Late Tuesday, Henry Gifford and his attorneys filed their opposition papers to the USGBC’s motion to dismiss the amended complaint in Gifford et al. v. USGBC, the much-ballyhooed lawsuit that is currently pending in the Southern District of New York (Case No. 1:10-CV-07747).

The original return date for the motion was April 21, but the court granted Mr. Gifford an adjournment to May 2, with USGBC’s reply papers due by midnight tomorrow, May 6. The court noted in a separate filing that it will grant no further adjournments on this motion, and it is likely that a decision will not come down for, at the very least, several months after the motion is fully submitted later this week. (Note that, right now, it is unclear whether the court will require oral argument).

As you will recall, the USGBC’s motion to dismiss is based on Rule 12(b) of the Federal Rules of Civil Procedure and claimed 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 relief can be granted.

Among other things, with respect to this second claim, USGBC’s moving papers argued that Mr. Gifford’s amended complaint fails to “plausibly allege” a Lanham Act claim for false advertising. In addressing the 2008 New Buildings Institute study that is essentially the gravamen of the allegations in the amended complaint, USGBC’s papers argued 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.”

Whether or not those conclusions were misleading will be an interesting question for the Southern District to consider and may ultimately decide the motion. However, Mr. Gifford’s opposition squarely addresses this issue:

[t]he NBI study simply does not support the central premise of the LEED myth, that LEED saves energy. . . . USGBC hails the results of the NBI study far and wide . . . . In truth, the data collected for the 66 page study reveals that LEED buildings use 29 percent more energy. . . . [B]alancing the age of the compared buildings would show that the LEED sample has an average (mean) energy use index of 105,000 BTUs per square foot per year, and the CBECS buildings of the same age had an average (mean) energy use index of 81,600 BTUs per square foot per year. To be anything but intentionally misleading, the Defendant [USGBC] would have to qualify the study thus: “by comparing new LEED buildings to older non-LEED buildings, and by comparing the median average of one dataset to the mean average of another dataset, and by carving out a sample of only 22 percent of all the LEED-certified buildings, we arrived at the conclusion that LEED-certified buildings perform better than non-LEED buildings in terms of energy use.” The Plaintiffs can easily meet their burden of proving the study is not sufficiently reliable to conclude that the Defendant’s LEED-certified buildings save energy.

Opposing Memorandum of Law, at 13.

The NBI study has been a long-standing lightning rod for both proponents and critics of LEED, and my hope is that the Southern District provides some measure of guidance and/or closure on how the study was conducted and its conclusions distributed to the green building community.

Mr. Gifford’s papers also dispute that, in order to have standing under the federal false advertising statute (Section 43(a) of the Lanham Act), it is necessary for a plaintiff to be a competitor of the defendant. They cite to a series of cases that “note that the requirement is not set forth in the text of Section 43(a).” (citing Fashion Boutique of Short Hills, Inc. v. Fendi USA, Inc., 314 F.3d 48, 56-58 (2d Cir. 2002)). “Because Plaintiffs are competitors of USGBC with a very real stake in the market for energy efficient building expertise . . . the USGBC’s assertions are simply incorrect as a matter of law,” Gifford’s attorneys argue. Although USGBC acknowledged in its moving papers that the law in the Second Circuit on this point is not clear, it will be interesting to see how the Southern District handles these arguments – and the ambiguous case law – in its decision.

When reading Mr. Gifford’s papers, I was also reminded that Shari Shapiro questioned the wisdom of USGBC raising the argument in its moving papers that New York’s consumer fraud statutes should be inapplicable to its alleged conduct on the basis that “USGBC’s marketing . . . is directed at businesses and professionals. . . . The mere fact that the USGBC website is publicly accessible does not convert USGBC’s promotion and marketing into ‘consumer-oriented’ conduct.” Moving Memorandum of Law, at 20. At the time, she wrote “it’s pretty clear that the USGBC is marketing directly to consumers, contrary to the Memorandum of Law in support of the USGBC’s Motion to Dismiss.”

Kudos to Ms. Shapiro, because this is exactly what Mr. Gifford’s attorneys argue in their opposition. “If the USGBC website were password protected for professional members only, that assertion would be more convincing,” Mr. Gifford’s attorneys write. “But the USGBC website is aimed at giving the general public an overview of LEED, with ‘What LEED Is’ on the masthead. USGBC’s website explains to the layman consumer: ‘By using less energy, LEED-certified buildings save money for families, business, and taxpayers. . . It’s absurd to think USGBC is not directing its marketing at the tenant-consumer.” Opposing Memorandum of Law, at 14-15.

Finally, Mr. Gifford’s attorneys also acknowledge that the relief sought by the plaintiffs is “primarily injunctive,” and that the relief they “most wish for is full disclosure, compelling USGBC to release actual utility rates in its buildings, in order to foster a healthy marketplace of ideas, as some progressive municipalities have started to require.” Opposing Memorandum of Law, at 16.

We’ll keep an eye out for USGBC’s reply papers and update you accordingly once the motion has been fully submitted for the Southern District’s consideration.

A copy of the opposing memorandum of law is available for download here.

USGBC filed its reply memorandum of law on Friday afternoon, and a copy is available for download here.

As expected, earlier today USGBC filed a motion to dismiss Henry Gifford’s amended complaint pursuant to Rule 12(b) of the Federal Rules of Civil Procedure for (1) lack of subject matter jurisdiction; and (2) failing to state a claim upon which relief can be granted. (Under the FRCP, this postpones USGBC’s obligation to answer the complaint until ten days after the Southern District decides the motion, if it is denied). The motion is accompanied by a 29-page memorandum of law and 3-page attorney declaration, which includes a number of exhibits of interest. (The parties had stipulated back in January that USGBC’s response to the amended complaint would be filed no later than today.)

Two of those exhibits – the 2008 New Buildings Institute study and the April 3, 2008 USGBC press release announcing the results of that study as demonstrating that “LEED buildings use 25 to 30 percent less energy than non-LEED buildings” – are particularly noteworthy because of the intense scrutiny that the green building community has given to each. In its memorandum of law, USGBC states that

“the 2008 [press] release 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. Real estate professionals are free to reject the study’s conclusions, like plaintiffs claim they have done, because of NBI’s express disclosures about how the study was conducted. But that fact does not plausibly or permissibly lead to any inference of false advertising on the part of USGBC.” (emphasis added).

As the memorandum of law notes, a court is permitted to consider documents referenced in a complaint in connection with a motion to dismiss. It will be interesting to see how Mr. Gifford responds to this line of argument in his opposition, and whether the court determines that the NBI study’s conclusions, as presented by USGBC, as well as Mr. Gifford’s other allegations satisfy the heightened pleading requirements of Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), which require enough facts in a complaint to make it plausible — not merely possible or conceivable — that the plaintiff will be able to prove facts to support its claims.

As you will recall, the amended complaint was restructured to directly assert false advertising claims against USGBC under federal, state, and common law after originally being filed as a class action. The complaint is also seeking injunctive relief against USGBC, enjoining it from promoting the energy efficiency of LEED buildings and/or “benefits of the LEED system” and compelling it to “disclose the actual energy use of LEED properties,” as well as money damages.

Although the discussion of the NBI study is the more interesting aspect of the arguments in the papers, USGBC’s motion is primarily based on the claim that Mr. Gifford and his fellow plaintiffs lack standing on a number of grounds:

Gifford, who alleges he is an energy consultant, has been a longtime gadfly, preoccupied with critiquing USGBC and LEED through the media, internet forums, and the like. Gifford has every right to voice his criticisms of USGBC and LEED in the public forums of his choosing. But unlike the internet and the public square, access to the federal courts is limited to those with standing to sue.

USGBC goes on to allege that (1) the plaintiffs fail to properly allege that they are competitors of USGBC such that they can maintain their false advertising claims; and (2) the amended complaint’s allegations of injury are “conclusory,” “general,” and “too disconnected” from any “specific wrongdoing” by USGBC to demonstrate an “injury-in-fact” to confer standing on the plaintiffs.

USGBC’s motion is returnable on April 21, and we’ll keep an eye out for opposition and/or reply papers in the coming weeks, subject to any changes in the motion schedule. Again, the Southern District’s docket number is 1:10 CV-7747.

Specifically, Judge Bryan agreed with the defendants that the Energy Policy and Conservation Act’s “building code exception” applies to the disputed amendments. (As you will recall, the building code exception is set forth in 42 U.S.C § 6297(f) and allows state and local governments to set energy efficiency targets for new residential construction which can be reached with equipment or products whose efficiencies exceed federal standards, provided the enabling legislation also includes other means to achieve the targets with products that do not exceed the federal standards.) Judge Bryan’s decision walks through the four prongs of the building code exception that were in dispute (and under which the defendants alleged the amendments fell), so the full opinion will be of interest to you from that perspective.

I also thought it was interesting that the opinion acknowledges the District of New Mexico’s unpublished opinion in Air Conditioning Heating and Refrigeration Institute v. City of Albuquerque, No. 08-633 MV/RLP, 2008 WL 5586316 (D.N.M. Oct. 3, 2008). There, as you may also recall, the court granted the plaintiffs’ preliminary injunction request on the basis that the disputed code amendments could “not be met with products that meet, but do not exceed, the federal standards.” However, Judge Bryan held that “[p]laintiffs here [in BIAW] have not made any such showing” and observed that “there appear to be substantial differences in the Albuquerque code and Washington’s code.”

Thanks to Cullen Howe for passing along a copy of the decision.

We’re happy to be back here at GRELJ after an extended winter holiday- I hope 2011 is treating you well so far.

Last month, the Ontario Municipal Board considered a variance dispute in Toronto’s Kingsway neighborhood. Specifically, the Board considered arguments from the applicants that the “modernist” design for their proposed 3-story home at 7 Ashwood Crescent - for which they intended to seek LEED certification and would replace an existing bungalow – qualified for a variance to Toronto’s Official Plan and the Ontario Planning Act on the basis that its proposed green features and third-party certification constituted “extenuating circumstances.”

In its decision rejecting the applicants’ request, the Board noted that their case “opened with emphasis on LEED. The architect’s letter called LEED ‘the best guarantee with respect to the quality’” of the project and that “environmental sustainability will be promoted.” (As you review the decision, note that the Board did not provide any overt criticism or critique of LEED, nor did it point to any authority addressing LEED or other green building performance issues).

However, the Board did state that it “must be cautious . . . concerning ‘sustainability’ and various trademarks for ‘green building’ – not for fear of overextending the cause of environmental innovation but, on the contrary, of trivializing it. The Board takes notice that, with so many reported attempts by all and sundry to oversell environmental benefits (notably to expedite approvals), a new word was coined in North America – ‘greenwashing.’ It also applies to construction.” The Board also pointed out that razing the existing bungalow “in the name of environmental sustainability” would “surprise at least some observers.”

Nevertheless, while the Board did note that the term “sustainability” is used in Toronto’s Official Plan, it held emphatically that the project’s claims “promoting environmental sustainability” are “no shortcut” around the statute (which provides that a variance can be authorized if it is minor, desirable for the appropriate development or use of the property, and maintains the general intent and purpose of the municipality’s plan). The Board stated that “[t]here is simply no statutory authority for [third-party environmental certification labels] to sidestep land use planning requirements . . . ‘Certification by a private third party’ is no substitute for a transparent and legally mandated public process, and no guarantee of good planning.”

While interesting on their own, the applicants’ arguments before the Board also reminded me of those that were successfully advanced in the Destiny USA litigation here in New York, 889 N.Y.S.2d 793 (App. Div., 4th Dep’t 2009). There, as you may recall, and contrary to the Board’s decision in 7 Ashwood Crescent, the Appellate Division used the project’s “unique” green features  and “revolutionary” construction financing to carve out an exception to well-settled law, holding that injunctive relief requiring the lender to continue funding the project was proper (notwithstanding, as one justice pointed out in dissent, that it was unclear how Destiny would be irreparably harmed).

We’ll add 7 Ashwood Crescent to Destiny USA on our roster of decisions connecting well-settled real estate and construction legal principles with third-party green building certification, and continue monitoring whether other, similar applications and proceedings manifest themselves here in 2011.

Many thanks to Marshall Leslie for passing along a copy of the Board’s decision.

The Addendum also creates a new role for design professionals, contractors, or consultants: the Green Building Facilitator, responsible under the terms of the Addendum for coordinating and facilitating the process of obtaining the owner’s desired green building status or certification, identifying green building measures (both procedural and physical), potential design and construction alternatives, and other services as required by the terms of the Addendum. The Green Building Facilitator is identified explicitly in Section 4 of the Addendum and can be the architect, engineer, contractor, or other corporate entity (or individual). However, the Addendum places certain risks on the Facilitator, and parties that choose to accept this role pursuant to the Addendum should review its terms and conditions carefully.

What’s most interesting for purposes of this article, though, is that Article 8 of the Addendum is devoted exclusively to risk allocation. Article 8.2 provides that the parties- including the Green Building Facilitator- will be subject to any limitations on liability that are included in their underlying contracts. However, this provision explicitly acknowledges that the owner’s “loss of income or profit or inability to realize potential reductions in operating, maintenance, or other related costs, tax, or other similar benefits or credits, marketing opportunities and other similar opportunities or benefits, resulting from a failure to attain the [project’s green building goals as defined in the Addendum] shall be deemed consequential damages subject to any applicable waiver of consequential damages” in any underlying design or construction contract. Compare this provision to the discussion which arose out of the Shaw Development litigation, where many commentators wondered what types of damages flowing from the breach of a green building contract would be deemed consequential in nature rather than direct. It’s therefore particularly noteworthy that the Addendum (i) acknowledges the types of unique damages that may flow from the breach of a green construction contract; and (ii) actually makes an initial effort at defining them. Of course, parties are free to negotiate the terms of the Addendum, including (depending on the project’s scope) (i) the types of damages which would be included in the provision; and (ii) any waivers – mutual or otherwise – in the underlying agreement. In Shaw, as you will recall, the issue was whether the lost tax credits were consequential and therefore waived by the owner through the A201′s mutual waiver provision; under the form terms of the Addendum, they would have been explicitly categorized as consequential. Had the parties in Shaw implemented a document like the Addendum, it would have assisted them in more comprehensively assessing the green building-related risk associated with the project and allocating that risk accordingly.

The Addendum also makes it clear that no project participant other than the Green Building Facilitator will be “liable or responsible for the failure of [any procedural or physical green measures] to achieve the [project’s green building goals as defined in the Addendum],” including the project’s failure to earn any third-party certification as designated in the Addendum. However, the Addendum also makes clear that these limitations on the project team’s liability do not relieve them “from any obligation to perform or provide [procedural or physical green measures]” as required by their underlying contracts. It will be interesting to see if additional form green building contracts and/or addenda are issued in 2010, whether they take these types of risks and limitations on liability into account, and, if so, in what particular fashion.

As you may know, ConsensusDOCS was founded in 2007 and, to date, its suite of form design and construction agreements has been endorsed by 23 different A/E/C organizations. You can download a copy of the Addendum via the link below. As always, the Arent Fox Green Building & Sustainability and Construction Practice Groups are happy to assist you with any additional questions you might have about either the Addendum or working with construction contracts generally.

• 310 Green Building Addendum (ConsensusDOCS)
• New Document Defines Role in Green Building Projects (Arch. Record)

In New York (like most jurisdictions), one of the elements for obtaining a preliminary injunction is whether there will be irreparable injury to the moving party if the court denies provisional relief. However, if the court can calculate the moving party’s damages with precision, there can be no irreparable injury while the action is pending because the moving party would be adequately compensated by money damages if it were to prevail at trial. The Destiny court, however, found two exceptions to the irreparable injury test based explicitly on the project’s green features. It held that

“an exception is warranted because the Project’s unique character renders it difficult to calculate any damages sustained by Destiny Holdings. Citigroup stated through its managing director at a U.S. Green Building Council Presentation on November 8, 2007 that the Project is a ‘visionary project’ that has created a ‘new financing paradigm for green economic development’ that is ‘revolutionary.’ Citigroup Chairman and Chief Executive Officer Charles Prince called the use of newly-created Federal Green Bonds [created under the American Jobs Creation Act of 2004 and authorizing up to $2 billion in tax-exempt, private activity bonds to be issued by state or local governments for qualified green building and/or sustainable design projects] in financing the Project ‘groundbreaking [and] a step forward in addressing climate change in the U.S. because the Project incorporates sustainable design, energy conservation, and renewable energy sources on a large scale. He further commented that the Project ‘is good for economic development and good for the environment.’ Thus, the unprecedented nature and scope of the Project makes it unique, so that it has no established market value and any damages sustained could not be calculated with reasonable precision.”

The court also found a second exception to the general rule because of the project’s highly touted green features, stating that “Destiny Holdings has established the enormous potential for harm to its reputation and the reputation of the entire ‘Destiny USA’ project. Harm to business reputation is harm for which money damages are insufficient and for which injunctive relief may be appropriate.” I don’t think it’s unreasonable to infer here that the court was connecting the project’s green features to its “reputation” in order to carve out another exception to the general rule barring injunctive relief in similar contexts. For both of the foregoing reasons, the Appellate Division upheld the trial court’s decision, but modified the order granting the preliminary injunction to require Destiny to post a bond in order to compel Citigroup’s performance under the loan agreement.

Interestingly, two justices joined in filing a dissenting opinion that ignored the project’s green features. The dissent stated that “there is no support in the record for the majority’s conclusion that an ‘enormous potential’ for harm to the reputation of Destiny Holdings exists, other than the bald assertion of a principal of Destiny Holdings that its reputation would be damaged as a result of its failure to complete the project. The core of the majority’s argument is that the nature of the project makes it unique and thus that Destiny Holdings would be entitled to specific performance [of the construction loan agreement]. While the scope of the Project may be unique to the region in both its size and impact, the record clearly establishes that the [construction loan agreement] itself is simply one to loan money in order to finance construction.”

I think that there are a few important things to take from this opinion. First, notwithstanding the Destiny project’s massive scope, the Appellate Division has given owners a basis for arguing that green building projects – regardless of their financing mechanism – are inherently unique.  In the event of any type of dispute, owners or other parties which might be seeking provisional remedies or are engaged in other motion practice (that, like in Destiny, is unrelated to the project’s green design features) can now rely on appellate authority that green building projects are different and deserve different treatment under applicable law.

Conversely, the opinion suggests why construction and real estate attorneys need to be well-versed in the green building space; if you were asked to oppose a similar motion where the movant was arguing that “green buildings are different,” you would likely want to argue in opposition how, to date, many green building projects have not resulted in such different outcomes from conventional projects (i.e, by identifying the ongoing LEED performance gap and studies analyzing the alleged rental and asset premium for different types of certified green buildings).

The decision is also important to note from a lender’s perspective. If potential borrowers looking to finance a green construction project have the ability to argue that their projects deserve special treatment in connection with any lending dispute, lenders may consider, for example, revisiting the terms of their construction loans or otherwise pricing this type of risk into the loan itself.

Are there other green real estate-related legal issues arising out of this opinion that you might anticipate arising in connection with these types of construction lending disputes?

My thanks to Kevin Garrison of Baker Donelson for forwarding a copy of the Appellate Division’s opinion in this matter to my attention. Either of us would be happy to forward you a copy of the opinion upon request.

As we move into the first full week of 2010, the Northland Pines decertification proceeding is casting a long shadow over the short-term green building legal landscape- but more on that in a bit. Before we push forward here at GRELJ and continue dissecting them in much more detail this year, I think it makes sense to look back at what I think were the five most important green building-related legal issues which emerged during 2009:

• The stimulus package contained numerous green building-related provisions, including significant funds for state and local governments to implement energy efficiency codes. However, most of these funds have yet to be distributed, so it will be interesting to track legislative implementation during the course of 2010. Some municipalities are beginning to look more closely at the logistics of  implementing third-party-driven legislation, including in our own backyard here in New York. This will be a critical and ongoing issue to monitor.

• USGBC acknowledged the legal risks implicit with building green, but its white paper on the subject dubbed them “old wine in new bottles.” We reviewed the white paper here at GRELJ and concluded that it seemed “to be an effort to sweep many of the thornier legal issues that may indeed ferment into ‘new wine’ under the rug.” My reasons for disagreeing with the paper’s conclusions stemmed (and continue to stem) from the pace of regulatory activity, the lack of input from the insurance industry on green building risks, the uncertainty over the prevailing standard of care for design professionals practicing in the green building space, and the questionable body of green building performance data.

• Critiques of LEED building performance moved into the mainstream; USGBC mobilized in response. The ongoing debate about the energy performance was picked up on in media outlets that included the New York Times after Henry Gifford and USGBC’s Brendan Owens debated the merits of LEED at the NESEA forum last March. LEED Version 3.0 was released with the obligation for owners and landlords to report data on building performance to USGBC, though many of you wondered what USGBC would actually do with that data upon its compilation. USGBC’s Building Performance Initiative, which was launched in advance of Greenbuild in Phoenix, is ongoing; we’re likely to start seeing results and further studies and critiques of LEED building performance throughout 2010.

• The National Institute of Building Sciences convened a Task Group to review various third-party building performance rating systems, which identified associated risk and policy problems for the A/E/C community to contemplate. The Task Group’s recommendations to NIBS’ Board of Directors included the development of various white papers analyzing risk and policy issues in greater detail; we emphasized the import of this effort in the context of NIBS’ political backing and the scope of the report’s conclusions.

• The potential for decertification of LEED Version 3.0 projects that (1) fail to report building performance data or (2) provide a legal mechanism for the reporting requirement to carry forward after a sale or sublease caused a firestorm of blogosphere commentary. Interestingly, though, the first publicly reported decertification proceeding- the Northland Pines High School complaint, which USGBC is currently reviewing – received comparably little attention.

In my opinion, these last two items were clearly the most important green building legal stories of 2009. Although the Northland Pines proceeding is not the full-blown green building litigation that many have predicted, it implicates all of the legal issues associated with decertification that were discussed last year. It is also the type of scenario out of which green building litigation could arise in the event USGBC/GBCI revokes the school’s LEED Gold status. For all of these reasons, and regardless of the outcome, the Northland Pines proceeding will be the first major green building legal story of 2010, particularly because we are (publicly) witnessing USGBC/GBCI follow the procedures of its Certification Challenge Policy for the first time.

If there are any other noteworthy issues we missed, please feel free to note them in the comments below. Happy New Year, everyone!

For those of you reading this article in a reader or by email, we recently gave GRELJ a makeover and encourage you to visit the site in your browser. Hopefully the new design is easier to read and better organized. One new feature is threaded comments, which allow you to reply specifically to a given comment in each thread. I look forward to any feedback on our new look.

This comment reminded me of language in the NIBS report which noted that “[a]t an increasing rate, state and local governments and their code/regulatory agencies are adopting building rating/certification systems, intended as voluntary systems, to be their code or regulatory requirements, often without fully understanding their benefits, tradeoffs, and costs.” While the Atlanta restaurant industry seems more concerned with what it perceives to be a green building cost premium, the fact that its opposition is also grounded in the lack of sufficient input from stakeholders also echoes many of the policy issues we’ve raised here at GRELJ over the past year, particularly with respect to the rush to mandate green building requirements.

In that vein, it’s also interesting that although Atlanta’s Bureau of Buildings will enforce the ordinance, the city council has yet to determine what types of fines or other enforcement mechanisms would be imposed on buildings that fail to comply. “This is still a work in progress,” a spokesman observed, and the restaurant industry is pointing to this specific comment as one of the bases for arguing that the ordinance needs more work before the city council even considers passing it. Again, this echoes the types of observations noted in the NIBS report. While these types of details are being worked out, the restaurant industry is instead advocating for additional financial incentives (such as tax credits and building permit fee reductions); this also reflects the conclusions of the NAIOP report issued earlier this year, which called for financial incentives rather than mandates to bridge landlords’ payback period gap for most types of energy efficiency improvements.

On another note, the ordinance may present some novel green leasing implications which the restaurant industry has picked up on. Although building owners will bear the responsibility under the text of the ordinance for ensuring that the required standards are satisfied, the restaurant industry is warning restauranteurs who do not own the premises out of which they are operating to review their lease documents and confirm that they will not be responsible for executing the legislation’s required retrofits. It is not difficult to imagine the scenario where a lease includes a clause obligating the tenant to comply with all applicable codes and regulations, and the landlord pinning responsibility for any such retrofits on that tenant in the absence of affirmative language to the contrary.

Just a quick editorial note- this article will be the only new post here at GRELJ for the rest of the month as I am getting married this Saturday and then off on the honeymoon. Thanks to everyone for your support and comments since we launched this site almost a year ago (and patience over the past couple of weeks while the pace of our posts has slowed in advance of the wedding). See you on the other side!

• Operators in Atlanta Fight Forced Green Conversions (NRN)
• Costly Eco-Friendly Laws Overlook Industry’s Proactive Green Efforts (NRN)

However, what got me thinking a bit more seriously about the intersection of green building and labor law was an article discussing the California Labor Federation’s two-day conference held earlier this month in San Francisco, where topics across a number of workshops included green real estate development and the creation of green collar jobs. One of the plenary speakers, Greg LeRoy, whose topic was “the emerging green economy,” noted in his remarks that “there are only two reliabile predictors of job quality, unionization and job quality standards. [W]hile some green employers are open to collaboration, others pay poorly and fight unions.” Mr. LeRoy also pointed out that “there are no labor standards in the U.S. Green Building Council’s LEED system.” Is it possible that future versions of LEED might require some type of labor standard for the trades, perhaps by requring that owners who pursue LEED ratings enter into some sort of project labor agreement with local unions or pay prevailing wage rates? Could USGBC itself integrate certain labor requirements into LEED itself? I am not a labor lawyer, but it seems to me that with increasing emphasis, particularly here in New York City, for example, on educating the trades about green construction practices, these types of labor law issues will become increasingly common in the green building context. Any thoughts?

• Green Roof Installers at Target Center Raise Safety, Wage Issues (Star Tribune)
• California Labor Federation’s Rousing Conference (BeyondChron)

Green roofs have been a part of building for over a thousand years. The current green building movement has, however, had the greatest impact on the growth of the green roofing industry. A green roof is commonly defined as a roof that consists of vegetation and soil, or a growing medium, planted over a waterproofing membrane. There are two basic types of green roofs: (i) an extensive roof, which has a few inches of soil cover; and (ii) an intensive roof that has two feet or more of soil for a variety of grass, trees, bushes and shrubs. Green roofs are used in a multitude of buildings, including industrial facilities, commercial offices, retail properties and residences. The benefits of a green roof include reduced storm-water runoff, absorption of air pollution, reduced heat island effect, protection of underlying roof material from sunlight, reduced noise, and insulation from extreme temperatures. A green roof can thus be a critical design element for a green building. As more properties across the country are attempting to obtain LEED certification, it is worth noting that a green roof can help a property obtain over a dozen LEED credits, including credits for reduced site disturbance, landscape design that reduces urban heat islands, storm water management, water efficient landscaping, innovative wastewater technologies and innovation in design. The increase in green roofs and the green building movement is also resulting in an increase in liability resulting from errors in the design, installation or maintenance of green roofs. As a result, owners, design professionals and contractors should carefully consider ways to mitigate the potential risks involved with building a green roof.

In order to mitigate liability, the stakeholders in a project that features a green roof should clearly detail their expectations and performance requirements in their contracts. This will require preparing contracts that might not easily fit within standard forms of architect and construction contracts. A clear example of green roof liability was detailed by Frank Musica at the AIA Convention 2007. In that instance, the green roof contractor and structural engineer failed to communicate the specifics of the green roof. The result was water leakage and significant structural damage. This scenario could have been avoided by simple communication. One can easily imagine potential disputes arising from any of these following situations: (i) failure to deliver the energy efficiency levels claimed by the installation of a green roof; (ii) failure to deliver a green roof that results in the claimed number of LEED credits that should be awarded by the USGBC; (iii) mold or other environmental hazards as a result of poor maintenance of a green roof; or (iv) a roof collapse resulting from a green roof that was not properly constructed, installed or maintained. Parties should look to limit unnecessary liability by drafting contracts that clearly detail how the applicable parties will be responsible for each of the above-mentioned items. Although liability for said items is not able to be eliminated, it is important to all stakeholders that it is appropriately detailed in contract form, instead of by a judge or jury.

Green building owners and general contractors should engage experienced green roofing professionals when building a green roof. The green roofing industry has begun to assist in this regard by designating such professionals in a manner similar to that of the USGBC’s LEED Green Associate or Accredited Professional designations. Green Roofs for Healthy Cities has established the Green Roof Professional (“GRP”), which designation was created to distinguish certain individuals that have achieved a specific knowledge level with regard to green roof design, project management, installation and maintenance.  The goal of the designation level is to allow green roofing professionals to differentiate themselves, establish an increased level of professionalism in the green roofing industry and help protect the public health, safety and welfare by the building of better green roofs. I would strongly encourage clients to seek GRPs when working on a green roof in an attempt to mitigate unforeseen liability. It is worth noting, however, that one likely unintended consequence of this accreditation program for GRPs is that they could very well be held too a higher standard of care should any problems occur following the installation, repair or maintenance of a green roof.

Green roofs provide a benefit to the environment, energy efficiency related savings to property owners and tenants and potential credits for owners seeking LEED or other third-party green building certification for their property. The legal risks and potential liabilities of green roofs should, however, be carefully examined, both by companies considering installing a green roof and by green roof professionals themselves before getting involved with any green roofing project.

Geoff White is a Senior Associate in the Commercial Transactions and Real Estate Group at Frost Brown Todd.  He is a LEED Green Associate (LEED GA) and a Fellow of the Institute of Green Professionals (FIGP).  A sizeable portion of his practice is spent advising clients on the legal issues of green building and sustainable development.  He recently co-authored the chapter “Understanding and Mitigating the Legal Risks of Green Building,” in the Aspatore Books Inside The Minds – Negotiating and Structuring Construction Contracts.  Mr. White is licensed to practice law in Kentucky and Ohio.  Contact him at gwhite@fbtlaw.com or (502) 568-0202.

First, in the MPR preamble, the LEED v3 program expressly provides GBCI with the ability to revoke LEED certification “upon gaining knowledge of non-compliance with any applicable MPRs.” It is thus crucial that project teams consider and comply with each MPR, particularly if the project seeks to take advantage of a state- or local-level LEED-driven incentive program that is keyed to the receipt of formal certification. While we have yet to see LEED-certified project have its certification revoked, an interesting question could arise here if a state or local government that had provided a project with an incentive upon certification sough to recoup those incentives if the project was de-certified by GBCI. Even thornier would be the scenario where a project that was required to earn certification under a legislative mandate loses certification. The corresponding liability-related issues would of course flow downstream and impact each member of the project team. MPR 1 actually obligates every LEED-hopeful project to “be designed to comply with all applicable USA federal, state and local environmental laws and regulations in place where the project is located and at the time of design and construction.” Comprehensive legislative surveys and strong contract language emphasizing regulatory compliance will thus be a priority for project teams under the LEED v3 regime.

From a legal perspective, MPR 7 is perhaps the most important to consider: “all certified projects must commit to allow USGBC to access all available actual whole-project energy and water usage data in the future for research purposes.” Moreover, “[t]his commitment must carry forward if the building changes ownership.” For attorneys, it will be an interesting challenge to draft such a covenant that will bind subsequent purchases of real property (or, in the context of LEED-CS and LEED-CI 2009 MPRs, subsequent tenants). For owners and project teams, it will be imperative to recognize that such language must be translated into purchase agreements or leasing documents such that GBCI cannot revoke a project’s LEED certification. More generally, it will be interesting to see if any private owners balk at granting USGBC access to such data, and whether there are any local legal obstacles (in terms of building codes, utility regulations, etc.) that may make it difficult for owners to provide the data as required by LEED v3.

Applicable MPRs are set forth below as printed in the text of the New Construction and Major Renovations rating system. Note that I have also set forth MPR 6 below, which lays out certain timeframes that project teams should remain aware of. I anticipate that there will be much more analysis of these and other provisions in LEED v3 as more project teams become familiar with the terms and scope of the program; please feel free to suggest any additional legal issues that we may have missed in the comments below.

Minimum Program Requirements (“MPRs”) – LEED 2009 – New Construction and Major Renovations

• LEED Version 3 (USGBC)

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.

• Need For Green Counsel Increasingly Salient (gbNYC, link to Musica presentation)
• W&M ELPR Symposium - It’s Not Easy Being Green

• Redevelopers Beware – SF Ordinance is LEED on Acid (gbNYC)

• West Coast Green Panel Discusses Risk Management for Green Building Projects (gbNYC)
• Minimizing Green Building Risks (Greener Buildings)
• Listening to Greenbuild (Green Building Law Blog)