiff’s class action bar is not made up of timid, chair-bound, billable hour type lawyers. It’s a highly entrepreneurial (yes, that term applies to lawyers) who take risks and occasionally have some passion for what they’re doing. That zeal tends to bleed over into complaints and usually does not prejudice the merits of the claim.

      Second, I think that the 3.0 changes are irrelevant for purposes of this action. The action is based on what’s occurred in the past and with respect to alleged misrepresentations related to studies and more generally to the alleged misrepresentation that LEED certification at any level and with any combination of points is a proxy for high energy performance. To my knowledge, it is customarily not a defense to a claim that, after the fact, the defendant took certain corrective action. Of course, the USGBC may respond that they reasonably relied on the findings of these studies and that they reasonably represented the results of those studies. More generally, the USGBC may argue that they have taken no action to require the use of their product, that they’ve not engaged in any coercion.

    • Stephen Del Percio October 14, 2010 at 9:01 am #

      Thanks, Steve. It is certainly phrased dramatically, but after reviewing the complaint again I do think Brian is right that post-2008 revisions to LEED may not be relevant in terms of the merits of the claims. Those revisions might be used, though, in opposition to the inevitable motion that will be filed to try and certify the class.

    • Larry Schnapf October 15, 2010 at 12:15 pm #

      I would say the RICO count was over the top along with naming Rob Watson individually.

      Larry

  4. Nadav Malin October 13, 2010 at 9:23 pm #

    Brian–I’m not a lawyer so I may not understand the terms here, but I noticed in the complaint that it defined the Class period as March 2008 to June 22, 2010. That’s well after the buildings used in the NBI study were certified (all were certified by the end of 2006), and after USGBC had already taken numerous steps to tighten up its energy requirements. Does that still constitute corrective action “after the fact” in your view?

    • Brian D. Anderson October 15, 2010 at 10:06 am #

      Nadav,

      I believe that the term of art “class period” bears on the eligibility of persons to join the class of plaintiffs. In the world of securities fraud class actions, the class period would, for example, restrict the class to those who bought the stock during a certain time period when the price of the stock would have been affected by the subject wrongdoing/manipulation. In this case, I suppose the “class period” refers to the period during which the class of plaintiffs would have been harmed by the alleged fraud. If this analysis is correct, then the v3 changes would likely be irrelevant. (Also, I believe the case is centered not on the certification of certain buildings as you reference but on repeated claims that LEED certification is a proxy for energy efficiency and on repeated references to certain studies, all during the class period.) So consider the stock manipulation case–would it be relevant that the company later issued a filing with the SEC restating their earnings for such class period? I think the answer is no–the plaintiffs have been harmed and the case is intended to seek redress of those discrete harms suffered during the class period.

      But I’m not a class action attorney, so I may be entirely wrong about this. I would welcome clarification and correction from somebody who practices in this area.

  5. Shari Shapiro October 14, 2010 at 11:59 am #

    Steve:
    Thanks for linking. Keep doing what you do so well. wish you were here in NOLA.

    Shari

  6. Eric Johnson October 16, 2010 at 6:23 pm #

    “First of all, what is LEED? LEED is not a regulation or a law; it’s not a stone tablet sent down from the heavens. It was intended to provide guidance for and verification of a project’s green attributes. It set up a gradated series of requirements, both technical and procedural, intended to guide people toward making better buildings. Not perfect buildings, greener buildings.
    When we were building the system we were very cognizant that our knowledge and the tools available would be improving over time and that our expectations should match. We considered an “It’s LEED or it’s not” type of approach, but realized it is simpleminded to expect binary answers to multidimensional questions, particularly when the current knowledge base was so limited.
    Or, as Aristotle put it, “It is the mark of an instructed mind to rest assured with that degree of precision that the nature of the subject admits, and not to seek exactness when only an approximation of the truth is possible.” Rob Watson http://in.reuters.com/article/idIN361459205420100625

    • Anne Whitacre October 18, 2010 at 4:28 pm #

      LEED is not technically law, but in many municipalities, LEED is required for specific buildings: buildings that receive public funding, or a building proforma that takes advantage of various LEED-based incentives (extra square footage, zoning changes, etc). The older versions of LEED are remarkably “one size fits all” for energy savings solutions and the problems with that method have become rampant enough so that the newest version allows for local modifications.
      Typically, a local building code is modified for local conditions and local practices (and can be appealed); when LEED is appended to the building code, that option is denied for the designer and developer.

      • Stephen Del Percio October 18, 2010 at 8:52 pm #

        Thanks for the comment, Anne. As your comment suggests, but Mr. Johnson’s does not acknowledge, there are a myriad of legal issues implicated when state and local governments incorporate third-party build rating systems into legislation.

        • Eric Johnson November 3, 2010 at 2:40 pm #

          Stephen,

          It isn’t my comment it’s Rob Watson. Attention to detail.

          • Stephen Del Percio November 4, 2010 at 9:29 am #

            I thought that was obvious, but thanks for the clarification.

    • Rosemary Daszkiewicz October 19, 2010 at 1:29 pm #

      “When we were building the system we were very cognizant that our knowledge and the tools available would be improving over time and that our expectations should match. We [...] realized it is simpleminded to expect binary answers to multidimensional questions, particularly when the current knowledge base was so limited.”

      Interesting comment in light of USGBC’s binary position on wood certification, which is that you’re either buying FSC or you’re out of luck. And the current proposed draft continues that absurd, unwarranted binary standard, though granted it has been gussied up a bit to pretend other certification systems might comply — albeit only some certification system that might exist in some fantasy universe.

      They grant that wood credit even if the FSC wood was harvested in a country where “FSC” is nothing more than window dressing, and the forestry standards are frankly barbaric. They grant that credit even if the FSC auditors were allowing the timber owner to ignore FSC’s proscriptions against, say, pesticide or herbicide use.

      Congratulations to Norah and her team for the courage to insist that USGBC walk its walk.

  7. Eric Johnson October 16, 2010 at 6:40 pm #

    Henry (& others) should have read the Development of a California Commercial Building Energy Benchmarking Database & Energy Benchmarking In Commercial Office Buildings DOE papers. They said what NBI said before they said it. :)
    Presented at the ACEEE 2002 Summer Study on Energy Efficiency in Buildings, August 18-23, 2002, Asilomar
    Conference Center, Pacific Grove, California, and published in the proceedings.
    “Points-Based Rating Systems, including (LEED), do not allow comparisons against other buildings, rather, they provide standards and guidelines to measure how efficient and environmentally friendly a facility is and compared it to best-practice standards.”
    http://poet.lbl.gov/cal-arch/paper245.pdf
    “Statistical distributions of office building EUIs developed from CBECS data can be used for comparing the performance of an individual building to others within its respective census division. Median EUIs are more reliable comparators when it is desired to compare the energy use of a sample of local buildings to CBECS census division statistics. Averages can be strongly influenced by a small number of buildings with excessive individual EUIs. This occurs in the CBECS database and will occur in local sampling of office buildings.”
    http://www.energy.ca.gov/greenbuilding/documents/background/13-ORNL_COM_BLDG_BENCHMARKING.PDF

  8. Eric Johnson October 16, 2010 at 7:08 pm #

    http://www.edcmag.com/Articles/Feature_Article/44b973b231d98010VgnVCM100000f932a8c0____
    On the subject of rigor, let’s put to rest the canard that LEED buildings are not energy-efficient. They are. We need to abandon the 1980s view that operational energy is the only relevant parameter; it’s about 60 percent of the equation. In terms of energy use involving buildings, their location matters (transportation energy), their water efficiency matters (energy to pump, purify and treat afterward), their landscaping matters (heat islands), and the materials used to build them matter (embodied energy). Any LEED-certified building will have achieved a significant combination of these areas that will result in much less energy consumption compared with standard practice.

    • Stephen Del Percio October 18, 2010 at 9:04 pm #

      The NBI study that is referenced in Gifford’s complaint and which has been the subject of numerous articles discussed both here and elsewhere since 2008 demonstrated that, although some LEED buildings do perform (from an operational energy perspective) quite well, others do not. Check out Larry Spielvogel’s comment on this issue below.

      • Eric Johnson November 3, 2010 at 2:53 pm #

        Stephen,

        Legally can you sue someone for stating the below? Indicate??? Really? If Bill can get away with what “is” the definition of “is”, I would think indicate could stand for suggest? Reasonable person standard and so forth. And in the referenced NBI study many of the issues are pointed out clearly? Then other studies agree with some of the findings? Even ones clearly looking to find mistakes? Seems like a hard nut to crack.

        “In the NBI study, the results indicate that new buildings certified under the U.S. Green Building Council’s (USGBC) LEED certification system are, on average, performing 25-30% better than non-LEED certified buildings in terms of energy use. The study also demonstrates that there is a correlation between increasing levels of LEED certification and increased energy savings. Gold and Platinum LEED certified buildings have average energy savings approaching 50%.”

      • Eric Johnson November 3, 2010 at 4:37 pm #

        Stephen,
        Check out my response to Larry.

  9. Eric Johnson October 17, 2010 at 4:38 am #

    Did HG ever read the Appendix G standard?

    “11. ENERGY COST BUDGET METHOD

    Informative Note: The energy cost budget and the design energy cost calculations are applicable only for determining compliance with this standard. They are not predictions of actual energy consumption or costs of the proposed design after construction. Actual experience will differ from these calculations due to variations such as occupancy, building operation and maintenance, weather, energy use not covered by this standard, changes in energy rates between design of the building and occupancy, and precision of the calculation tool.”

    • Stephen Del Percio October 18, 2010 at 9:20 pm #

      This might be an important fact cutting against a party making a direct assertion against USGBC that the LEED system did not provide the energy performance that the party was anticipating, but that isn’t the allegation in Gifford’s complaint.

  10. Larry Spielvogel, PE, FASHRAE October 18, 2010 at 8:06 pm #

    As a 19 year member and past Chairman of the ASHRAE committee that sets the LEED energy benchmark, and as a practitioner who also sees the actual utility bills for thousands of buildings, both new, old, and LEED, I can tell you that most LEED buildings have energy performance no better than most new and old buildings, and in too many cases, it is worse. Between compliance with ASHRAE 90.1 and the measures to get more LEED energy points, buildings become so complex that they cannot be operated efficiently, and too often they waste energy efficiently. The widely publicized LEED Platinum ASHRAE Headquarters Building is just one example.

    That no one has produced and published comprehensive metered energy data to contradict Henry Gifford’s conclusions in more than two years speaks volumes.

    Larry Spielvogel, PE, FASHRAE

    • Eric Johnson November 3, 2010 at 2:55 pm #

      Larry,

      What do you mean by “most LEED buildings”? How did you get your data? Is it publicly available or did you gather it yourself?

    • Eric Johnson November 3, 2010 at 4:03 pm #

      Larry,

      FYI
      The ASHRAE HQ site energy intensity is 49 and source is 162. The national average site energy use index (EUI) is 68 and average source EUI is 228. Are you going to criticize the Energy Star program as a sham?

    • Eric Johnson November 3, 2010 at 4:35 pm #

      Larry,

      If I use the ENERGY STAR® Performance Ratings Technical Methodology for Office, Bank/Financial Institution, and Courthouse to do a quick and dirty calculation and divide 162/283 I get 0.572 or an Energy Star rating around 85. I’m no Fellow of ASHRAE but that seems pretty good. Hmmm….Are they wasting our taxpayer dollars??? No, I don’t think so, maybe someone has an ax to grind. They should get their facts straight first.

    • Eric Johnson November 4, 2010 at 10:12 am #

      Larry,

      So when you say “most LEED Buildings” do you mean “in the greatest number of instances”? So are you saying if you compare 5,000 of the 6,000 buildings certified they have no better energy performance than most new and old buildings? Seems like a bold statement? Do you have some proof or is it just talk?

  11. Norah Hart October 19, 2010 at 1:35 pm #

    If you want to inquire about joining the class of Plaintiffs, please go to http://www.consumerclasslaw.com and register, and attorney will contact you.

  12. Old Man Architect October 22, 2010 at 10:27 am #

    I think the USGBC looks and smells like a monopoly. I think this law suit has merit.

  13. John A. Mayes, Architect October 28, 2010 at 2:38 pm #

    At a recent seminar for architects, perhaps 300 of us were told that after all the analysis of costs and savings of LEED were completed, a Net Present Value calculation was made to “prove out” the savings.
    I asked what program, if any, was utilized in that analysis, and the answer was “Excel”. I do not know if this is a prescribed procedure, or just the presenter’s, but he was a highly placed person in the Green movement.

    The LEED official has not responded to the proofs I sent him verifing the error that exists in Excel and all popular Spreadsheet programs such as Lotus 123, Quattro Pro, and the new Open Source operating systems, resulting in a NPV that is incorrect, varying by roughly the discount rate chosen from the correct answer because the first year is omitted in the Formula, and the second used for the first, and so forth.

    The NPV calculation in those spreadsheets is only useful for annuities, having been devised by an actuary, probably, and copied by all later programs. It is incorrect for other MPV calculations. Every user of NPV to whom I have shown this acknowledges the proofs, including members of the Big 4 accounting firms. Anyone can verify this by first doing the calculation by the book, then in the program, and comparing the results.

    The same error exists in the formula for IRR, another widely used calculation. Oddly enough, Indian accountants seem to know this, and I have it found in accounting books printed in the UK.

    The use of an incorrect formula to “prove out” their desired result casts great doubt upon the validity of claims of LEEDS design, in my view.

    One of my firms utilizes NPV to calculate fees on projects. On the evening of the day I discovered this error, I had dinner with a friend, a Federal Judge. His comment began with “who do I sue if I find that I sold my $10,000,000 company and my accountant used the flawed Microsoft formula to value it?”

Trackbacks/Pingbacks

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