Welch Allyn, a Skaneateles, New York-based manufacturer and distributor of medical supplies, purchased Protocol Systems in 2000. Since then, it’s leased 100,000 square feet of space in Beaverton, Oregon from PS Business Parks (pictured), which owns over 27 million square feet of office and industrial space across the country. In 2009, when its lease came up for renewal, the company was able to capitalize on the soft commercial real estate market by negotiating nearly $1 million in base building upgrades that should result in – at the very least – a Silver rating from USGBC under the LEED for Existing Buildings: Operations and Maintenance rating system.

“It was the worst business climate possible (in 2009), so building owners everywhere had to be as receptive to the terms in a long-term lease as they would ever be,” Peter Murray, vice president of operations at Welch Allyn and site executive for the Beaverton office told the Oregon Daily Journal of Commerce. “They knew they’d have to make these investments, even though getting a client to stick around for a certain price level is not a straightforward (return on investment).”

Specific retrofits that Welch Allyn successfully negotiated with PS Business Parks included the replacement of the building’s 28-year-old HVAC system, new lighting systems, and plumbing upgrades that are projected to save over 465,000 gallons of water annually. The tenant also created its own internal “green team” that monitors utility bills and banned personal space heaters (which were adding $20,000 to annual energy bills). The team continues to encourage behavior changes and promote ideas for new cost-saving projects.

Although it’s unclear how the landlord’s obligation to perform the retrofits was incorporated into the lease documents (if at all), the project demonstrates that economic conditions remain ripe for commercial office tenants to use both base building improvements and LEED certification as a tool in lease negotiations.

The plaintiff in Drew George & Partners, Inc. v. Farmer et al. (Case No. 37-2011-00101909) has filed an 8-count complaint againts two of its former employees and their new green building consultancy for, among other things, unfair competition and breach of contract. DGP is a LEED consulting and commissioning firm, and the allegations in its complaint are relatively straightforward: it claims that two former employees diverted business opportunities to their new company while still in DGP’s employ.

Of particular interest, the complaint also alleges that the defendants misappropriated the plaintiff’s proprietary “LEED Scorecard:” an “approximately twenty-page document that DGP, at substantial time and expense, created in order to manage all technical aspects of LEED consulting assignments” which “consolidates the information typically included in meeting minutes and/or status reports into one project status tracking tool.” While still employed by DGP, the defendants allegedly “devised a plan to set up a competing LEED consulting firm and to rapidly acquire new business by raiding [the plaintiff's] current and prospective clients.”

The suit was filed on December 2, 2011; no additional details appear presently available but we’ll follow up if anything else of interest arises in connection with the matter. A copy of the complaint is available upon request.

Before we get started in earnest here at GRELJ in 2012, let’s take a look back at five of the most important legal stories in the green building space from 2011.

No. 1: After both sides submitted a full set of motion papers, the Southern District of New York granted the USGBC’s motion to dismiss Henry Gifford’s false advertising lawsuit.

We followed this story closely here at GRELJ, from Mr. Gifford’s initial amendment of his putative class action suit into a direct set of claims against USGBC, to the papers that each side filed in connection with USGBC’s motion to dismiss the amended complaint and Judge Leonard Sand’s written opinion (which, unfortunately, did not address the merits of the 2008 New Buildings Institute study as many commentators had hoped).

No. 2: Tax-exempt, green bond financing for the Destiny USA mega-mall project in Syracuse was threatened because the project’s developer failed to incorporate certain green design features as promised when it applied for the exemption.

In a comprehensive, well-researched piece, the Syracuse Post-Standard investigated developer Robert Congel’s receipt of $228 million in federal, tax-exempt, “green bonds” for the upstate mega-mall, which was tied to the project implementing certain green design features. Chris Cheatham’s Green Building Law Update also reviewed the saga in a detailed 9-part series of posts. The story triggered an important conversation about green building policy. (Note: Mr. Congel recently paid the Syracuse IDA that administered the green bonds program $1.5 million for a second six-month extension of time to complete the first phase of the Destiny expansion and maintain the exemption.)

No. 3: Although the number of green building-related litigations continued to slowly increase, full-blown “LEEDigation” remained elusive.

In re Hampton Technologies, Inc.(LEED-driven bid protest); Tagliarini v. New Haven Board of Aldermen et al. (zoning amendment approval); In the Matter of Penelope McIver (Toronto zoning variance decision); Bain v. Vertex Architects (failure to obtain LEED certification); CLP Elements LLC v. Benton County Assessor (property tax appeal); and Kinetics Noise Control, Inc. v. ECORE International, Inc. (antitrust); were all cases we noted here at GRELJ in 2011. But other than Bain, none involved allegations that a project had failed to earn the level of LEED certification as anticipated by the owner.

No. 4: Even in the face of a continued soft commercial real estate market, the green lease gained traction as municipalities – including New York City and San Francisco – unveiled initiatives aimed at incorporating model green lease language in public and private office leases.

The law firm WilmerHale’s new lease at the LEED Gold 7 World Trade Center was highly publicized as the first to incorporate green lease language developed by Mayor Bloomberg’s Green Lease Task Force, which New York City intends to incorporate into its own office leases moving forward; San Francisco launched an online green lease toolkit intended as a resource for buildings across the country.

No. 5: As the International Green Construction Code (“IGCC”) continued to gain traction within state- and local-level building codes, commentators continued to question the propriety of LEED-driven legislation.

Florida, North Carolina, and Oregon, and Phoenix, Scottsdale, and Boynton Beach were among the jurisdictions that adopted portions of the IGCC in 2011. The Boston Society of Architects continued to underscore the issues associated with LEED-driven legislation by using Gifford v. USGBC to question whether private, fee-generating non-governmental organizations should “assume what amounts to a regulatory role in the building industry.”

For some context, check out our similar retrospectives for 2010 and 2009.

In Västerås, Sweden, just west of Stockholm, the nuclear technology company Westinghouse Electric Sweden AB recently signed a 10-year lease with the publicly traded Swedish property company Kungsleden AB. Kungsleden will renovate two buildings for Westinghouse that total 14,000 square meters of commercial and industrial space (pictured). Each had been vacant for nearly a decade and will be built out during 2012 for occupancy by the end of the year.

In a press release, Kungsleden characterized the transaction as a green lease, one where it “collaborates with its tenants to reduce environmental impact through decreased energy consumption.” Additional lease terms that would be of interest to us here at GRLEJ – other than an annual rent just north of $2 million – do not appear available.

Kungsleden’s portfolio includes 639 properties in 142 municipalities across central and southern Sweden, valued at SEK 26.5 billion. The company has been traded publicly on the NASDAQ OMX in Stockholm since 1999.

We’re starting to see an increase in press releases touting the environmental aspects of commercial real estate transactions – both domestically and abroad – which bodes well both for the commercial real estate market generally, and green leasing specifically, as we move ahead in 2012.

Back in November, City Planning Commissioner Amanda Burden announced that her office would be proposing amendments to the New York City Zoning Resolution, which dates from 1961. Last week, the Commission released the text of the proposed revisions, which it is calling the most comprehensive effort of any U.S. city to “remove zoning obstacles to the construction and retrofitting of green buildings.” Drafted in cooperation with Mayor Bloomberg’s Green Codes Task Force, officials are projecting that the initiative could unlock over $800 million annually in local energy savings.

“Zone Green,” as the revisions are being called, would permit solar panels, green roofs, storm water systems, skylights and other green features on New York City buildings, despite existing restrictions within the 1961 code. They would also permit owners to install wind turbines up to 55 feet above rooftops on waterfront buildings and buildings taller than 100 feet. (Free standing turbines would be permitted on waterfront blocks in commercial and manufacturing areas.)

Specifically, Zone Green would also:

• Exempt external building insulation from floor area requirements, allowing existing buildings to add insulation within their property lines;
• Eliminate penalties for high-performance envelopes in the way floor area is measured, by exempting a portion of thicker, better insulated walls from floor area calculations when buildings substantially exceed the New York City Energy Conservation Code;
• Allow solar panels to be installed on any building roof, by allowing them as a “permitted obstruction” above the corresponding height limit;
• Allow sun control devices (i.e. shades or screens) to project from building facades over required open areas;
• Accommodate a broad range of rooftop green features, including green roofs, wastewater management equipment, boilers or cogeneration facilities, and recreational decks; and
• Encourage local food production by allowing a waiver of floor area and height limits for greenhouses on top of non-residential buildings.

The full text of the proposed amendments – which are available for your review here – will now begin its march through the public review process (i.e., referral to all 59 Community Boards, the five Borough Presidents and Borough Boards, and review by the City Council and full City Planning Commission), which should take six months. They join the Greener Greater Buildings Plan (four New York City-specific pieces of green building legislation, which we’ve noted previously) and the work of the Green Codes Task Force (111 recommendations to green New York City’s building code, 38 of which the City Council has enacted to date).

Container architecture frequently – and inherently – intersects with green building practices. Here in New York City, for example, the New York Center for Sustainable Energy opened earlier this fall in Brooklyn: designed by Gensler, the structure was built from used 40-foot steel shipping containers as a net zero educational and electric vehicle charging station for Brooklyn Bridge Park. More generally, people seem intrigued by the design possibilities implicated by these large – and frequently colorful – steel structures that have been manipulated in many interesting ways. But a pending lawsuit against a pop-up shopping mall in New Zealand – built with shipping containers – now has some commentators wondering about the future of this type of architecture. At a minimum, the dispute also presents a good opportunity to reflect on certain key provisions in design and construction contracts.

London’s Boxpark shopping center is being promoted by its development team as “the world’s first pop-up mall” and is slated to open in the city’s Shoreditch neighborhood before the end of the year. Featuring a collection of local businesses and small retailers, the mall is built entirely from converted shipping containers. But according to its developer, Roger Wade, a 60-container pop-up mall in Christchurch, New Zealand has stolen Boxpark’s design concept. Mr. Wade claims that the Christchurch developers actually visited Shoreditch in May “to discuss a potential Boxpark joint venture in Christchurch.” Now, he and his team are “surprised to hear that apparently the world’s first pop-up mall is now happening in Christchurch. This is blatant breach of the Boxpark intellectual property rights. Boxpark has now instructed legal action against the owners of City Pop-Up Mall for intellectual property rights infringement.”

Twenty-seven local retailers are currently installed at the Christchurch mall (dubbed Re:START and pictured below) while the city’s permanent mall is rebuilt after New Zealand’s devastating February earthquake (which gave rise to Re:START). Although local residents are thrilled to have a new shopping destination, the Atlantic’s Cities blog reports that “Wade and his development groups are not likely to back down from what they see as an outright theft. As members of an intellectual property rights protection organization called ACID – Anti-Copying in Design – it’s expected that they’ll push as hard as they have in order to get either some sort of licensing deal or even shut down the project.”

In a globally soft commercial real estate market, pop-up stores are becoming increasingly popular and the term itself generic. So Re:START’s decision in late October to remove all references to “pop-up mall” from its promotional materials seems both curious and overcautious. According to Re:START developer Paul Lonsdale, the move “was a precaution until the specific details of Wade’s complaint could be clarified.” Mr. Lonsdale also claims that Re:START’s configuration is in the shape of two separate horseshoes, while Boxpark’s is the shape of one large box. “It will be very hard to say it’s a copy because it doesn’t look anything like Boxpark,” Mr. Lonsdale said. “The only thing that aligns these things together is they both use containers.”

So what – if anything – might this mean from a legal perspective? For construction lawyers, the story is a powerful reminder of how critical ownership of documents provisions are when negotiating design and construction agreements. Obviously the idea of container architecture is nothing new. But the particular layout of the London pop-up mall might be. If Mr. Wade can prove that he owns the design of how the containers are arranged, and that design was reproduced without his consent, perhaps he has a legitimate claim against the Re:START project. The details that we would only likely uncover in the event of an actual lawsuit are what specific rights Mr. Wade received to the design under his agreement with Boxpark architect Anton Tritt and whether any of those rights were breached (either by Mr. Anton or Re:START itself).

From a green building perspective, the story is also reminiscent of an insurance claim reported by Frank Musica back in 2006, where an architect specified an “innovative” solar panel system that turned out to be patented by another designer and triggered a suit against the specifying architect. Although patents are not the issue here (contrary to a note in the Atlantic’s article), the dispute emphasizes the importance of provisions relating to intellectual property in design and construction agreements. We’ll be keeping an eye out in the event that things move beyond this initial verbal sparring between the two developers.

Earlier this year, New York City took an important step towards becoming the country’s leader in public green leasing practices when Mayor Bloomberg’s Green Lease Task Force released model green lease language aimed at addressing the split incentive in most commercial office leases. The language was incorporated with much fanfare by Silverstein Properties into its lease with the law firm WilmerHale at the LEED Gold 7 World Trade Center, as well as adopted by the City for all of its future leases.

Now, recently after it was named North America’s greenest city in a study published by Siemens, San Francisco has fired back by launching a Green Tenant Toolkit of its own, created at the recommendation of the San Francisco Mayor’s Task Force on Existing Commercial Buildings. Although designed primarily for San Francisco buildings, the free, on-line resource is being promoted as adaptable for any geographic location. It was developed by a 26-member group of real estate and environmental professionals representing brokers, property management, large tenant groups, attorneys, electrical utilities, and design and construction experts, assembled by San Francisco’s Business Council on Climate Change.

The Toolkit is divided into three sections: a general green leasing guide, tips on stakeholder engagement, and a checklist of items summarizing key sustainability metrics for any property. The toolkit isn’t written for lawyers. But it appears to be a good jumping off point for tenants and landlords that are unfamiliar with green leasing generally and want to get up to speed quickly, regardless of where they may find themselves in the leasing process. And it’s also worth noting that the New York City model language (along with our article discussing the WilmerHale lease at 7 WTC) is included in the Green Tenant Toolkit’s database of additional resources.

As you may recall, San Francisco led two major urban green building indices this year: the study from Siemens and, for a second consecutive year, the city topped Cushman & Wakefield’s Green Building Opportunity Index. We reviewed the Index’s analysis of New York City’s Midtown submarket – which placed second overall in the Index – over the summer here at GRELJ in significant detail.

Last week in Toronto, I had the opportunity to present at the second annual Greenbuild Legal Forum. As my colleague Chris Cheatham points out in his overview of the event at Green Building Law Update, the fact that the green building community is embracing attorneys and the value they can provide to the industry is itself noteworthy. In fact, USGBC General Counsel Susan Dorn indicated at the Forum that her office will sponsor a series of legal webinars next year to address various green building legal topics. We’ll follow up here at GRELJ once those details are announced.

But back to the Forum: all of the presentations were excellent and, in my opinion, demonstrate how far green building law has progressed since 2008, when I lamented the lack of discussion about risk and liability at the Boston Greenbuild. If you’re looking for a blow-by-blow recap, attorney Dan Sheridan of the Sheridan Law Firm has written an excellent summary at his Legally Green blog, which I encourage you to review.

My topic in Toronto was the applicability of the proposed 2010 version of the FTC Green Guides to the marketing of green real estate. Although public comments on the proposed revisions to the Guides closed last October, FTC confirmed to me that it has yet to establish a date for their final release. And, according to one Forum attendee with close ties to FTC, the organization is still culling through a large volume of comments, many of which voiced strong opinions about the proposed revisions. I’ve embedded my slides below for your review:

My presentation’s primary goals were (1) to explain what the Green Guides are; (2) how the Green Guides are enforced; and (3) how they apply to real estate. To accomplish this third point, I presented photographs of how owners and operators have marketed green features and third-party certification of real estate in New York City (in increasing order of acceptability based on the revised Guides).

In preparing for my remarks, one of the most interesting documents I came across was a set of recommendations from USGBC to FTC. USGBC submitted the document after a public workshop in July of 2008 that specifically discussed the Guides’ applicability to green buildings. You can access the document here (scroll down, it’s number 26 in the list).

Although those recommendations were not incorporated into the version of the Guides that is currently pending (though they could be somewhere down the line), USGBC was – and, in my opinion, remains – concerned about how the LEED label is being applied to buildings in pursuit of certification. Indeed, one of the major takeaways I emphasized during my remarks in Toronto was that more guidance from FTC on this topic is inevitable: as you’ll see in my slides, the organization has stressed that it will not hesitate to enforce environmental marketing that is directed at non-consumers.

1. San Francisco
2. Midtown New York City
3. Washington, D.C.
4. Midtown South, New York City
5. Los Angeles
6. Boston
7. Downtown New York City
8. Portland
9. Seattle
10. Oakland

New York City’s Midtown, Midtown South, and Downtown submarkets cracked the top ten, placing second, fourth, and seventh, respectively in the Index, which (among other goals) aims to assist urban planners and policymakers in examining data to understand what new policies and incentives may be useful in accelerating green building practices at the local level.

Specific rankings (again, out of 30 markets evaluated) within each of the Index’s six categories for New York City’s submarkets are:

• Midtown: 3rd in office market conditions; 3rd in investment potential; 5th in green adoption and implementation; 4th in mandates and incentives; 9th in state energy initiatives; and 3rd in green culture.

• Midtown South: 2nd in office market conditions; 2nd in investment potential; 25th in green adoption and implementation; 3rd in mandates and incentives; 8th in state energy initiatives; and 2nd in green culture.

• Downtown: 7th in office market conditions; 7th in investment potential; 20th in green adoption and implementation; 6th in mandates and incentives; 10th in state energy initiatives; and 4th in green culture.

Some of these individual rankings may seem somewhat inconsistent to you (for example, every new commercial office building at the rebuilt World Trade Center site will be LEED Gold-certified, which makes Downtown’s ranking for green adoption and implementation seem unfair). But a closer review of the 10-page national overview should provide some context and clarity to the bare statistics referenced above.

This year’s Index also – for the first time – separately profiled 2 of the top 10 markets, including Midtown Manhattan, in significant detail. The Midtown Profile Report analyzed a variety of factors specific to the Midtown submarket, including general and green office market statistics, major leasing transactions, and a review of the submarket’s LEED-certified and Energy Star-rated commercial office buildings. We’ve reviewed the Report and, below, present some of its conclusions for your consideration in order to suggest some anecdotal conclusions about the state of the Midtown market vis-a-vis green.

Overall Market Inventory & Investment Outlook

Manhattan is the country’s largest office market with a total of nearly 393 million square feet of inventory. 241 million square feet of that space is located in the Midtown submarket. In Midtown, 20.3 million square feet of that space is LEED-certified (8.4 percent of total inventory) and 50.3 million square feet of space is Energy Star-rated (20.9 percent of total inventory). We expect these figures to continue growing. More energy efficiency initiatives will be enacted under the Greener, Greater Buildings Plan, ultimately driving down learning curves and costs of compliance. And large owners and operators like Vornado, SL Green, Durst, and Malkin are likely to remain committed to greening their portfolios.

LEED-Certified Commercial Office Buildings

According to the Report, there are currently 28 LEED-certified commercial office buildings in Manhattan, which total 24.1 million square feet of space. 23 of those buildings are located in the Midtown submarket and constitute 20.3 million square feet of space. 18 of those 23 buildings are certified under the LEED for Existing Buildings rating system; 5 buildings under LEED for Core and Shell.

So far in 2011, the following 9 properties in the Midtown submarket have earned formal LEED certification from USGBC:

• 900 Third Avenue (LEED-EB: O&M Gold; May 5, 2011; 515,200 square feet)

• 250 Park Avenue (LEED-EB: O&M Gold; May 5, 2011; 471,260 square feet)

• 125 West 55th Street (LEED-CI 2.0 Gold; April 20, 2011; 48,000 square feet)

• 909 Third Avenue (LEED-EB: O&M Silver; April 20, 2011; 1,125,000 square feet)

• Two Penn Plaza (LEED-EB: O&M Silver; April 19, 2011; 1,500,000 square feet)

• 1740 Broadway (LEED-EB: O&M Silver, April 8, 2011; 412,704 square feet)

• 11 Penn Plaza (LEED-EB: O&M Silver, April 7, 2011; 1,987,328 square feet)

• 1290 Avenue of the Americas (LEED-EB: O&M Silver, April 7, 2011; 1,987,328 square feet)

• 1120 Avenue of the Americas (LEED-EB: O&M v. 2009 Silver; February 23, 2011; 400,000 square feet)

Energy Star

99 buildings in Manhattan earned Energy Star accolades in 2010, and the total number of Energy Star-labeled properties has more than doubled since the last Green Building Opportunity Index was released in 2010. The Report identifies the Greener, Greater Buildings Plan as a major catalyst for the increase.

Midtown currently stands heads and shoulders above the other New York City submarkets in terms of LEED and Energy Star adoption, ranking 5th overall in the Index with Downtown and Midtown South trailing at 20th and 25th, respectively. While the Midtown South submarket lacks Midtown’s volume of Class A trophy properties that have almost uniformly pursued LEED-EB: OM ratings, we do expect Downtown to perform better in future Indices as the new World Trade Center towers come online.

Mandates & Incentives

This section of the Report starts by noting that “New York’s passage of the Greener, Greater Buildings Plan in late 2009 has already had a definitive impact on commercial office properties, as the number of Energy Star certified properties in Manhattan has more than doubled since the last iteration of the Green Building Opportunity Index a little over a year ago.” Specifically, it focuses on the first private sector phase of the Greener, Greater Buildings Plan: the benchmarking law that is requiring all residential and commercial owners of buildings larger than 50,000 square feet to benchmark their energy and water usage against 2010 results. The Report also points to two public initiatives that we’ve yet to discuss here at gbNYC:

• Back in March, Con Edison announced that Lockheed Martin would run its Industrial Energy Efficiency Programs, which provide cash rebates and incentives to facilitate reduction in gas and electricity usage by its commercial and industrial customers. Thus far, more than 250 applications have been received which are generating over $3 million in rebates and incentives for Con Ed customers.

• Second, NYSERDA’s Focus on Commercial Real Estate Program (FOCUS CRE) is another program we’ve yet to note at gbNYC. The program provides building owners with a variety of strategies to assist them in assessing various performance factors, including energy consumption, efficiency, and how costs and savings will accrue to the owner as opposed to tenants. It’s a great resource for owners and tenants alike that are interested in greening their leasing practices.

Finally, we were also pleased to note that the Report identified Mayor Bloomberg’s Green Leasing Language in this section, as well as the city’s commitment to including the language in all new leases in which the city is a tenant.

Overall, Midtown ranked second among the thirty markets surveyed (behind Washington, D.C.) in the Mandates & Incentives category.

Green Culture

The Index’s Green Culture category seems inherently more subjective than the others. Nevertheless, Midtown ranked first in the Transit Ridership and second in the Walk Score subcategories that were used to produce each submarket’s overall Green Culture score. According to the data that the Index pulled from SustainLane, “New York City’s per capita emissions are a third of those in the rest of the country because of public transit use, densely packed buildings, and smaller homes.” SustainLane is a peer reviewed study whose results, factors, and methodologies are available here.

Final Thoughts

Ranking cities in the Green Building Opportunity Index is an important step towards promoting competition and improvement among the 30 markets that participated. We’re pleased that New York City has performed so well thus far, but work remains if Gotham is to be as successful in 2012. For example, we hope to see both Midtown South and Downtown improve in the number of Energy Star-labeled and LEED-certified buildings. But as the Report notes, the Manhattan office market “is one of the healthiest in the country, with investor demand in core central business district markets continuing to put upward pressure on property values.” As the commercial real estate climate continues to – hopefully – improve into 2012, we do expect New York City to fare just as well in next year’s Index. What we do hope to see regardless are detailed Profile Reports for the Downtown and Midtown South submarkets, which could identify specific green pressure points within each local submarket.

Again, a fully copy of the Midtown Profile Report is available here for your download and review.

In a written Memorandum and Order that was issued on Monday, U.S. District Court Judge Leonard Sand granted USGBC’s motion to dismiss Henry Gifford’s amended complaint in Gifford et al. v. USGBC. As you will recall, the motion was fully submitted to the Southern District of New York on May 6 and Judge Sand heard oral argument back on July 26. Again, the motion was based on Rule 12(b) of the Federal Rules of Civil Procedure and claimed that (1) Mr. Gifford and his fellow plaintiffs lacked standing to maintain their suit; and (2) the amended complaint failed to state a cause of action upon which the SDNY could grant relief to Mr. Gifford and his fellow plaintiffs.

Unfortunately for those of us who were hoping that the Southern District would analyze the 2008 NBI study – and USGBC’s dissemination thereof – as part of its analysis, Judge Sand’s decision rested squarely on his finding that Mr. Gifford and his fellow plaintiffs lacked standing to assert their claims under Section 43(a) of the Lanham Act. (In other words, the opinion does not address the underlying merits of Mr. Gifford’s claims against USGBC.)

Judge Sand identified two tests that Second Circuit courts have used to assess standing under the Lanham Act: the “strong categorical” and the “reasonable commercial interest” tests. The former requires a plaintiff to “be a competitor of the defendant and allege a competitive injury.” The latter requires a plaintiff to demonstrate “(1) a reasonable interest to be protected against the false advertising; and (2) a reasonable basis for believing that the interest is likely to be damaged by the alleged false advertising.”

After quickly disposing of any standing argument under this first test, Judge Sand turned to the second test:

Plaintiffs do not adequately allege a reasonable commercial interest that is likely to be damaged by USGBC’s alleged false statement: the press release indicating that new LEED-certified buildings perform on average “25-30% better than non-LEED-certified buildings in terms of energy use.” The “reasonable basis” prong requires the plaintiff to show “both likely injury and a causal nexus to the false advertising.” As to likely injury, Plaintiffs’ allegation that “LEED has begun to subsume the Plaintiffs’ roles’ is entirely speculative.” . . . 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. . . . Whatever the merits of Plaintiffs’ claim that the conclusion of the [NBI study] was false, their allegation that their “sales are specifically affected by [USGBC's] behavior” is too speculative to permit recovery under the Lanham Act.

By dismissing Mr. Gifford’s federal claims, Judge Sand was also able to dismiss his state law claims (alleging false advertising and deceptive trade practices) on jurisdictional grounds.

Earlier today, USGBC issued a press release with comments on the decision from Rick Fedrizzi. We’ve reached out to Mr. Gifford’s attorneys – who could still, among other things, appeal the decision up to the Second Circuit – for a reaction and will follow up here at GRELJ as warranted.

A copy of the decision is available for download here.

In a per curiam decision, the Supreme Court of Pennsylvania last month rejected a bid protest brought by an electrical contractor arising out of the award of a $20 million contract for a new 14-story, Ewing Cole-designed Family Court building in center city Philadelphia (pictured). Two justices filed dissenting opinions (both of which are available at 2011 WL 2507091 and were filed on June 24). Although there is little in the way of novel green building legal precedent in either dissent, the decision is notable for a number of key reasons that we have discussed previously here at GRELJ in the context of public contracts.

Back in January, the contractor (Hampton Technologies, Inc.) filed an emergency application for a stay of the Pennsylvania Department of General Services’ final determination denying its protest of the award of an electrical contract to another contractor (which was an intervenor in the proceeding) even though Hampton was the lowest bidder. After the award, DGS told Hampton that it received “weak” scores in certain evaluative categories. But DGS refused to provide the detailed score sheets used in the determination. So Hampton proceeded to file the protest in writing under the applicable Pennsylvania statute.

In its protest, Hampton claimed that DGS inappropriately considered each of the bidders’ “experience with LEED certification” and alleged that “the factor was not included in the solicitation criteria of the RFP for the Family Court Project.” Hampton argued that any award based on LEED-related criteria would therefore be arbitrary and capricious.

In March, DGS rejected the bid protest. It determined that the winning bidder had, in fact, earned the highest technical score in its response to the RFP. It also specifically addressed Hampton’s claim that it had improperly considered the bidders’ LEED-related expertise, noting that an appendix to the RFP “specifically referenced LEED experience in two categories worth 21 of the potential 400 points.”

The reasons why the dissenting justices would have granted the emergency stay were unrelated to the LEED-related issues (and had to do with questions about the winning bidder’s licensing status). But the protest itself demonstrates how LEED- and green building-related requirements are winding their way into RFPs and other contracting guidelines. For project teams, it also emphasizes the increasing importance in accurately presenting green building credentials in RFP responses, particularly as federal, state, and local government entities continue to require third-party certification for public projects.

This past Tuesday, July 26, U.S. District Court Judge Leonard Sand heard oral argument on USGBC’s motion to dismiss Henry Gifford’s amended complaint in Gifford et al. v. USGBC, still pending in the Southern District of New York. As you may recall, USGBC’s motion was fully submitted to the court on May 6. Based on Rule 12(b) of the Federal Rules of Civil Procedure, the motion claims that (1) Mr. Gifford and his fellow plaintiffs lack standing to maintain their suit; and (2) the amended complaint fails to state a cause of action upon which the SDNY can grant relief to Mr. Gifford and his fellow plaintiffs.

Although we don’t have a copy (yet) of a written transcript of the proceedings, Norah Hart, who serves as counsel for Mr. Gifford was kind enough to share some thoughts with GRELJ about what took place during the oral argument, which apparently focused on whether the 2008 New Buildings Institute study (claiming 25 to 30 percent energy savings in LEED-certified buildings) should be considered advertising under the federal Lanham Act.

“Judge Sand was skeptical about two critical aspects of the case: (1) whether the claim of ’25 to 30 percent energy savings’ in LEED-rated buildings can be attributed to USGBC (never mind that the NBI study that arrived at that conclusion was commissioned by USGBC and that USGBC propagates that myth relentlessly); and (2) whether the NBI study’s conclusions can be considered advertising,” Ms. Hart wrote to us in an email.

Whether the NBI study is advertising is a key threshold issue because USGBC’s moving papers argued that Mr. Gifford’s amended complaint failed to “plausibly allege” a Lanham Act claim for false advertising, and that “the 2008 [press] release [describing the results of the NBI study, concluding that new LEED-certified buildings are on average performing 25 percent to 30 percent better than non-LEED buildings in terms of energy use] does nothing more than accurately report the conclusion of the NBI study and provide a link to the study itself, so that persons in the building industry could make their own judgments about that study.”

No word on when we can expect to see a written decision from Judge Sand, but we’ll keep you posted. The Southern District’s case number is 1:10-CV-07747.

Recently, in Tagliarini v. New Haven Board of Aldermen et al., the Superior Court of Connecticut denied an appeal from a decision of New Haven’s zoning board that authorized a zoning amendment creating a Planned Development District for the Yale School of Management’s new Norman Foster-designed campus. The amendment has allowed Yale to proceed with the construction of a 230,000-square-foot, LEED Gold-hopeful building that is the centerpiece of the development. (A PDD is a New Haven-specific tool that effectively allows large-scale projects to proceed expeditiously by carving out a new zoning area within an existing one. The enabling legislation calls it “a legitimate legislative act by the city to regulate growth and meet the need for flexibility in modern zoning ordinances.”)

In order to determine the legality of a PDD, Connecticut courts must consider (1) whether the zoning amendment is in accordance with the comprehensive plan; and (2) whether it is reasonably related to the city’s police power. The purpose of a comprehensive plan – as opposed to a master plan – is to prevent the arbitrary, unreasonable, and discriminatory exercise of a city’s zoning power.  Effectively, the comprehensive plan “serves as an effective brake upon spot zoning.” (Spot zoning is the application of zoning to particular parcels of land within a larger zoned area where the new zoning is contrary to the jurisdiction’s master development plan and general zoning restrictions.)

The appeal is notable for our purposes here at GRELJ because New Haven’s Comprehensive Plan:

underlines a concern with the environment. [It] states as a goal: “to promote the urban environment through energy efficient design, green spaces, community gardens, and other pervious landscape treatments. . . . To achieve [high-end business development], attention must be paid to environmental design, pollution control, aesthetics, transportation/access, and the public infrastructure within and around the city’s business districts.” In a following paragraph entitled Green Design it notes . . . “attention must be paid to green building design by encouraging the development of environmentally-sustainable buildings that meet or exceed energy targets (e.g. Energy Star, LEED certification); provide for daylighting; minimize transportation movements; and recycle and/or control waste streams.”

In other words, a zoning amendment’s approval in New Haven hinges – in part – on a project’s dedication to green building and sustainable development practices.

After noting that “compliance with environmental regulations should be included as a condition of a city land use approval,” the Tagliarini court went on to observe that:

as far as energy conservation is concerned the building’s lights are on an activation system which turns them off when rooms are not in use. At night the south portion of the building will not be occupied and not have need of internal lighting because that area is devoted to administrative offices. In one of its submissions the applicant represented the following:

SOM sustainability goals: The University is seeking to achieve a LEED Gold certification for the new SOM building. To that end, considerable efforts have been made to reduce energy use. Measures include reducing energy consumption through the use of insulated glass, a large horizontal window shade on the south exposure, demand control ventilation sensors, high efficiency fan and pump motors, displacement ventilation, and radiant heating in certain areas. In addition, renewable energy technologies may be utilized, such as photovoltaic panels which will be installed on the roof. Preliminary examination has shown that the building may also meet the Energy Star rating requirements.

The court concluded its analysis of the project’s green features by holding that “[t]here would appear to be sufficient compliance with the environmental concerns of the Comprehensive Plan” and went on to uphold the zoning amendment in Yale’s favor.

It’s also worth noting that the record before the court included “several pages” of testimony from the final hearing before the Board in which a gentleman “believed the building already on the site was quite a fine architectural work and claimed Yale could not claim to be ‘green’ if the buildings already there were torn down. He also said the massiveness of the building made clear that it did not fit in with the neighborhood and it would overwhelm abutting property.”

As we continue to monitor emerging “LEEDigation,” it’s becoming clear that land use and other zoning proceedings are a primary focal point where LEED- and green building-related issues are becoming increasingly commonplace. Tagliarini joins In the Matter of Penelope McIver, Ontario Municipal Board Case No. PL100661 (Jan. 17, 2011) as recent opinions where green design has played a significant role in a written judicial opinion. There, though, the Ontario Muncipal Board rejected the applicants’ claim that their LEED project deserved a variance on the basis that it promoted environmental sustainability in the spirit of Toronto’s official zoning plan.

The citation is Tagliarini v. New Haven Board of Aldermen et al., 2011 WL 1288638 (Conn. Super., March 11, 2011). The plaintiff will not appeal the decision, and construction is moving forward.

A malfunctioning geothermal heating and cooling system at the Sussex County Emergency Operations Center in Georgetown, Delaware has officials scrambling for a temporary solution before the summer heat begins in earnest.

The $13 million, 18,000-square-foot facility opened in 2008 and was heralded as energy-efficient green building that could respond to large emergency events even during dangerous weather. The structure was designed to withstand wind loads of up to 120 miles per hour. But the facility is now in danger of its air conditioning shutting down and the oppressive Delaware summer damaging its millions of dollars of state-of-the-art electronics equipment.

To function properly, that equipment needs constant air conditioning which is provided by the geothermal system. The closed-loop system uses groundwater as its starting point, the temperature of which should range from 60 to 70 degrees Fahrenheit. But in recent weeks the water in the system’s 24, 600-foot-deep wells has ranged from 80 to 85 degrees. On more than one occasion it has even even topped 95. If the temperature reaches 100 to 105, the building’s air conditioning system will shut down. $2 million in county equipment and $2 million in state equipment could be in jeopardy.

Earlier this month, Sussex County approved a temporary generator to operate the building’s cooling systems while the problem is investigated (at a cost of $14,000 through Labor Day). Digging more wells or installing a permanent cooling tower would cost approximately $200,000. The county is also seeking advice from geothermal experts. More ominously, the county “will try to determine whether an engineering or design flaw contributed to the problem and, if any are found, will try to recover any costs.” Already the county engineer has publicly speculated whether the project’s designers factored in that the building would always need to be cooled “because of the amount of heat generated by equipment in the EOC. Possible litigation could center on that.”

Hopefully the issue can be resolved without any significant damage to the EOC or litigation. But as more green buildings that opened during the mid- to late-00s continue to operate, the odds that similar problems with other advanced building technologies could manifest themselves will increase.

We’ll keep an eye on the Suffolk County Emergency Operations Center as the summer proceeds and experts weigh in on possible solutions to the geothermal system’s woes.

An important article about the roles of USGBC, LEED, and the LEED accredited professional appears in the most recent issue of ArchitectureBoston, a quarterly publication of the Boston Society of Architects.

Written by Michael Liu, a principal at The Architectural Team in Chelsea, Massachusetts, the piece notes the proliferation of LEED-driven legislation at the state and local levels. It observes that “[a]lthough the USGBC’s LEED system has done more to bring the cause of sustainability into the public consciousness than an other, perhaps the time has come to revisit that assumption in the case of a private regulatory body that is not answerable to governmental authority.”

While this issue is not necessarily a novel one, it is significant that a major architectural publication has openly asked the question. The article itself appears to be motivated (at least in part) by Henry Gifford’s lawsuit against USGBC. From that perspective, perhaps Mr. Gifford’s suit can already be deemed a success, regardless of the Southern District of New York’s decision on USGBC’s pending motion to dismiss his complaint.

Liu asks whether “[t]he shrill original allegations aside, at its core, the [Gifford v. USGBC] case raises the question of whether it is appropriate for a private fee-generating nongovernmental organization to assume what amounts to a regulatory role in the building industry.” This legal concept is likely familiar to you: by relying on the LEED system within legislation, state and local governments have effectively punted control over their programs to an unaccountable private third-party organization.

As we’ve noted here previously, although this type of policymaking may have legal repercussions worth discussing under the non-delegation doctrine, Liu’s article is more concerned with the “process of certifying buildings and the creation of a new fee-generating bureaucratic structure to do so.” Although he does not walk through any proposed solution, Liu writes that “[i]t seems fair to ask whether so much administrative complexity and hierarchy actually advances the cause of sustainability.”

The article refrains from critiquing LEED itself. (“The issue then is not the LEED rating system, the virtues and shortcomings of which can be separately discussed.”) But Liu identifies many of the legal process questions that have floated across the green legal landscape since LEED-driven legislation began to proliferate in the mid-2000s.

One open issue is whether the IGCC will become the policymaking tool that LEED itself was never intended to be. Already several states have incorporated it into building codes. The IGCC itself raises a host of issues outside the scope of both this article and Mr. Liu’s. But shining a spotlight on these issues as green building regulatory activity continues is critical, particularly as construction starts increase in an improving real estate climate.