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.

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.

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.

The amended complaint – which also features two engineers (Andrew Ask and Elisa Larkin) and an architect (Matthew Arnold) as plaintiffs – is notable because it is no longer structured as a class action, and essentially asserts false advertising claims directly against USGBC under federal, state, and common law. However, the plaintiffs continue to seek 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. Also of interest is that Rick Fedrizzi, Rob Watson, and the other individuals named as defendants in the class action are no longer parties.

The Southern District’s docket numer is 1:10 CV-7747, and the USGBC (which is being defended by Proskauer Rose) has until April 7 to respond to the complaint, presumably by way of a motion to dismiss.

A copy of the First Amended Complaint is available for download here.

In what’s becoming an annual year-end tradition here at GRELJ, we take a look back at the five most important legal issues (plus a special bonus issue!) that we discussed during 2010 before moving forward into what promises to be just as wild a ride for green design, construction, and real estate legal issues in 2011.

• USGBC found itself squarely in the middle of the year’s biggest story: Henry Gifford’s $100M class action lawsuit against it, which was filed in the Southern District of New York back in October. While it remains to be seen what – if anything – will come of Gifford’s action from a legal perspective, the filing of the suit itself set off shock waves throughout the green building community. Equally interesting were USGBC’s general silence about Gifford’s allegations and Gifford’s posture in ongoing settlement negotiations. Regardless of whether the suit slowly fades from the green building public’s eye or heats up once again, this will continue to be one of 2011′s most intriguing stories.

• Green building litigation broke out at New York City’s Riverhouse condominiums. Filed back in May in New York County Supreme Court, Gidumal v. Site 16/17 Development LLC could mark the tip of an iceberg of claims that use the promise of a building’s or tenant space’s anticipated LEED certification or increased energy efficiency as an actionable sword to reform leases, escape purchase agreements, or recover money damages. At least one other similar suit has been filed against a green developer in Toronto, and other unreported cases also exist. Expect more discussion of this type of risk on the owner/sponsor/developer side of the green building equation in 2011.

• Industry stakeholders continued to fight back against proposed increases in energy efficiency requirements at the state and local levels. Federal lawsuits in Albuquerque, New Mexico (AHRI) and Washington State (BIAW) moved forward against proposed building codes, alleging that the codes would mandate energy efficiency standards for certain types of HVAC and other products that exceed controlling federal requirements and were thus preempted as a matter of law.  As USGBC begins to commit to Standard 189P and the International Green Construction Code as a legislative tool in 2011, the potential will increase for similar suits elsewhere in the country.

• The green building legal community was left to wait for another year for the anticipated boom in LEED-related litigation (i.e. “LEEDigation”). We wrote about this recently here at GRELJ: the fact that there was no reported litigation arising out of a project’s failure to earn LEED certification as anticipated in 2010 is extremely notable and could have significant policymaking repercussions in 2011.

• Standard 189P was incorporated into the International Green Construction Code as an optional compliance path. I expect this to be on our list of 2011′s top green building legal issues as USGBC begins to push Standard 189P and the IGCC as a legislative tool for state and local governments while LEED itself returns to the role for which it was originally intended: a voluntary tool for the very top of the marketplace.

Bonus issue:

• The legacy of USGBC’s decision to uphold the LEED Gold certification of Northland Pines High School remains unclear. Are USGBC and GBCI serious about penalizing LEED projects that fail to comply with LEED Version 3.0′s Minimum Program Requirements or other prerequisites? Is “decertification” a legitimate risk or a green building red herring? These questions are still unclear as 2010 draws to a close; perhaps 2011 will begin to shed some light on them.

My sincere thanks to everyone who has participated here at GRELJ in 2010 and best wishes to you for a healthy and happy 2011!

A recent article in the Sydney Morning Herald suggests that Henry Gifford’s class action suit against USGBC has resonated not only domestically, but across global real estate markets as well.

Consider the following: while visiting Melbourne to observe green Australian commercial office buildings, Roderic Bunn, the principal consultant at Britain’s Building Services Research and Information Association said that “[w]e are piling often unmanageable complexity into these buildings, so the consequence is unmanageable complexity. It’s the enemy of good performance.” Although Bunn stated that he was “not saying it [a lawsuit] will happen [in Australia] or in the UK,” he did affirm his belief that “Australian commercial and public sector buildings are suffering the same problems as those in Britain.”

Pointing specifically to Henry Gifford’s lawsuit against the USGBC currently pending in the Southern District of New York, Bunn went on to say that “[p]roperty organizations have accused the [USGBC] of selling green certification. Some people are waking up to the fact they believe they have been mis-sold a rating system that guarantees performance, and the construction industry hasn’t been quick to disabuse them of that notion.”

In addition to its referencing the Gifford litigation, I think the article is important to note because it highlights many of the same building performance issues that have plagued green buildings here in the U.S., as well as the operational issues that green lease provisions are designed to address. For example, Bunn observes that:

• “We have been seduced by the often false promises of new technologies. A building can be mounted with wind turbines and photovoltaics, but they don’t contribute nearly as much as designers think they do because they haven’t driven down the energy requirement to begin with. We tend to glue these things on to the outside of buildings before we actually have reduced the loads of the building as far as we can go. The mantra should be ‘half the loads, double the efficiencies. Halve the carbon in the fuel supply before we go anywhere near on-site renewables. They are often expensive, small, very complex, and maintenance hungry, and the maintainability of these things is rarely taken into account.”

• “The construction industry is very good at designing dreams but crafting nightmares – and it’s the managers who inherit the nightmares. We can’t afford to have a sustainable building not delivering what they are supposed to deliver.”

Bunn served for 16 years as editor of the Building Sciences Journal, which is the official journal of the Chartered Institute of Building Services Engineers, and has received numerous government grants to study building performance in the United Kingdom. Uniformly, according to Bunn, those studies found that “energy consumption was far too high, systems were not finished off properly, no one knew how to use them, and they were misfiring on a whole range of criteria.”

Some of the solutions which Bunn suggested to the Sydney Morning Herald include requiring the project team to remain engaged with the building for a period of time after construction is complete to get it “as close to the design targets as they can get. Finish it off properly, follow through. Builders should be appointed on the basis they will stay engaged for a significant period after occupation to fine tune and perform, monitor the energy use to optimum satisfaction.” Of course, in the U.S. construction industry, this rarely happens; the project team wants to get off the job as quickly as possible, and for the owner to keep it engaged for any additional period of time costs money.

Although addressing the gaps between green design, construction, and operations will continue to be a major challenge in 2011, I think it’s clear that the Gifford litigation is playing a major role in raising awareness about those gaps and increasing the level of conversation about the types of measures that can improve it. Indeed, Bunn also identified the new building performance reporting requirements in Australia for office buildings as potentially closing the gap between design and operations and allowing future green building projects to more meaningfully address it; as you may recall, as of November 1, Australia requires landlords to disclose the energy efficiency of their office buildings when they either sell or lease space that is larger than 21,530 square feet (2,000 square meters). (Ratings are based on the National Australian Built Environment Rating System (“NABERS”), which is on a scale of 1 to 5 stars, and Australia’s current median market performance stands at 2.5 stars). I think this is also important to note because, in the aftermath of the 2010 USGBC Legal Forum at Greenbuild, we pointed to building performance reporting requirements as a trend that will likely increase in 2011.

Finally, I thought Bunn’s remarks were also timely given the recent release of the International Green Construction Code for a second round of public comments in light of the types of green building practices that could soon become mandatory as part of building codes throughout the U.S. We’ll have more thoughts on the IGCC and what it means for the future of local-level green building programs in an upcoming article here at GRELJ.

Late last week, I had the opportunity to speak with Norah Hart, counsel for Henry Gifford in his class action suit against the USGBC in the Southern District of New York, which has elicited some very strong reactions throughout the green building community. According to Ms. Hart, USGBC has retained outside counsel to defend it in the action, and is currently working with Mr. Gifford (through Ms. Hart’s office) to understand Mr. Gifford’s intentions in filing the suit. Here’s, specifically, what Ms. Hart told me she has communicated to USGBC through its attorneys:

USGBC has said that its goal is ‘market transformation’ and indeed they have achieved remarkable results and are in the fortunate position to be able to truly effect change.  We believe that the disclosure of utility bills – which some districts are already requiring – is the fastest way to bring an energy efficiency premium into the market. Markets are most efficient when accurate information is available. If buyers can see the past energy use bills of a property, they can weigh its energy efficiency into the price they will pay. If developers and planning officials see the actual energy bills of existing buildings in their region, they can choose design and construction techniques that are proven to work, and inevitably, will begin to adopt practices that save fuel and money. The disclosure of actual energy use bills will transform the market.

According to Ms. Hart, the plaintiffs are also currently “formulating a list of the injunctive measures [they] want to see, namely, that actual energy bills for all [LEED-certified buildings] are available, databased in an accessible, meaningful way, so information is available with which honest assessment can be done.”

It’s interesting that the parties seem to be – at least on the surface – engaged in these discussions at such an early stage in the litigation. However, the negotiations raise a number of questions, particularly with respect to the building performance data that Ms. Hart hopes to obtain. First, as Larry Spielvogel has pointed out, that raw data is not particularly useful without other pertinent information about each building (such as its occupancy levels, user types, etc.). Second, much building performance data is highly proprietary; as attorney Brian Anderson noted in an email to me, what would be the implications for that raw data becoming public knowledge? “Can USGBC really force building tenants and owners to give information if they have not signed off on such disclosures in their leases?” Anderson asks.

Independent from this latest development, I have also been getting quite a few inquiries over the past few weeks about next legal steps in the action and, assuming something isn’t worked out between the parties in the interim, here’s a rough outline of how the action could move forward:

• The Federal Rules of Civil Procedure require a party to respond to a complaint within twenty (20) days, unless the time to respond is extended by mutual consent of the parties’ attorneys (which it has been here for USGBC, according to Ms. Hart).
• Unless the parties are able to reach some sort of resolution, I expect that USGBC will move to dismiss the complaint under Rule 12 of the Federal Rules of Civil Procedure (which permit a party to make such a motion in lieu of answering on a number of bases); 
• Finally, my guess is that such a motion would not be successful (at least with respect to all of the causes of action in the complaint). At that point, the parties could go back to the negotiation table, or the plaintiffs could move to certify the class under Rule 23(a). In deciding that type of motion (which USGBC would oppose), a court is permitted to order limited discovery, which might (or might not) create a pressure point encouraging settlement. It’s also important to note that the timeframe during which these procedural mechanisms will play out are significant (months, if not years), so this is a story that we will likely be tracking for some time.

 As always, we’ll stay on top of any further developments in the suit and keep you posted here at GRELJ.

On Thursday, November 18, I will sit on a panel at USGBC’s 2010 Legal Forum at Greenbuild. “The Legal Challenges Posed by Green Building” will feature three, one-hour panels, two of which are titled “Current Green Building Statutory & Policy Issues” and “Practical Practice Pointers.” I will sit on the third panel, “What’s the Next Big Challenge in Green Building Law?” with Chris Cheatham and moderator Shari Shapiro. I anticipate a robust discussion of Henry Gifford’s class action lawsuit (which, in some ways, I think has more merit than does Ms. Shapiro) as well as the future of “LEEDigation” (which I believe is manifesting itself in a very different context than does Mr. Cheatham). I mention this not to take any sort of peremptory shots at my colleagues, but rather to suggest that the panel should be a spirited one, so I hope you will consider attending if you will be at Greenbuild, even if you do not need the CLE credit.

I also think it is worth pointing out that – two years ago, in my description of what I thought was “good,” “bad,” and “ugly,” about Greenbuild 2008 over at gbNYC, I noted that there was very little discussion at the conference about legal issues arising out of sustainable design and green building. I wrote:

The Ugly: No Discussion of Liability and Risk Management Issues

Unless I missed something, not one panel discussion or education session featured any presentations regarding the risk management aspects of building green. This was an enormous Greenbuild shortcoming, in my opinion. As you may know, I practice construction and real estate law and the number of lawsuits that our group has seen in the last few months since the Wall Street meltdown has increased significantly. Litigation that might not have been necessary as recently as the summer may now mean the difference between turning a profit on a job or a development and walking away in the red. A stakeholder that, in years past, would not have asserted a claim arising out of a green project because of the fear of being branded the bad guy might not care anymore if the dollars aren’t adding up. For these reasons, I believe that failing to educate our industry about emerging green building risks is a huge mistake, particularly as we head into what will likely continue to be a particularly brutal economy through 2009.

Also in looking back at what I wrote two years ago, it struck me that Henry Gifford was, even back then, casting a shadow over USGBC and LEED:

The Bad: Not Enough Emphasis on LEED Building Performance Failures

On Friday, Alex Beam of the Boston Globe wrote a column about a recent article by building science expert Joseph Lstiburek in the journal of the American Society of Heating, Refrigerating and Air-Conditioning Engineers. The article reviewed a report that was written back in March by New York City-based Henry Gifford which dissected the USGBC-commissioned New Buildings Institute study. The NBI study was unveiled at last year’s Greenbuild and claimed that LEED buildings were performing 25 percent better than comparable buildings with respect to energy efficiency.

As Mr. Gifford sets forth in his report (available via the link below), the NBI study suffered from a few big problems, including that it only obtained data from 22 percent of the LEED-certified buildings in the country, and then compared it to a national database (CBECS) that includes buildings dating from the early part of the 20th century. However, notwithstanding the fact that the data pools were flawed from the beginning, the study’s most egregious failure was that it compared the median energy consumption for LEED buildings to the average of the pool of comparable buildings. In other words, it compared an apple to an orange and drastically shifted the results of the study to make a much more compelling case for LEED. In the piece in the Globe, Lstiburek said that he’s “gotten hundreds of e-mails about his article, mostly saying, ‘I can’t believe they let you publish this’” and called Greenbuild “six thousand looney-tunes wandering around Boston.”

It’s clear that, because points with respect to energy consumption are being awarded based on a predictive model and not actual, performance-driven data, LEED buildings are not performing as well as they should in terms of energy savings, and the building science experts who have spent decades analyzing building performance are being vilified for pointing out the shortcomings of the LEED system. Moreover, from a legal perspective, if you’re building an energy model for a LEED project and don’t have a green building lawyer looking at your contract documents, you absolutely need to hire one.

I don’t think there’s anything wrong with questioning the merits of LEED- it seems like the type of thing we should be doing in order to continue refining the system. Mr. Lstiburek and Mr. Gifford are the types of people who should be speaking at Greenbuild, either keynoting or providing stakeholder education about best design practices or commissioning procedures once a building is operational. Mobilizing the industry is important, and creating green good will is great too, but I think the USGBC is missing a big opportunity here by not embracing these types of leaders who can help improve the energy performance of our buildings- we can’t lose sight of that ultimate goal.

Although I think it’s safe to assume that Mr. Gifford will not be speaking at this year’s Greenbuild in Chicago, I also think it’s interesting that the tenor of the building performance discussion does not seem to have changed all that much in the past two years; as Larry Spielvogel noted in a recent comment here at GRELJ, “[t]hat no one has produced and published comprehensive metered energy data to contradict Henry Gifford’s conclusions in more than two years speaks volumes.”

In any event, this post is not only a plug for our panel, but also an opportunity to pause and take stock of what has been a very busy few months in the green real estate legal space. From Mr. Gifford’s complaint, to the ongoing vote over the new forest certification benchmark within LEED, building code preemption litigation out West, and the condominium lawsuit in Battery Park City’s Riverhouse, there been no shortage of fascinating legal topics that will continue to merit discussion both here at GRELJ for the rest of 2010, as well as on our panel in Chicago.

If there are any other topics that you believe merit particular discussion during our panel, I would welcome your input in the comments below. I hope to meet many of you after the panel concludes!

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

Some reactions are already beginning to trickle in:

• Henry Gifford Sues USGBC (Real Life Leed)
• Is Henry Gifford Rosa Parks? (Green Building Law Blog)
• USGBC, LEED Targeted by Class Action Suit (Building Green.com, with quotes from Gifford and USGBC)
• $100 Million Class Action Filed Against LEED & USGBC (Treehugger; Lloyd Alter writes that Gifford “is hurting himself and green building in general. I think he’s nuts.”)

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

Why Sue?

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

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

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

*Updated Thursday, October 14

In his opening remarks, Mr. Gifford discussed both his problems with the LEED system generally, as well the basis of the critiques in his paper. “The first study we heard was in ‘07, and even before that, it was becoming law. The study came out and said that LEED-rated buildings save 25-30 percent compared to a national database. Well, I did a radical thing. I read the study, and I think there’s nothing in the study that supports, related to, or even references the conclusion. I think the conclusion was invented and stuck on. They found a 24 percent difference between two numbers, mean energy used by the national database and the median of the LEED buildings. Mean to mean would have shown that LEED did 29 percent higher.”

Mr. Owens responded by agreeing with Mr. Gifford that “before this research was done, there was a leap of faith involved, but the characterization of this as a scandal and a con is really unfortunate. I’ve never found anyone other than Henry saying that these buildings are using more energy. LEED is an assessment of potential for a building to perform. That’s all it is. We could do better to educate the public that the model isn’t good enough, yet. We haven’t really gone through and said ‘this is the first step in a 6 or 7 or 8 step process.’”

Fred Unger, a former board member of NESEA, challenged Mr. Owens and USGBC from the floor “to commit to not putting LEED or USGBC on any legislation” and called it a “scandal” that “LEED is being put into building codes when it still has these bugs to work out.” Mr. Owens responded by saying that although “the USGBC has never advocated putting this into law, it’s not the best use of this rating system.” According to Mr. Prager, Mr. Owens said USGBC would not make that commitment to keep LEED out of any legislation. He did, however, state that perhaps USGBC should have been more of an advocate in terms of articulating that LEED was not meant to be used as a legislative tool. Just as a side note, as recently as approximately one year ago, USGBC did have a statement on its home page that LEED was not intended for adoption into legislation or local building codes, but I am not certain whether it’s still there in any capacity or not.

I think it’s important for USGBC to engage building scientists like Henry Gifford at events such as these and, for that, I give it and Brendan Owens credit for attending the NESEA forum; indeed, one of the major disappointments of this past year’s Greenbuild event was USGBC’s failure to acknowledge LEED performance failures and other risk implications of building green. In a post at gbNYC that discussed the event, I wrote, with respect to building performance, that “[m]obilizing the industry is important, and creating green good will is great too, but I think the USGBC is missing a big opportunity here by not embracing these types of leaders who can help improve the energy performance of our buildings- we can’t lose sight of that ultimate goal.” Hopefully that’s what’s beginning to place here.

I also think it’s encouraging that green building performance issues are beginning to receive more media attention, particularly in the context of LEED. If anything, the NAIOP study and Henry Gifford’s ongoing efforts have stakeholders on both sides of the aisle considering the merits of predictive energy modeling more vigorously; hopefully that debate will continue as USGBC prepares to release its LEED 2009 system. In the interim, the construction and real estate attorney’s role in the context of building performance will continue to be- as Mr. Owens hinted at during the NESEA panel- educating clients that the LEED model “isn’t good enough, yet” and may present liability implications that they have not previously had to consider.

I am certain there will be much more to say about both this forum and the NAIOP study in the coming weeks and I look forward to hearing your thoughts and reactions in the comments below. I also encourage you to check out the comments to BuildingGreen.com’s article discussing Mr. Gifford’s “Lies Damn Lies” paper, where folks like Fred Unger, Rob Watson, and Mr. Gifford himself have left a tremendously interesting series of responses which I think that you’ll find to be quite insightful.

• Lies Damn Lies (BuildingGreen.com)
• LEED Controversy (Michael Prager)