leed certification litigation: emerging...
TRANSCRIPT
PD.4620470.1
LEED Certification Litigation: Emerging Risks Minimizing Liability Through Green Building Contracts and Effective Insurance Coverage
THURSDAY, JANUARY 6, 2011
APPENDIX I – LEED and Green‐Related Litigation
Builders Association of Twin Cities v. Minnesota Green Star, District Court, Second Judicial District, Ramsey County, Minnesota (filed December 9, 2010).
• Plaintiff, Builders Association of the Twin Cities (“BATC”), a former and founding member of the defendant non‐profit organization, Minnesota Green Star (“Green Star”), sued Green Star alleging that: (a) Green Star’s continued use of “Green Homebuilding Guidelines” developed by BATC is in violation of BATC’s intellectual property rights; and (b) Green Star is in default and breach of a Promissory Note between the parties. The suit seeks a declaratory judgment that BATC retains sole property rights to the Guidelines, an injunction enjoining Green Star from licensing or otherwise using, selling or transferring the Guidelines (as allegedly planned by Green Star) and monetary breach of contract damages for Green Star’s alleged default on the Note. The trial court granted a TRO on December 13, 2010 restricting Green Star’s use of the Guidelines, with a hearing regarding permanent injunction reportedly set for January 24, 2011.
Henry Gifford, et al. v. U.S. Green Building Council, et al., U.S. District Court for the Southern District of New York, 10‐7747 (filed October 8, 2010).
• Class action lawsuit filed against USGBC by longtime critic Henry Gifford alleging damages and/or injunctive relief under the Sherman Act, Lanham Act, RICO, New York state deceptive trade practices and false advertising statutes and unjust enrichment under New York state law. Claims are centered on the allegation that USGBC misrepresents efficacy of LEED from an energy savings standpoint. Among other things, plaintiffs allege that USGBC misrepresents the results of a 2008 study performed for the USGBC by NBI Buildings Institute by stating that the study indicates that LEED buildings are performing 25‐30% better than non‐LEED buildings without qualifying the results to reference the limitations of the study.1 Pursuant to a January 4, 2011 stipulation, parties agreed to February 7, 2011 deadline for plaintiffs to file an amended complaint and an April 6, 2011 deadline for defendants to file responsive pleadings.
1 See Cathy Turner and Mark Frankel, Energy Performance of LEED for New Construction Buildings, Final
Report, March 4, 2008, prepared for U.S. Green Building Council and published by NBI Buildings Institute.
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Building Industry Association of Washington, et al. v. Washington State Building Council, et al., U.S. District Court for the Western District of Washington No. 3:10‐cv‐05373 (filed May 25, 2010).
• Industry pre‐emption challenge to Washington state building energy code asserting that the minimum energy efficiency standards for HVAC equipment, water heaters and other major appliances/equipment set forth in the Energy Policy and Conservation Act (“EPCA”) pre‐empt state legislation. Plaintiffs seek to strike the building energy code in its entirety. State defendants and intervenors have pending motion for summary judgment which, if granted, would uphold the code. Comment: The pre‐emption challenges made in this case and in City of Albuquerque (see below) are significant given the impact that a holding in favor of plaintiffs would have on green building codes, including those promulgated pursuant to ANSI/ASHRAE/USGBC Standard 189.1 and/or the International Green Construction Code.
Steven Gidumal and Allison Keely v. Site 16/17 Development, LLC, et al., Supreme Court of New York, New York County, No. 10/105958 (filed May 6, 2010).
• Owners of unit in Riverhouse condominium complex in New York City sued developers, project architect and project engineer seeking recovery of damages related to a variety of alleged construction defects and asserting claims of negligence, breach of contract, fraud, negligent misrepresentation and, with respect to architect, professional malpractice. Allegations concerning “insufficient heat” state that although the building “was marketed as being the cutting edge of ‘green’ technology” and “supposedly a LEED Gold‐related building featuring fresh filtered air, filtered water, eco‐friendly materials and is designed for low energy consumption,” plaintiffs’ forensic engineers found significant deviations from USGBC and LEED standards with regard to “cumulative size of holes and cracks allowing infiltration of cold air.” Comment: Plaintiffs’ allegations that architect’s failure to notice alleged defects and/or certification of pay applications for purportedly substandard work amount to negligence, malpractice and even fraud illustrate risk of potential litigation aimed at design professional even where LEED credits and/or building deficiencies at issue appear to be within contractor’s means and methods or otherwise construction‐related.
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Destiny USA Holdings, LLC v. Citigroup Global Markets Realty Corp., 69 A.D.3d 212, 889 N.Y.S.2d 793 (2009) (suit filed June 9, 2009; appellate opinion rendered November 13, 2009).
• In a 3‐2 decision, intermediate appellate court affirmed trial court’s granting of an injunction which required specific performance of a construction loan agreement for a “green” shopping center/tourist attraction project in Syrecuse, N.Y., thereby forcing the lender to fund remaining draws sought by the plaintiff. In so holding, the court found that an exception to the “irreparable injury” rule was warranted due, in part, to the project’s “unique character,” citing the defendant’s own description of it as a “visionary project” which set a “new financing paradigm for green economic development” by using newly created Federal Green Bonds along with other public and private financing. The court also found that an exception from the irreparable injury rule was further warranted due to the “enormous potential for harm to [the plaintiff’s] reputation and the reputation of the entire ‘Destiny USA’ project” if the defendant did not fund the construction draws sought by the plaintiff so that the project could be completed. Comment: Extension of this holding would significantly increase litigation risks of LEED and other green building projects due to availability of injunctive relief and/or specific performance in place of or in addition to monetary damages.
Northland Pines High School Certification Dispute (appeal of LEED Gold certification filed December 23, 2008; USGBC denying appeal on April 27, 2010)
• See slides.
The Air Conditioning, Heating and Refrigeration Institute, et al. v. City of Albuquerque, U.S. District Court for the District of New Mexico, No. 08‐633 (suit filed July 3, 2008).
• Industry pre‐emption challenge to the Albuquerque Energy Conservation Act (“AECA”) based on the EPCA. The AECA sets forth prescriptive and performance based compliance paths that, per plaintiffs, set minimum energy efficiency standards for HVAC equipment, water heaters and other products that are more stringent than applicable federal product standards. On October 3, 2008, the district court entered a preliminary injunction enjoining enforcement of the AECA and stating that “development of a full record” was required to determine pre‐emption (See 2008 WL 5586316). Despite first finding that a temporary injunction was warranted because plaintiffs’ challenge stood a “substantial likelihood of success,” in an Order entered on September 30, 2010, the court denied summary judgment as to the two performance based code provisions (while granting summary judgment as to the prescriptive path) due to plaintiffs’ failure to establish a record supporting their challenge. Plaintiffs face a January 14, 2011 deadline
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to re‐file their motions for summary judgments and associated scheduling deadlines running through the first half of 2011. Comment: The pre‐emption challenges made in this case and in Washington State Building Code Council (see above) are significant because of the impact that a holding in favor of plaintiffs would have on green building codes, including those promulgated pursuant to ANSI/ASHRAE/USGBC Standard 189.1 and/or the International Green Construction Code.
Washington Nationals Park Payment Dispute
• Payment dispute in LEED project (Nationals Park) centered on when project was “substantially complete.” Settled in October 2008.
Southern Builders, Inc. v. Shaw Development, LLC, Circuit Court, Somerset County, Maryland No. 19‐C‐07‐11405 (filed and settled in 2007)
• See slides.