LEEDigation Update: Gifford v. USGBC Dismissed

In October 2010, energy efficiency consultant Henry Gifford filed a salacious and potentially ground-breaking lawsuit challenging the U.S. Green Building Council’s LEED certification system. Gifford made a number of interesting (and, as it turns out, legally insignificant) claims against the USGBC, but the essence of Gifford’s complaint was this: he contended that the USGBC promoted LEED as resulting in more energy efficient buildings; that, as a result, consumers favored LEED-accredited professionals over non-LEED accredited professionals; that the USGBC’s claims connecting LEED certification with increased energy efficiency were, in fact, untrue; and, as a result, energy efficiency consultants like Gifford who refused to “drink the Kool Aid” were being damaged and driven out of business.

Well, gadfly Gifford has been vanquished. In a nine-page opinion issued on August 15, 2011, the federal district court for the southern district of New York dismissed Gifford’s complaint in its entirety.

Given the aura of anticipation that surrounded this case and the occasional venom that pierced through the cold hard paper record (yes, the USGBC really did refer to Gifford as a “gadfly” in one of its filings), not to mention the fact that Gifford is one of those people who seems to have the uncanny ability to provoke strong feelings, even from those who do not know him, I suspect many will find the opinion both surprisingly bland and generally unintelligible.

So here, in a nutshell, is why Gifford’s complaint failed:

As I’ve discussed in previous posts, a basic concept of any lawsuit is the idea of “standing.” This means, quite literally, that the person or entity bringing the suit is the right person or entity to bring the suit. Generally, a plaintiff must identify two basic things: first, that he or she has suffered an injury that is discrete, real, and compensable by the payment of money; and, second, that there is a legally relevant connection between that injury and something that the defendant allegedly did.

Gifford brought his claims under the federal Lanham Act, which generally prohibits the false representation of goods or services in interstate commerce. The Gifford court recognized two ways of showing standing for a Lanham Act claim: either the plaintiff and the defendant are competitors, or the plaintiffs must allege a “reasonable commercial interest” that is likely to be damaged by the defendant’s alleged false statements.

Gifford failed to clear the basic hurdle of standing. Gifford and the USGBC are not competitors. The court found that the USGBC, through the LEED certification system, provides third-party verification that structures have been designed and built in a way that should make them more energy efficient. Gifford, in contrast, held himself out as an energy efficient building expert. Since the USGBC expressly disclaimed any energy efficiency expertise, and the since Gifford did not content he was in the certification business, the federal court found that they were not competitors.

Likewise, “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.” In other words, the fact that a building owner might aspire to LEED-certification does not mean that Gifford cannot work on the project.

I do not know Henry Gifford, or any of the other plaintiffs in the Gifford v. USGBC suit, and I have no desire to pass judgment on him or them. Gifford may have valid, meritorious complaints about the LEED system. Just as LEED seems to be creating jobs in some areas, it may well be the cause of the demise of others. And it seems likely that some consumers will indeed feel that through LEED the USGBC has promised exactly that which Gifford says LEED does not and cannot deliver: a building that is more energy efficient than one that is not LEED-certified. Indeed, the most recent appropriations bill for the U.S. Department of Defense charged the DOD with studying this very point.

The simple fact is that Gifford alleged that the USGBC was a major player in the sustainasphere, and that he believed that was having an adverse affect on him and people like him. But what Gifford could not allege is that the USGBC was actually doing something – anything – wrong. And a fancy way of saying that is, “case dismissed for lack of standing.”

LEEDigation Update: Amended Complaint in Gifford v. USGBC

Back in October 2010, New York energy use consultant Henry Gifford filed a class-action complaint against the U.S. Green Building Council. Gifford broadly challenged the USGBC’s LEED-certification system as a house of cards built on “lies and omissions” regarding the efficacy of LEED-certification, that lacked a scientific basis, deceived consumers, and undermined competition, and that was designed to monopolize the “market for energy-efficient building design.” In a particularly sensational twist, Gifford alleged that the USGBC had “engaged in a pattern of racketeering activity” in violation of the RICO statute.
 
Strong and serious stuff, and the sustainablogasphere lit up with commentary on the merits and weaknesses of Gifford complaint. Many, including this sustainablawger, opined that the legal theories in the Gifford complaint suffered from some serious and likely fatal deficiencies.
 
I had been tracking progress on the case, and it was clear to me that the lawyers for both sides had been talking, because the only real activity in the case was an order indicating that the parties had agreed that Gifford could amend his complaint.
 
Gifford filed that amended complaint yesterday. It is a substantially different animal than what he first filed.  Here’s the short list of the material changes.

• The case is no longer a class action. Instead, three energy-efficiency professionals have been added as plaintiffs.
• The case no longer alleges antitrust violations of monopolization through fraud.
• The case no longer alleges racketeering or a violation of the RICO statute.

Instead, what Gifford has done is hone his case down to focus on allegations of unfair competition through false advertising. The meat of the coconut, as one of the legends of the Arkansas bench, the Honorable Henry Woods, used to say is summed up in paragraph 50 of the Amended Complaint:

Consumers are being deceived into believing that the LEED-certification will be verified by a third-party to reduce their energy costs. Not only will these consumers suffer in many cases by actually using more energy, rather than less, but they will have to spend thousands of dollars on LEED certification they believed would help them use less energy.

Setting the merits of the new case to the side, Gifford has made some wise decisions. The antitrust allegation was fatally flawed and likely would have been dismissed without any discovery or proof, as Gifford had failed to make any of the required market allegations. The RICO allegation was likewise probably fatally flawed because it was not grounded in a credibly alleged criminal predicate offense. And alleging the case as a class action not only made it unwieldy, but presented real issues as to whether Gifford was an appropriate class representative.

So the case is now leaner and meaner. The USGBC has until April 6, 2011, to respond. I anticipate that they will move to dismiss some or all of the amended complaint. It will likely be several more months before we really know where this is heading. That gives us plenty of time to blawg about it. Stay tuned!

LEEDIGATION UPDATE: Gifford v. USGBC

Back in October 2010, Henry Gifford and a few of his apparently like-minded friends launched a class-action assault on the U.S. Green Building Council’s “LEED” certification standard. Sustainabloggers from all over (including this one) quickly weighed in with their opinions on Gifford, the USGBC, the merits of the suit, and LEED.


So what has happened since the filing of the suit? Not much! The suit has fallen into the classic litigation mode of “hurry up and wait.” While the USGBC presumably denies Gifford’s allegations, they have yet to file an answer to the complaint.

And it will be at least three months before they do. This is because on January 4, 2011, the parties filed an interesting “stipulation to extend time” with the U.S. District Court for the Southern District of New York. The stipulation is short and sweet, and it basically says (1) that the Gifford plaintiffs have until February 7, 2011, to serve and file a First Amended Complaint, and (2) that the defendants have until April 6, 2011, to respond.

This is interesting because it is unusual for a plaintiff to amend their complaint before the defendant either answers or moves to dismiss, and without the benefit of any discovery. At the time he filed the Complaint, Gifford presumably felt that it stated claims upon which relief could be granted, made factual contentions with evidentiary support, and presented legal contentions warranted by existing law or a good faith argument for extending the law, and therefore passed muster. One is left to wonder what has changed. I can speculate – and this is nothing more than rank speculation of the first order – that Gifford’s attorneys received a strong signal that the complaint was fatally flawed and worked out a deal to buy some time to try to fix the problems. This would not be unusual, and, indeed, would be a sign of good lawyering.

And, at least to this sustainablawger, the complaint does have some serious deficiencies. For example, the complaint alleges antitrust allegations but makes no allegation as to the relevant product or geographic markets. This is a failure that, at least down here in the sleepy south, would warrant dismissal of that claim.

In any event, we will know in a little less of a month, and then we will get to hurry up and wait and see what the USGBC does. I fully expect them to move to dismiss the complaint. Which means we will get to hurry and wait some more and maybe, just maybe, by the end of summer the world at large will have an idea of where the case is headed.

So, hurry up and wait…but stay tuned!

Five “Green Law” Issues to Look for in 2011

Green Leasing. Arkansas is a landlord-friendly state. Evictions are expensive due to the filing fees and because a lawyer is required, but they are also straight-forward proceedings, and the end result is generally clear: material lease violations mean eviction. Leases in green buildings, however, present new and unique issues. Consider the tenant who leases space in a LEED-certified building that is subsequently decertified, or the landlord of a LEED-certified building faced with a tenant who engages in conduct that threatens certification. In these situations, the tradition remedies of possession or money damages may not be appropriate. This means the parties, and their lawyers, will need to do some new thinking, and they will need to do it on the front end when they are drafting the lease.

LEED as the New Building Code. The City of Little Rock’s resolution that all new city buildings be LEED-certified raises interesting issues because it treats the LEED requirements as though they were building codes. But they are not. LEED standards are aspirational and were designed to codify best practices. Treating them as building codes means using them for an unanticipated purpose, likely with unanticipated consequences. What happens if a new building fails the standard? What is the mechanism of enforcement? Do we really mean to give the U.S. Green Building Council power over our local municipal buildings? Is LEED even the right standard? Why not Energy Star? What happens when the city refuses to pay a contractor who, despite best efforts, has failed to deliver a certified building? The LEED standard was not made for this type of duty. Send in the lawyers.

Green Washing and False Green Claims. Green Washing involves misrepresentations (or outright lies) regarding the “green” or “sustainable” characteristics of place, product, process, or service. Envision a granite countertop advertised as “recyclable.” All things being equal, green-conscious consumers will prefer this product over the granite countertop that is not advertised as “recyclable.” And yet, if there are no places where granite countertops can actually be recycled, then the “recyclable” claim is meaningless. Likewise, even if there are recycling opportunities for granite, if the countertop is made from virgin granite, the “recyclable” claim is misleading. These are examples of green washing, and they related directly to claims that I have seen made in 2010 in the Arkansas sustainasphere. In eight days, on December 9, 2010, the comment period for the FTC’s proposed green guidelines related to green claims will end, and the new guidelines will be final and go into effect sometime in 2011. All making green claims should take notice, and be prepared. And consider this: are those who make false green claims violating the Arkansas Deceptive Trade Practices Act?

Will LEED survive? The answer is yes, but it’s going to be an interesting journey because of a class-action lawsuit filed in federal court in New York in October, Gifford v. USGBC. The Gifford suit challenges the very essence of the LEED certification regime, contending that LEED lacks an empherical, scientific basis, does not result in buildings that are more energy efficient, and steers consumers away from energy efficiency certification programs that do achieve greater efficiency. This lawsuit has it all – allegations of fraud and wrongdoing, misrepresentations, anti-competitive and monopolistic behavior, deceptive trade practices, even criminal racketeering. It is sensational, and I predict that as the case progresses at least three things will happen. First, there will be copycat lawsuits. Second, the USGBC will make some interesting changes to the way in which is promotes and manages the LEED brand. And third, the alleged class will not be certified and the case will be dismissed before trial.

LEEDigation and the Arkansas Deceptive Trade Practices Act. To me, the allegations in the Gifford case with the greatest staying power are those that LEED constitutes a deceptive trade practice. Most states, including Arkansas, have a statute that prohibits businesses from engaging in deceptive, unlawful, and unconscionable practices in business, trade, and commerce. (For a classic example, think rolling back an odometer.) To date, there has not been much LEEDigation in Arkansas. But it is coming, and I predict it will come in 2011. Consider the energy efficiency guru who “guarantees” a certain level of LEED certification and then fails to deliver. The injured party will likely be able to swear out a complaint that the guru violated the Arkansas Deceptive Trade Practices Act. Likewise, many in the sustainable blogosphere are predicting that either (a) there is a wave of LEED-decertification coming or (b) that there are numerous buildings that should be decertified but, for a myriad of reasons, will not be. Either way, the end result is LEEDigation, and if there is actual injury a cause of action for violating the Arkansas Deceptive Trade Practices Act is a natural fit.

LEEDigation and the Arkansas Deceptive Trade Practices Act

Back in October, sustainblawgers were handed a gift in the form of a class action lawsuit against the U.S. Green Building Council, Henry Gifford, et al. v. U.S. Green Building Council et. al. The suit, filed in federal court in the Southern District of New York, broadly alleges that the USGBC’s “LEED” certification is a deceptive sham that does not result in greener buildings or greater energy efficiency, all the while steering consumers away from alternative certifications that actually work.

In this vein, one of the claims in Gifford is an allegation that the LEED program amounts to a deceptive trade practice under New York law. The New York law at issue provides simply that, “deceptive acts or practices in the conduct of any business, trade or commerce or in the furnishing of any service in the state of New York are hereby declared unlawful.”

There is an equivalent to this statute in Arkansas, the Arkansas Deceptive Trade Practices Act. The Arkansas Deceptive Trade Practices Act (or, for those of you who enjoy alphabet soup, the “ADTPA”), is Arkansas’s underused, all-purpose consumer protection statute. It makes a wide-range of behavior illegal, including knowingly making false representations as to the characteristics, uses, benefits, sponsorship, approval, or certification of goods or services, and engaging in any unconscionable, false, or deceptive act or practice in business, commerce, or trade.

Only the Arkansas Attorney General can seek an injunction under the Arkansas Deceptive Trade Practices Act, but private citizens actually injured by a deceptive trade practice can sue to recover their actual damages and, in a departure from the general rule in Arkansas, their attorneys’ fees.

While Arkansas has yet to see much, if any, LEEDigation, the conduct alleged in Gifford, if true, amounts to knowingly false representations as to the characteristics and benefits of LEED certification and arguably states a claim under the Arkansas Deceptive Trade Practices Act.

I expect that when LEEDigation hits the Natural State -- and it is coming -- plaintiffs (and their attorneys) will craft an ADTPA cause of action. All involved in the LEED-certification process – indeed, in any “green” certification process – should take notice.

(Department of Legal Citations: The ADTPA is codified at Ark. Code Ann. § 4-88-101 et seq.; a non-exhaustive list of the deceptive and unconscionable trade practices prohibited by the ADTPA can be found at Ark. Code Ann. § 4-88-107.)