Straight Green: LEED and the Lanham Act
In my February 2009 article “The Uncertain Future of Green Building,” I made reference to an article by Joe Lstiburek titled “Prioritizing Green-It’s the Energy, Stupid,” in which he shot gaping holes in the analysis made in a USGBC-commissioned report “Energy Performance of LEED for New Construction Buildings” by the New Buildings Institute. The report concludes that, on average, LEED buildings perform 25 to 30 percent better than the national average. Before Lstiburek published his paper pointing out problems with the NBI report, Mr. Henry Gifford, a self-described energy efficiency expert, was pointing out the same problems with the report on his web site and during public speaking gigs. Gifford is particularly unhappy about the fact that, in the opinion of green real estate law blogger and attorney Stephen del Percio, “He, like many other designers, has pursued efficiency in buildings for decades. And now, many designers with years of experience are being told that if they don’t have a LEED-AP designation or the capability to navigate the notorious LEED bureaucracy, they shouldn’t bother responding to requests for proposals ...”
Gifford’s unhappiness with LEED erupted in October, 2010 with a $100 million class action antitrust lawsuit filed against the USGBC. The lawsuit focused on Sherman Act monopolization through fraud, unfair competition, deceptive trade practices, false advertising, wire fraud and unjust enrichment. None of the green building law blogger attorneys believed that the law suit could meet the rigorous requirements to be certified as class action. Some speculated the lawsuit was brought more for shock value (to get USGBC’s attention) and for some sort of settlement. None of that ever materialized.
In February, 2011, Gifford’s legal team amended the complaint from a class action suit to a false advertising claim under the Lanham Act.
Gifford’s unhappiness with LEED erupted in October, 2010 with a $100 million class action antitrust lawsuit filed against the USGBC. The lawsuit focused on Sherman Act monopolization through fraud, unfair competition, deceptive trade practices, false advertising, wire fraud and unjust enrichment. None of the green building law blogger attorneys believed that the law suit could meet the rigorous requirements to be certified as class action. Some speculated the lawsuit was brought more for shock value (to get USGBC’s attention) and for some sort of settlement. None of that ever materialized.
In February, 2011, Gifford’s legal team amended the complaint from a class action suit to a false advertising claim under the Lanham Act.
The Lanham Act
The Lanham Act was passed in 1946 under President Harry Truman to protect trademarks. It prohibits activities such as trademark infringement and trademark dilution and permits business competitors to sue one another for false advertising. Courts have formulated the following elements for a claim under the Lanham Act: The defendant must have made a false or misleading statement of fact in advertising, that statement must have actually deceived or had the capacity to deceive a substantial segment of the audience, the deception must have been material, in that it was likely to influence the purchasing decision, the defendant must have caused its goods to enter interstate commerce and the plaintiff must have been or is likely to be injured as a result.
Gifford’s lawsuit is seeking both injunctive relief and monetary damages. To obtain monetary damages, a Lanham Act plaintiff must demonstrate actual consumer reliance on the false advertisement and a resulting economic impact on its own business.
Gifford’s amended complaint focuses on the USGBC’s claims that LEED-certified buildings are “designed and built using strategies aimed at improving performance across all the metrics that matter most: energy savings …”
The NBI report makes the claim that LEED-certified buildings use substantially less energy than non-LEED-certified buildings, a claim that the USGBC has repeated many times on its web site and in printed literature, according to the complaint. In addition to Gifford’s and Lstiburek’s dissections of the NBI report, I found another analysis done by Dr. John H. Scofield of Oberlin College titled “A Re-Examination of the NBI LEED Building Energy Consumption Study.”
Scofield finds several critical flaws in the NBI analysis and finds that “the average energy consumption by LEED-certified buildings is actually higher than the corresponding average for the U.S. commercial building stock.” He also concludes that “LEED certification is not yielding any significant reduction in GHG emission by commercial buildings.” It’s not difficult to understand why many people feel that the USGBC claim that LEED-certified buildings are more energy efficient than non-LEED-certified buildings is false.
Has this deceived, or had the capacity to deceive, a substantial segment of the audience? I would say “Yes.” Here are a few examples (from dozens and dozens).
A U.S. Conference of Mayors resolution for the support for the greening of school districts finding that: “Greening existing schools using tools like the LEED green building rating system can optimize building performance, resolve operational inefficiencies, and dramatically reduce utility costs.”
King County Washington Green Building Ordinance 16147 requiring that all buildings achieve LEED certification and states, “The achievement of LEED performance targets reduces operating costs, enhances asset value, optimizes building performance and creates healthier and more productive workplaces for King County employees and visitors.”
Missoula County Green Building Policy requiring that all new construction and major renovation projects apply LEED criteria and register for LEED certification and states, “The LEED rating system calls for buildings to be constructed in ways that have been proven to reduce the consumption of energy and other natural resources, enhance recycling and re-use of building materials, minimize disposal of construction and demolition debris, and improve building performance, cost efficiency, and building longevity…”
Did claims about energy efficiency influence the purchasing decision? Were the plaintiffs injured? Did they suffer economically as a direct result of the alleged false advertising? No one can say for sure, but in the opinion of one attorney blog post I read, the law suit may very well survive a motion to dismiss (something that the USGBC will most certainly ask for) at which point it will enter the discovery phase. If this happens, plaintiffs may gain access to all sorts of potentially damning information that could help them with their claims against the defendant.
Nora Hart, Gifford’s attorney, confirms that this is the reason the complaint was amended in a recent blog posting: “The amended complaint reflects an expedited path … to discovery. There were many choices to be made, in terms of the range of potential plaintiffs, and the cognizable claims. Fostering public awareness and demanding accountability of USGBC is our goal, whether through a consumer class action, or an anti-competitive/deceptive trade action or both. Plaintiff Andrew Ask gives a succinct explanation of our goal: ‘to let the market for green buildings develop based on actual measured results, not predictions, and not hand-picked data samples.’”
Gifford’s amended complaint focuses on the USGBC’s claims that LEED-certified buildings are “designed and built using strategies aimed at improving performance across all the metrics that matter most: energy savings …”
The NBI report makes the claim that LEED-certified buildings use substantially less energy than non-LEED-certified buildings, a claim that the USGBC has repeated many times on its web site and in printed literature, according to the complaint. In addition to Gifford’s and Lstiburek’s dissections of the NBI report, I found another analysis done by Dr. John H. Scofield of Oberlin College titled “A Re-Examination of the NBI LEED Building Energy Consumption Study.”
Scofield finds several critical flaws in the NBI analysis and finds that “the average energy consumption by LEED-certified buildings is actually higher than the corresponding average for the U.S. commercial building stock.” He also concludes that “LEED certification is not yielding any significant reduction in GHG emission by commercial buildings.” It’s not difficult to understand why many people feel that the USGBC claim that LEED-certified buildings are more energy efficient than non-LEED-certified buildings is false.
Has this deceived, or had the capacity to deceive, a substantial segment of the audience? I would say “Yes.” Here are a few examples (from dozens and dozens).
A U.S. Conference of Mayors resolution for the support for the greening of school districts finding that: “Greening existing schools using tools like the LEED green building rating system can optimize building performance, resolve operational inefficiencies, and dramatically reduce utility costs.”
King County Washington Green Building Ordinance 16147 requiring that all buildings achieve LEED certification and states, “The achievement of LEED performance targets reduces operating costs, enhances asset value, optimizes building performance and creates healthier and more productive workplaces for King County employees and visitors.”
Missoula County Green Building Policy requiring that all new construction and major renovation projects apply LEED criteria and register for LEED certification and states, “The LEED rating system calls for buildings to be constructed in ways that have been proven to reduce the consumption of energy and other natural resources, enhance recycling and re-use of building materials, minimize disposal of construction and demolition debris, and improve building performance, cost efficiency, and building longevity…”
Did claims about energy efficiency influence the purchasing decision? Were the plaintiffs injured? Did they suffer economically as a direct result of the alleged false advertising? No one can say for sure, but in the opinion of one attorney blog post I read, the law suit may very well survive a motion to dismiss (something that the USGBC will most certainly ask for) at which point it will enter the discovery phase. If this happens, plaintiffs may gain access to all sorts of potentially damning information that could help them with their claims against the defendant.
Nora Hart, Gifford’s attorney, confirms that this is the reason the complaint was amended in a recent blog posting: “The amended complaint reflects an expedited path … to discovery. There were many choices to be made, in terms of the range of potential plaintiffs, and the cognizable claims. Fostering public awareness and demanding accountability of USGBC is our goal, whether through a consumer class action, or an anti-competitive/deceptive trade action or both. Plaintiff Andrew Ask gives a succinct explanation of our goal: ‘to let the market for green buildings develop based on actual measured results, not predictions, and not hand-picked data samples.’”
Conclusion
There is a lot of speculation flying around cyberspace about what might happen as a result of this lawsuit. Some think the suit has no merit and will be thrown out. Some think there will be a settlement. Some think the law suit could make it to discovery whatever the outcome, I can’t help wonder what other lawsuits may be coming on the heels of this one. Gifford and the other plaintiffs are suing over false advertising related to energy use reduction and verification, but what about other claims made about the LEED-certified buildings? Claims have been made about reduced absenteeism, increased productivity, increased test scores and superior indoor air quality. If Gifford and his fellow plaintiffs cannot convince the court that they have been (or likely will be) injured, there are certainly others who could.Looking for a reprint of this article?
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