LEED Lawsuits

Introduction

Alleged false advertising, monopoly tactics and LEED buildings actually performing 29% less energy efficient than conventionally-built structures, a $100 million lawsuit was filed against the U.S. Green Building Council (USGBC) and it’s Leadership in Environmental and Engineering Design (LEED) rating system.

This article will address this lawsuit along with other industry green lawsuits, sustainable growth projections and risk management considerations.  


USGBC Lawsuit Allegations

The lawsuit was filed on October 8, 2010 in the U.S. District Court, Southern District of New York by Henry Gifford of Gifford Fuel Saving Inc. The lawsuit claims LEED-certified buildings actually use 29% more energy than conventionally-built structures, not the 25-30% energy improvement the USGBC claims. The lawsuit demands an injunction ordering USGBC to cease and desist it’s deceptive practices and demands judgment for statutory damages in the amount of $100 million for consumers who were defrauded of the costs of LEED. The suit also alleges USGBC knowingly used false advertising to mislead consumers and many LEED-accredited individuals are "increasingly people with no experience whatsoever" in the industry and USGBC is attempting to "monopolize the market for energy-efficient building design."


Causes of Action

In March 2008, USGBC commissioned a study by the New Building Institute (NBI) requesting relationships of actual performance levels to other benchmarks; including initial modeling and Energy Star ratings. The lawsuit claims that “USGBC fraudulently mislead consumers by intentionally omitting material information”, i.e., the fact the “NBI study sample was comprised of just 22% of LEED certified buildings, not all LEED certified buildings” and “USGBC knowingly selected a skewed sample”. Using the NBI study and USGBC’s promotion of it, the suit alleges fraud under the Sherman Anti-Trust Act, among other statutes.

The second cause of action in the lawsuit is filed under the Lanham Act, Unfair Competition. This act was conceived to prevent deceptive, false, misleading marketing practices in the connection with goods and services used in commerce. These activities are liable in a civil action for damages. The suit repeats the similar concerns in alleging USGBC proclaimed LEED buildings are performing 25-30% better than non-LEED and the claims from the NBI study are false and proof of USGBC's intentions to defraud the consumer and marketplace.

The lawsuit has been filed as a Class Action claiming several parties have been harmed by USGBC including; consumers, taxpayers, building design and construction professionals.


Green Lawsuits

Maryland Condominium Project
More green and sustainable lawsuits are popping up in the industry for failed projects based primarily on unfilled requests and expectations of project owners. One of the first cases involves a project that didn’t meet it’s LEED certification level. This case involved a $7.5 million condominium project in Maryland that was brought before the circuit court in 2007. The developer, Shaw Development sued Southern Builders after its Captain’s Galley Condominium Project failed to obtain a LEED Silver certification. Shaw Development claimed it lost $635,000 in state tax credits as a result of not obtaining the certification. The case was settled in November 2008 and terms were not disclosed.

HVAC vs City of Albuquerque, N.M.
A lawsuit was recently filed against the City of Albuquerque, New Mexico by the Air Conditioning, Heating and Refrigeration Institute (ACHRI), Arlington-based Air Conditioning Contractors of America (ACCA); Columbus, Ohio-based Heating, Air Conditioning & Refrigeration Distributors International (HACRDI) and 11 HVAC contractors. The lawsuit claims there are conflicts between federal regulations and local state and city-level state green regulations. The conflicts are creating multiple regulatory requirements causing increased costs on projects by requiring manufacturers to build and supply equipment that would need to comply with several varying standards.


A/E Law Firm Survey

SmartRisk recently conducted a survey of A/E Law Firms representing 292 attorneys across the United States that specialize in design and construction litigation.

In the survey, the law firms were asked:

Have you seen or anticipate increased claims and litigation related to green and sustainable design projects? 

Response:

75% indicated an increase in claims and litigation. 

Causes of claims and failure of sustainable projects:  

• Unfulfilled Client and Project Expectations

• Poor Performance of Products and Systems

• Inadequate Budget and Schedule Allocated

• Increase Cost and Lack of Return on Green Project

• Inexperience Green Team

• Client/Owner

• Design Team

• General Contractors & Subs

• Warranties and Guarantees of LEED Certification or Environmental/Energy Performance

• Improper Operation and Maintenance Upon Completion

Law Firm Report Link: http://www.smartrisk.biz/reports.html



Green Opportunities

Green and sustainable project opportunities will continue to grown with estimates for 2010 at $71.1 billion and projections for 2015 at $172.5 billion. Energy upgrades and renovations will comprise 30% of the market segment based on limited new building construction activity driven by slow economic conditions.

Based on the technical knowledge and expertise of architect and engineers (A/E), they are in the perfect position to take a leading role in the sustainable design movement. However, as government entities use a mix of mandates, conflicting regulations and incentives to push for greener buildings for both the public and private sectors, the stakes and risks for sustainable projects increases.



Conclusion & Recommendations

Sustainable projects opportunities driven by green objectives are here to stay, however, a great deal of caution is needed. Changing regulations, green  certification continue to be a moving target and mandates increasing for both public and private projects increases the challenges for these projects. Project owners along with design and construction firms face increased risk for achieving project success, a goal for all.  

It is essential that sustainable project objections align with project cost, schedule and project team expertise. Watch for warranties and guarantees for LEED certification and energy and environmental performance. Conflicting regulation need to be clarified by owners and due diligence is essential in identifying products and systems for meeting sustainable goals. Clearly define that operation and maintenance is not part of the design and construction process and is the responsibility of the building owner and/or end-users.   




Sustainable Project Support

SmartRisk has worked with many design and building professionals in developing effective strategies for sustainable projects. If you are interested in obtaining information on SmartRisk's Sustainable Project Risk Management Strategies including Sustainable Project SR Risk Assessments and Sustainable Project Program Outlines, please contact us.