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‘LEEDigation’ is growing as building industry adopts sustainable practices

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A surge of “green living” has permeated all aspects of our society in recent years, yet indisputably, the most innovative -- and standardized -- industry in relation to the green movement is the building sector, which long ago embraced the practice of sustainable construction. As a result, “LEEDigation” has emerged as a new concept to describe lawsuits involving green building, which may include disputes arising from certification, flawed design or improperly constructed green building strategies.

As the push toward green living increases, we are likely to see more of this type of litigation. As with any type of litigation, protecting yourself at the onset of a project is key to avoiding LEEDigation.

In 1993, the U.S. Green Building Council (USGBC) began encouraging architects, owners, contractors and consumers to adopt sustainable practices, and soon after established the Leadership in Energy and Environmental Design -- known as LEED -- to certify buildings as environmentally friendly. To achieve LEED status, a third-party verifies that a building was designed to improve energy and water efficiency, as well as indoor environmental quality, and other environmentally friendly attributes. LEED certification is comprised of a four-level rating system, with platinum being the highest designation. It is available for new construction and major renovations on existing buildings.

With the drive to develop LEED certified buildings there are underlying risks, especially if a project fails to perform as promised or falls short of the desired level of LEED certification.

In a recent example of LEEDigation in Maryland, a developer sued a contractor for breach of contract when the building failed to meet the LEED certification standard of silver. As a result, the developer claimed a loss in tax credits of more than $700,000. The contract, however, did not allocate responsibility to the contractor for meeting the silver standard, and consequently a pretrial settlement failed to leave a clear understanding of where responsibility will or should be laid.

In New York City, the owners of a 31-story condominium unit building filed a $1.5 million lawsuit in the Supreme Court of New York state against the project’s developer and building manager for breach of contract, construction defect and fraud, claiming the building was not “green” enough.

In this case, the condo project was marketed as being at the forefront of green technology and advertised as a LEED gold-rated building with eco-friendly materials and low energy consumption.

The green features the developer allegedly promoted included a geothermal heating and cooling system, photovoltaic cells, low-E double-pane windows, a green roof and Energy Star appliances.

However, the complaint alleges the building is not maximizing energy efficiency, which has resulted in additional costs for the condo owners and diminished the units’ value. While the outcome of the case is pending, results of the case could trigger an onslaught of claims where LEED certification or increased energy efficiency is a selling point in advertising properties.

In another case, Gifford v. USGBC, the entire LEED ratings system is being challenged for alleged false advertising and fraud.

Henry Gifford alleged that the USGBC had fraudulently represented the performance of LEED buildings, and doctored study results to support their claim that LEED buildings performed more efficiently than standard construction. Gifford’s complaint also claims that the USGBC has misrepresented the energy efficiency of LEED buildings, and that the LEED certification is not a verification of a building’s actual energy performance.

When LEEDigation is tried in federal court, such as the Gifford case, the court’s decision may have a significant impact on future LEED challenges throughout the United States.

LEED certified building is becoming increasingly popular locally, with San Diego boasting numerous buildings that are LEED certified, including the new San Diego County Operations Center -- recently granted LEED gold certification for its first phase buildings -- the San Diego Zoo Beckman Center for Conservation Research with LEED silver status, and downtown’s Columbia Center, also LEED gold certified.

Also furthering the building industry’s increasing focus on going green is California’s new CALGreen Act, which became effective earlier this year. While it is not as stringent as the voluntary LEED program, the legislation mandates green building practices for all new construction across the state.

LEED compliance is determined by the USGBC, but the newer CALGreen is regulated and enforced by local building inspectors. Any claims that a building did not meet the mandates set forth in CALGreen would be subject to code violations and the local administrative processes.

So far, violations of CALGreen have not surfaced. However, if LEEDigation is any indication, litigation regarding CALGreen is imminent. With this in mind, until clearer rules are established, the best way to protect yourself from LEEDigation is to establish clear terms in contracts, carefully identify the scope of work and provide clear specifications regarding what is to be expected in the project.

Victor L. Wolf is a partner at Best Best & Kreiger LLP in Riverside. He leads the firm’s business services practice and focuses his litigation practice on construction law. He can be reached at victor.wolf@bbklaw.com. Scott W. Ditfurth is a senior associate and business litigator at the law firm, whose practice focuses on construction law, contract litigation and real property. He can be reached at scott.ditfurth@bbklaw.com.>

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