Green Building Law Update : Green Building & Construction LEED AP, Lawyer & Attorney Chris Cheatham : Washington DC, Virginia, New York City

I have one last green building legal development to tell you about before I take my hiatus. 

When people ask me about green building disputes, I tell them that they will arise from three scenarios.  A project may not comply with regulatory requirements -- i.e. Destiny USA.  Second, disputes may arise from green building certification -- i.e. Bain v. Vortex Architects (via Stephen Del Percio's Green Real Estate Law Journal).  And finally, new green building materials and techniques can lead to defects and litigation. 

We now have a lawsuit describing this third scenario: The Chesapeake Bay Foundation, Inc., et. al. v. Weyerhaeuser Company (PDF).  The lawsuit involves the first project to obtain LEED Platinum certification, the Chesapeake Bay Foundation's ("Foundation") Philip Merrill Environmental Center.  The project has received numerous awards and accolades from Treehugger. 

The following is a description of the Plaintiffs' allegations. 

The Project

The Foundation contracted with the architecture firm SmithGroup to design the project in 1998 and Clark Construction Group to build the project in 1999.

Because of its environmental mission, the Foundation wanted the project to incorporate "recycled and environmentally-friendly construction products. . . "  The design also included a roof truss system and various columns and beams that were exposed to the weather. 

The contract documents permitted the use of Parallel Strand Lumber -- or Parallams -- for the roof truss system, columns and beams.  According to the Foundation's website, Parallams are green because they are produced from fast-growth trees. 

Clark contracted with Trus Joist MacMillan, a subsidiary of Weyerhaeuser Company, in 2000 to supply the Parallams. Weyerhaeuser delivered parallams that had been treated with PolyClear 2000, after allegedly assuring SmithGroup that the treatment was suitable for exposed building components.  Weyerhaeuser allegedly never received approval to use PolyClear 2000. 

Construction was substantially complete December 7, 2000.  Shortly after completion, water intrusion was identified at various portions of the project.  Throughout 2003, various modifications were made, including adding a sealant to the Parallam, that resolved the leakage.

In 2009, the Foundation performed an inspection and observed deterioration of weather-exposed Parallams, including widespread rot.  A subsequent expert report asserted that "the Parallams had not been treated to the levels prescribed by the contract documents or else the preservative had deteriorated because it was unsuitable for the application." 

The Foundation, SmithGroup and Clark subsequently entered into an agreement to remediate the project and to pursue litigation against Weyerhaeuser. 

The Allegations

According to the lawsuit filed by the Foundation, SmithGroup and Clark, Weyerhaeuser provided "defective, inferior and or unsuitable building products" for the Foundation's project.  The lawsuit goes on to allege five causes of action: 

• Breach of contract
• Common law indemnity
• Contribution
• Negligent Misrepresentation; and
• Negligence

Most interesting to me is the negligent misrepresentation argument, where the Plaintiffs divulge that the building is at risk of collapse: 

"As a result of Plaintiffs' reliance on Weyerhaeuser's assurances that Parallams pressure-treated with PolyClear 2000 was appropriate material for use in construction of the Project and that the preservative had been adequately applied -- which statements were untrue -- the structural integrity of the Project is in jeopardy and the building is now at risk of collapse.  Thus, the defective condition of the PolyClear 2000 has created a clear risk of death or serious injury at the project." 

The lawsuit goes on to assert damages in excess of $6,000,000. 

The Chesapeake Bay Foundation case is an example of green building litigation that can develop as a result of the materials and products that go into the project.  The Foundation chose specific products because of their environmental appeal.  But these products allegedly failed when exposed to the elements.  While this lawsuit could occur on any construction project, the introduction of new green materials can result in unanticipated results and lawsuits. 

Photo Credit: Miss Leslie

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You remember the $100 million dollar lawsuit against the US Green Building Council, right?  

It’s back in the spotlight, and it has taken a new form through an amended complaint filed by multiple Plaintiffs. No longer is the Plaintiff asking for $100 million.  No longer is the Plaintiff asserting a class action lawsuit that would have represented essentially anyone that ever took a step into a LEED building.  

You can download a copy of Henry Gifford’s amended complaint (PDF), which was filed on February 7, 2011.  Here are the basics of the complaint:

• The Plaintiffs are four design and construction professionals:  Henry Gifford, Elisa Larkin, Matthew Arnold and Andrew Ask.  
• The Plaintiffs allege that the USGBC has falsely led consumers to believe that LEED buildings are more energy efficient.  The Plaintiffs claim that the USGBC’s own data proves that LEED buidings are actually not more energy efficient.  The Plaintiffs also assert that the USGBC never actually verifies that buildings are designed and constructed to save energy.  
• To prove the USGBC’s alleged lack of verification, the Plaintiffs point to the Northland Pines High School LEED certification challenge.  You may recall that I covered this story extensively in 2010.  
• The Plaintiffs do not assert how much they have lost due to the USGBC’s actions. 

“USGBC's false advertising causes consumers of building design and construction advice to utilize a LEED-certified professional instead of Plaintiffs because consumers mistakenly believe that LEED-certified professionals will design a LEED-certified building that is verified by a third-party to be more energy-efficient than the building that Plaintiffs would design. . . .”

What do you think of this argument? 

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I am trying to make sense out of a number of different events that will be shaping the design, construction and green building industries for the foreseeable future.  Maybe you can help me make sense out of it all.  Here is what I am seeing:

Something is going on with LEED

The number of LEED registrations appears to be down substantially this year.  To learn more, I would suggest you register for this upcoming webinar hosted by Greener Buildings and Rob Watson.  The decline in registrations is not surprising given the decline in the design and construction of new commercial buildings. 

What is surprising is the anger that I am hearing by those frustrated with the LEED rating system.  Many of these frustrations are now being publicly expressed in reaction to the Henry Gifford lawsuit against the US Green Building Council.  Environmental Building News ran a fascinating article on the reaction to the Gifford lawsuit:  "In the years that I've been reporting for Environmental Building News, I can't think of another news story that has drawn as much immediate and widespread interest."  The article goes on to survey the reactions to the Gifford lawsuit.  I have always feared a green backlash would occur, but I never expected it so soon and so abruptly.  I wonder if the decline in registrations and certifications is tied to the green building community's frustration with LEED? 

Update:  Also, check out this article written by Lloyd Alter regarding LEED bashing.  

We need a solution for our infrastructure needs

And speaking of anger, the Tuesday elections will most definitely affect the future of the construction industry.  The shutdown of the New York-New Jersey tunnel by Gov. Chris Christie is a perfect example of what I believe will be a reining in of public works spending.  The Republicans resoundingly won 60 seats in the House based in large part on a message of fiscal austerity; fiscal austerity means less federal investment in large construction projects.  And yet, our infrastructure needs significant rehabilitation.  When I mention our infrastructure, I like to include the inefficient buildings that could be retrofitted.  Next week, at the Construction User's Roundtable convention, I will be speaking about the country's aging infrastructure, the current political climate and one potential solution:  public-private partnerships (PPPs).  As federal and state green building projects are cut in the name of fiscal austerity, hopefully PPPs will provide an answer to a very complicated issue. 

I am in the process of creating my business strategy for 2011.  I see American Recovery and Reinvestment Act projects dropping off, federal and state construction projects being abandoned, and public-private partnerships being touted as the savior for our infrastructure and green building needs.  The next two years will also be very important for the future of green buildings and the LEED rating system.  How quickly the Gifford lawsuit is resolved will be important, but just as important is what the US Green Building Council does to address the anger underyling the lawsuit. 

What do you think?  How do you interpret everything that is going on? 

Photo credit:  J.VillaretePhoto

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Today, I am publishing a guest post from engineer Ian T. Hadden.  I asked Ian to write a guest post after he made the comment "there is something built into the high performance, sustainable design building method that works against litigation" on August 9.  Below, Ian elaborates on his point so please take a look and let us know what you think. 

If you are interested in guest posting for Green Building Law Update, please contact me at chris@cheathamconsulting.com with your story idea.  Your story should focus on risk management, legal or regulatory issues in the green building industry.   

By Ian T. Hadden

I apparently peaked Chris' interest with my recent comments about integrated, collaborative design reducing the rate of LEEDigation as he's afforded me the opportunity to expand my thoughts. As a little background, I've been actively involved in the LEED certification of 4 projects and am working as the Project Administrator for 14 additional projects. All of these projects are from the K-12 education sector and have used design build, traditional hard bid and construction management procurement methods.

Maybe my experiences have been out of the norm or they were less litigious because they were school districts. But after hearing tales of other LEED projects and continued exposure to LEED projects, I believe the process avoids more pitfalls that lead to litigation than it opens doors for new litigation paths. The process drives detailed conversations that start early and continue through the process and they highlight the interdependency of the owner, the designers and the contractors. And that's why I think LEEDigation will be more common from outside parties, such as the school in MN, than between members of the integrated design team.

As part of role as a LEED Project Administrator, I often find myself helping facilitate the integrated design process. Often, many of the team members do not have any experience with an integrated design process. To avoid confusion, let's define integrated design as the use of deliberate steps to ensure all parties affected by the life cycle of project are engaged in the development of the project. It has a focus on data collection (like energy modeling), discussion, visioning and goal setting. This is often done in charrettes which provide a face to face, personal meeting of this cross discipline group of people. In traditional design, the owner often doesn't have much contact with any of the design team beyond the architect. This face to face meeting with the opportunity to have input starts building a level of trust and mutual accountability across all parties. When trust is present in any relationship, it becomes easier for all parties to admit and take responsibility for errors and omissions and focus on corrective action rather than blame. Let's take look at a couple of hypothetical situations and since I'm an engineer we'll focus around energy issues.

In traditional design, without an energy model there are likely few conversations the owner and the mechanical engineer have other than "what kind of HVAC equipment do you like." With the owner's preference in mind, the engineer proceeds to design a system assuming maximum occupant capacity and maximum allowable lighting power density and the engineer adds a 10 or 15% safety factor onto his or her load calculations to make sure no one every complains about being to hot or cold. But when the electrical engineer is very aggressive and reduces the lighting power density and the average occupancy is only 85% of capacity the system is now oversized so it doesn't control humidity well and does not operate efficiently. Who is at fault? Why are they at fault? Was the mechanical engineer responsible for asking the electrical engineer about lighting or was it the electrical engineer's responsibility to tell the mechanical? Is the owner at fault for failing to discuss occupancy patterns?

By comparison, a project team pursuing LEED typically does an energy model, which drives discussions about these topics and more. With an energy model, systems are sized more closely to the design load and with fewer compounded safety factors. There is risk in this method that weather or occupancy patterns outside the design parameters may lead to comfort issues. But those risks have been discussed and been jointly accepted by the owner and the design team.

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Reader's note:  This is my last post on the LEED certification challenge.  Thanks for staying with me.

I thought I would end my discussion of the Northland Pines High School LEED certification challenge with some constructive suggestions.  The LEED challenge issue is not going away anytime soon and clearly requires some fixes. 

Do you have any more thoughts on the LEED challenge process?  How do we fix it?

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Reader's note:  Three more posts on the LEED certification challenge.   

If you have taken a look at the Northland Pines High School LEED certification challenge documents, you know that the documents are extremely technical.  I am not an engineer but I will share with you some of the more interesting parts of the documents that caught my attention. 

Taylor Engineering was retained by the United States Green Building Council (USGBC) to review the challenge allegations.  I was immediately drawn to the first substantive paragraph of the Taylor Engineering report: 

"While I disagree with most of the complainants’ claims, there were several violations of Standard 62.1 and Standard 90.1 requirements in the design as originally documented. As such, the original design did not meet Indoor Environmental Quality (EQ) Prerequisite 1 and Energy and Atmosphere (EA) Prerequisite 2 of LEED NC version 2.1. However, based on follow-up documentation provided by the design team in response to our comments, I feel the project provides a sufficient level of compliance with these Standards and hence the LEED prerequisites. While I am not fully confident the project merits all of the EA Credit 1 Enhanced Energy Performance points awarded to it, the design team diligently responded to several rounds of comments based on our detailed review of the DOE-2.2 simulations and it appears that they reasonably followed the modeling rules established by ASHRAE Standard 90.1. Hence I accept their EA Credit 1 claim of 7 points."

The most important statement to me in the preceding paragraph is that the original design did not meet the LEED requirements: "the original design did not meet Indoor Environmental Quality (EQ) Prerequisite 1 and Energy and Atmosphere (EA) Prerequisite 2 of LEED NC version 2.1."  After reading this paragraph, I have many unanswered questions:

• What additional documentation was provided - "the design team diligently responded to several rounds of comments" - to satisfy Taylor Engineering? 
• How can follow-up documentation ensure that a project is in compliance with ASHRAE standards and LEED prerequisites when it was determined that there were violations in the original design?
• What are the standards for LEED certification?  Is "diligently" responding to comments and "reasonably" following ASHRAE energy modeling rules enough? 

"Allegation: Violation of Standard 90.1-1999 6.2 Mandatory Provisions (page 18). The complaint says the chiller does not meet minimum requirements. Independent consultant review comments: Per Table 6.2.1C of the 1999 version, the minimum COP at ARI conditions is 2.8 and the minimum IPLV is 2.8. The chiller schedule on H1.1 shows a COP of 2.9. It is not clear from the schedule if this is at ARI or design conditions. The installed chiller per submittals has an ARI EER of 2.81. The IPLV is not scheduled, but if the full load efficiency is 2.8, it is almost certain that the IPLV will be higher. Thus the chiller does meet Standard 90.1-1999. (Note that the chiller efficiency in the energy model, according to EAp2 documentation, has a COP of 3.0, which is not consistent with the equipment schedule. This was corrected in a revision to the energy models starting with the version dated December 10, 2009 that USGBC requested to fix this and other inconsistencies between the model of the proposed design and the actual design.) No apparent violation."

Again, I am not an engineer.  From these descriptions, I understand that after the school's LEED certification was challenged, the USGBC determined that the energy modeling was inadequate and requested revisions.  Based on these revised energy models, Taylor Engineering and the USGBC determined the school was reasonably in compliance with LEED.

Do I have that right?

Photo credit: nielsvk

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Welcome to our first afternoon edition of Green Building Law Update. 

No one is quite sure whether the challengers to the Northland Pines High School LEED certification have grounds for an appeal.  But I figured two statements by the United States Green Building Council (USGBC) regarding the "appeal" warranted a special blog post.  First, Brendan Owens, USGBC's vice president, was quoted yesterday in ENR regarding the LEED challenge controversy:  

"Brendan Owens, USGBC's vice president of LEED technical development, says USGBC is using the challenge as a case study for the certification team, noting, 'We can do continuous improvement and still have been right in the past.'"

I also received the following statement from Susan Dorn, USGBC General Counsel, regarding the recent "appeal" by the LEED challengers: 

"USGBC stands by its conclusion that the Northland Pines High School project and project team complied with all the requirements necessary to achieve LEED Gold certification.  In response to a complaint, USGBC followed its certification challenge policy, which requires a thorough and technically rigorous review of the project. Given the vociferous and confrontational nature of the complaint, we further asked for two additional and separate technical reports detailing the expert professional opinions of highly regarded independent consultants. Their findings agreed with ours.

Anyone who has actually been through a LEED certification review knows that it is a  dialogue between the project team and the reviewer. After reviewing the documentation submitted by a project team, the reviewer issues a request for more information in a "Preliminary Review".  The project team responds to any reviewer comments and resubmits.   The reviewer then reassesses the project and issues a 'Final Review'.

The process USGBC used to deal with this appeal was similar to our standard process but in addition to having the original submission and reviewing everything we normally review we also had the complaint document.  There were issues in the complaint document that were not (from our independent consultant's point of view) adequately addressed by the 2007  submission so we asked for and received additional clarifying documentation from the project team.  This additional documentation answered all open questions and made it possible for USGBC and the independent consultants hired to provide their expert technical opinions to conclude that the project does in fact comply with LEED Gold requirements.

LEED's intent, and USGBC's mission, is about helping people learn about and understand how to design, build and operate better buildings.  Buildings are complex systems of systems and any of the 100,000 of decisions associated with design, construction and operation can always be second-guessed. We are confident that our due diligence has been more than sufficient to put these issues to rest, and we are moving forward to focus our efforts where they do the most good -- advancing the market uptake of green buildings and communities that is at the heart of our work."

As Stephen Del Percio has said, this has been a wild week for LEEDigation.  I have linked to some reactions from around the interwebs below.  Be sure to check them out if you have a moment.

Any reactions to this controversy? 

Photo credit:  realmofreals

Related Links

Rating Controversy Heats Up (ENR)
Wild Week for Green Real Estate Includes Response to USGBC from Northland Pines Appellants (GRELJ)
Needling Naysayers or Constructive Critics--The Tough Case Of Northland Pines (GBLB)
LEED Certification Challenge in Less Than 140 Characters (BPCL)
First Ever LEED Challenge Goes to Appeal (Builders Counsel Blog)
 

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As we begin our review of the challenge to the Northland Pines High School LEED certification, the most obvious starting point is the LEED challenge itself.

The challenge was prepared by two engineers - Mark Lentz and Lawrence Spielvogel - on behalf of five appellants.  By just the second paragraph, my jaw was on the floor:

"The engineering professionals preparing this appeal were originally retained to review the design for non-compliance with LEED prerequisites due to litigation threats made by the design team against the appellants for publicly expressing their concerns for the design provided."

Think about that sentence for a minute.  According to the LEED challenge, the threat of LEEDigation - "litigation threats made by the design team" - led to LEEDigation - the LEED challenge.

The challenge then explains that the grounds for the LEED protest are the design and construction of the project did not meet LEED prerequisites EA1, EA2 and EQ1:

EA1, Prerequisite, Fundamental Building Systems Commissioning was not complied with. The first three steps of the Commissioning Process include review of design intent, basis of design documentation, and incorporation of commissioning requirements into the Construction Documents. All are required prior to bidding and construction. The reviewing professionals have been unable to confirm that any were performed. Had a competently executed Design Review been performed by the Commissioning Agent, as required by LEEDTM NC 2.1, ANSI/ASHRAE/IESNA Standard 90.1-1999 and ASHRAE Guideline 1-1996, the majority of the EA2 and EQ1 violations identified by the reviewing professionals should have been identified by the Commissioning Agent and corrected by the design team prior to the issuance of the Construction Documents for bid.

EA2, Prerequisite, Minimum Energy Performance: The design of the HVAC systems and other listed elements of the building do not comply with all of the requirements of ANSI/ASHRAE/IESNA Standard 90.1-1999. The scope and number of prerequisites violations was pervasive.

EQ1, Prerequisite, Minimum IAQ Performance: The design of the HVAC systems failed to comply with ANSI/ASHRAE Standard 62.1-1999, Ventilation for Acceptable Indoor Air Quality. Validation computations were performed to determine the actual basis for ventilation rates and to determine what the actual ventilation requirements would have been had the required Ventilation Rate Procedure computations been performed. These computations established that the actual basis for ventilation was the Wisconsin Enrolled Code, which produces significantly lower ventilation rates at both individual zones and at the system level than those which would have otherwise been required to comply with ANSI/ASHRAE Standard 62.1-1999.

What are your thoughts on the grounds for the LEED challenge?  Have you witnessed problems with these credits?

Photo Credit: Jinho.Jung

Related Links

LEED Credibility Destroyed (pdf)
Complete NPHS Appeal (pdf)
Horizon Report (pdf)
Taylor Report (pdf)
USGBC Letter (pdf)
Response to Horizon Engineering Report (pdf)
Response to Taylor Engineering Report (pdf)
Appellants' Statement (pdf)

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News continues to emerge about the challenge to the LEED Gold certification received by the Northland Pines High School.  Green Building Law Update previously reported on a statement made by United States Green Building Council (USGBC) General Counsel Susan Dorn that the certification challenge had been denied.
 
There is so much more to this story.
 
First off, the LEED challengers are not satisfied with the result, and they are not going away quietly.  This past weekend the challengers and their experts released a statement and documentation surrounding the LEED challenge.  The LEED challengers are five individuals from the community surrounding the high school:

• Mr. Ronald Ritzer, an architectural design professional and local builder of high performance homes
• Mr. Roderick McKinnon, a commercial property developer
• Mr. Patrick Smith, a construction professional
• Dr. Kevin Branham, a Doctor of Chiropractic with a Masters degree in Public Health
• Mr. Curt Hartwig, a local businessman and community leader

Since I previously published the USGBC's statement regarding the challenge, here is the other side of the story, as told by the five LEED challengers: 

What is all the ruckus about Northland Pines?
 
In 2004, the voters of Vilas County Wisconsin voted to approve the sale of $28,535,000 worth of bonds to finance a new High School for the Northland Pines district.

The appellants in this case all served on the Building Committee for the new school and each brought specific talents and experience in design and construction of large buildings. Each was dedicated to the proposition of creating the most efficient structure possible.
 
The design team and school board discouraged any outside input and set forth to design and construct the school as they saw fit.
 
As the design developed, the appellants questioned whether the facility would indeed meet the prerequisites for LEED® Certification and were told that it would despite what appeared to be glaring shortfalls with respect to these requirements.
 
The appellants retained the service of two highly regarded consulting engineers to review the plans. Both of them determined that the facility as designed would not qualify for LEED® Certification.
 
In December 2008, the appellants filed an appeal with the USGBC challenging the award of the Gold Certification given to Northland Pines. Some 16 months later the appellants were notified that the USGBC had looked into the matter and found everything to be fine. They based this on reports from two more consulting engineers who said that the building did not meet the prerequisites but concluded that “pretty close” is close enough. When the appellants' engineers asked for the back up data to the USGBC reports, they were told that they were pretty busy and would address that request when they have time. Time has passed and the requested materials have not been forthcoming. Why?
 
On behalf of the taxpayers of Vilas County who would like to know with certainty whether they got what they paid for or not, we ask the engineering community to look at this file and tell us, did we miss something here? How can it be alright to certify a building that doesn’t fully comply with the rules set forth by the body that is doing the certifications?
 
We would love to hear what you think. We are only in search of the truth which ultimately will be what is best for Northland Pines.

Following this post are links to the engineering reports, correspondence and opinions that have been made available by the LEED challengers.  If you have a few minutes, I would recommend reviewing these documents.  We will be reviewing discussing these documents in the coming weeks.
 
Please share your opinion on this LEED challenge.  I would like to put together a post with some of the best responses from you, the readers.

Photo credit: Reway2007
 
Related Links:

LEED Credibility Destroyed (pdf)
Complete NPHS Appeal (pdf)
Horizon Report (pdf)
Taylor Report (pdf)
USGBC Letter (pdf)
Response to Horizon Engineering Report (pdf)
Response to Taylor Engineering Report (pdf)
Appellants' Statement (pdf)
 

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I am wrapping up review of the LEED Certification Challenge Policy.  Today, I will discuss the third of three reasons why the challenge policy creates significant risk for parties involved in a project seeking LEED certification:

(1) Any person can challenge a building's LEED certification;
(2) Any and all LEED points can be challenged; and
(3) A LEED certification challenge can be brought at any time. 

In the legal world, statutes of limitations usually require that a case be brought within a certain time period.  Such a statute of limitation does not exist within the challenge policy.  Again, here is the relevant challenge language:

"Persons desiring to make a complaint may submit a written statement identifying the persons alleged to be involved and the facts concerning the alleged conduct in detail, and, to the extent available, the statement shall be accompanied by any available documentation. The statement shall identify others who may have knowledge of the facts and circumstances concerning the allegation. The person making the complaint shall identify him/herself by name, address, and telephone number."

Of the three factors, I anticipate that the timeliness of LEED challenges will be adjusted first.  Permitting LEED challenges on any building, no matter the vintage, is simply untenable.  Here are a couple of issues that immediately come to mind:

• Will architects and contractors have to seek additional insurance to cover a project in perpetuity?
• What happens if a project has its LEED certification stripped ten years later and is no longer in compliance with a green building regulation that requires certification?

What do you think? 

Photo Credit:  DaDaAce

Related Links

Cranks, Gadlfies and Rivals Can Challenge LEED Status (GBLU)

Every Single LEED Point Can Be Challenged (GBLU)

LEED Certification Challenge Policy (GBLU)

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Under the LEED Certification Challenge policy, all LEED points can be challenged by any "person," resulting in reduced or revoked LEED certification.  Today, I am going to describe a scenario under which such a LEED challenge could prove costly.  

A few months ago, attorney Matt Devries wrote about a news report in Nashville, Tennessee that uncovered illegal dumping by a subcontractor at the Music City Center project (click here to see the incredible video).

Related Links: 

State Finds Illegal Dumping From Music City Center (NewChannel5)

Green Building Reality Show? Music City Center Contractor Nabbed on Video Disposing Recyclable Materials (Best Practices Construction Law)

LEED Certification Challenge Policy (GBLU)

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I am going to take a temporary hiatus today to jump from the Wisconsin LEED challenge to discuss breaking LEEDigation news.  

LEEDigation is, of course, litigation involving LEED certification.  I have previously discussed Shaw Development v. Southern Builders, which is an example of a project failing to achieve LEED certification.  But how else could LEEDigation develop?

Could you imagine a scenario where an owner refuses to pay for additional costs necessary to achieve LEED certification?  What if the owner was a famous NASCAR driver?  

According to a group of subcontractors, this is what happened when NASCAR star Kyle Busch requested upgrades during construction so that his new headquarters would achieve LEED certification:

"Nearly a dozen companies involved in building a new race shop for Kyle Busch say they have filed liens or intend to file liens because they are collectively owed about $1 million for work done on a high-tech headquarters built for Busch in Mooresville.

The project's general contractor, L.B. Builders Construction Group, owns the building and has been in mediation with Busch's attorneys this week.

Busch was supposed to buy the building but has delayed the purchase because the final price tag was more than expected. The subcontractors say that's because the young multimillionaire NASCAR driver wanted a top-of-the-line, LEED-certified building and ordered upgrades during construction."

At this point, the subcontractors have only filed liens and have not undertaken litigation to enforce the liens.  The subcontractors involved include an electrical supplies distributor, a mechanical equipment vendor, and a glass and aluminum company.  

When I discuss LEEDigation, it is most often in the context of failing to achieve certification.  But the opposite scenario can certainly occur:  you achieve certification but the owner refuses to pay for the costs associated with the green building components.  If an owner decides in the middle of a project to seek LEED certification, it is imperative that the architect and contractor not only request contract modifications but also educate the owner about the additional costs that will be incurred as a result.

Photo Credit:  Amplified Photography

Related Links:

Busch Dispute Centers On Green Construction (Charlotte Observer)

Shaw Development v. Southern Builders (GBLU)

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On Wednesday, I began a review of the Green Building Certification Institute's ("GBCI") LEED Certification Challenge policy.  There are three reasons why the LEED Certification Challenge Policy creates significant risk for all parties involved in a LEED-certified project:

(1) Any person can challenge a building's LEED certification;
(2) Any and all LEED points can be challenged; and
(3) A LEED certification challenge can be brought at any time.  

Today we are looking at the second point, "any and all LEED points can be challenged."  Here is the relevant language from the policy:

"GBCI may revoke previously granted LEED certification or take other action regarding LEED certification such as determine to reduce points or category of LEED certification previously granted, if GBCI determines that credits/prerequisites for LEED certification were granted based on erroneous determinations or inaccurately or falsely submitted documentation."  

Obviously, the opportunities to challenge LEED certification are only limited by the LEED prerequisites and credits obtained on a specific project.  In theory, a person could challenge every single prerequisite and credit applicable to a project.  

If you are an architect, engineer, contractor, subcontractor, consultant or any other party that takes part in projects seeking LEED certification, you should be concerned by the additional liability created under the challenge policy.  Under the policy, one LEED point that you were not involved with could be challenged and result in LEED certification being revoked or stripped.   If you are responsible for a building's LEED certification, you could find yourself defending a challenge to every single point and prerequisite, whether those points were your responsibility or not. 

On Monday, we are going to look at a hypothetical (with video!) of how this liability could arise.  

Related Links

Cranks, Gadflies and Rivals Can Challenge LEED Status (GBLU)

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A few weeks ago, after a green building legal presentation, I remarked to a colleague that I was growing tired of discussing Shaw Development v. Southern Builders, the prime example of LEEDigation.  Less than one week later, along came the Wisconsin LEED challenge and the discovery of the LEED Certification Challenge Policy.  

The LEED Certification Challenge Policy is the most significant legal risk for LEED certified projects that I have seen to date.  You may recall the discussion of Minimum Project Requirements last year and the possibility of LEED decertification.  The risks inherent in the LEED Certification Challenge Policy substantially dwarf the LEED decertification issue.  

There are three reasons why the LEED Certification Challenge Policy creates new risks for all parties involved in a LEED-certified project:  

(a) Any person can challenge certification;
(b) Any and all LEED points can be challenged; and
(c) A LEED certification challenge can be brought at any time.  

(1) Injury - the person was harmed;
(2) Causation - the injury was caused by the conduct of the other party; and
(3) Redressability - a favorable court decision can remedy the injury.

"Persons concerned with possible inaccurately granted LEED certification are encouraged to contact the GBCI, provided however that GBCI reserves the right to institute an investigation and review of such possible errors or inaccuracy or veracity of documentation without third party complaint.  

Person desiring to make a complaint may submit a written statement identifying the person alleged to be involved and the facts concerning the alleged conduct. . . . The person making the complaint shall identify him/herself by name, address, and telephone number."

• Environmental groups could challenge a corporations' achievement of LEED certification in order to protest corporate actions.  

• Concerned citizens could challenge local projects' LEED certification if the citizens want a greener project or a less expensive project.  

• Rival developers could challenge each other's LEED certification in order to develop a business advantage. 

The possibilities for "persons" that will bring LEED challenges seem limitless.  What other examples can you come up with?  

Related Links: 

Shaw Development v. Southern Builders (GBLU)

Northland Pines High School LEED Challenge (GBLU)

This Post is Really Imporant and Not For the Faint of Heart (GBLU)

Will Clark on Twitter (Twitter)

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Up in Wisconsin, a group of concerned citizens challenged the LEED certification of a high school under the Green Building Certification Institute's (GBCI) Certification Challenge Policy.  The LEED challenge came to light in December 2009 although it was originally filed in 2008.  Last week, the United States Green Building Council (USGBC) denied the LEED challenge.  The following is a description of the ruling that I received from Susan Dorn, USGBC and GBCI General Counsel:  

"(On April 28, the) USGBC concluded its review of a challenge to the certification of a Gold LEED for Schools, that of Northland Pines High School (NPHS) in Eagle River, Wisconsin. In the process of its review, USGBC engaged two extraordinarily qualified engineering consultants (Taylor Engineering and Horizon Engineering) to review the technical merits of the prerequisites and credits in question.  Further, USGBC staff performed a site visit of the school.  After an exhaustive review of the final engineering reports and documentation submitted by NPHS, USGBC concluded that there was sufficient evidence to show that the school's perquisites and credits had been met.  Thus, no adverse action will be taken as to the LEED certification of NPHS.  Challenges to LEED certification advanced in the future will be undertaken by GBCI; the challenge to NPHS was reviewed by USGBC as a legacy project."

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I am going to be honest with you, I have been sitting on some LEEDigation-related stories.  I sat on these stories because I wanted to understand the implications before writing about them.  

Take our first story from Wisconsin.  As was first reported at the Green Real Estate Law Journal, a group of Wisconsin residents filed a challenge to a project's LEED certification:

"[A]ccording to an article that appeared last week in Eagle River, Wisconsin’s Vilas County News-Review, a group of local residents have filed a 125-page complaint with USGBC that challenges the award of LEED Gold certification to the Northland Pines High School, which was completed in the fall of 2006 and earned formal certification under LEED for New Construction Version 2.0/2.1 on May 10, 2007. It’s unclear when the complaint was filed or what specific allegations it asserts. However, according to the article, the residents initially raised concerns about the project during the design phase, claiming that a more efficient HVAC system was available and should have been specified by Hoffman LLC, the Appleton, Wisconsin-based firm that designed the school."

You may recall that back in July 2009, we discussed the concept of LEED Decertification in the LEED 2009 rating system if a project fails to attain Minimum Project Requirements.  The Wisconsin project was actually certified under a prior LEED rating system and was challenged under the "Certification Challenge Policy."  

When I first learned of this story, I asked a question that many of you may also be asking.  There's a LEED Certification Challenge Policy?  Yes, according to the Green Building Certification Institute (GBCI) LEED Policy Manual (.pdf):

"GBCI may revoke previously granted LEED certification or take other action regarding LEED certification such as determine to reduce points or category of LEED certification previously granted, if GBCI determines that credits/prerequisites for LEED certification were granted based on erroneous determinations or inaccurately or falsely submitted documentation. Persons concerned with possible inaccurately granted LEED certification are encouraged to contact the GBCI, provided, however that GBCI reserves the right to institute an investigation and review of such possible errors or inaccuracy or veracity of documentation without third party complaint.

Persons desiring to make a complaint may submit a written statement identifying the persons alleged to be involved and the facts concerning the alleged conduct in detail, and, to the extent available, the statement shall be accompanied by any available documentation. The statement shall identify others who may have knowledge of the facts and circumstances concerning the allegation. The person making the complaint shall identify him/herself by name, address, and telephone number.

Upon receipt of a complaint or upon the finding of concern, the GBCI President shall confer with legal counsel. The GBCI President shall direct a detailed technical review of documentation submitted in connection with the project which served as basis of award of credit/prerequisite. GBCI may request supplemental information from the person(s) making the complaint.

If GBCI determines that the complaint is frivolous or not relevant to credits required for LEED certification, no further action will be taken. Should GBCI determine that the allegation appears credible and the allegation is founded on the error or inaccuracy of GBCI or veracity of the documentation submitted in support of the credits/prerequisites in question, GBCI shall proceed with its investigation, requesting information from the Project Manager and/or the Owner or others involved in the project."

What do you think was the result of the first LEED challenge? 

Related Links:

Wisconsin Residents Appealing LEED Gold Certification of Northland Pines High School (Green Real Estate Law Journal)

This Post is Really Important and Is Not For the Faint of Heart (GBLU)

GBCI LEED Certification Policy Manual (GBCI)(.pdf)

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From time to time, I like to step outside the green building industry and look at construction of renewable energy projects.  While windmill construction is nothing new, countries are looking for new opportunities to develop wind energy.  One new type of development has certainly caught my attention from a risk management standpoint. 

"By offering generous incentives, the U.K. already has built more offshore wind power than any other nation.  Now it is planning a wave of vast new wind farms, in some of Europe's stormiest waters." 

"Some dismiss the windmills as quixotic. . . . And many more challenges await, judging from those the project at Kent faced, ranging from the need to protect marine worms to a design flaw that causes turbines to sink into their foundations."

"Owners of a Dutch wind farm found their turbines had shifted a few inches, the result of a design flaw in equipment connecting the towers to their foundations.  RenewableUK, a trade association, said most of the 336 turbines operating in the U.K. waters could have the same fault, and would cost about $250,000 each to fix."  

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As federal agencies continue to push green building certification, some federal projects are running into conflicts when building green.  Take for example, a recent article I reviewed regarding military construction and LEED certification.  The basic premise of the article is that green building rating systems and military construction do not always work together. 

"'An office building and military building are very different,' said Katrina Rosa, principle and director of LEED services for The EcoLogic Studio LLC. 'The reviewers are trained to review an office building.'

She said efforts to better train reviewers should help in the future. Input from contractors working in military construction can encourage other changes as well." 

The article then provides examples of conflicts between military construction and the LEED rating system: 

• "Energy efficiency is one of the key focus areas for certification. Robbins said he planned to implement energy-efficient air conditioning at a Navy building in Monterey to earn credits.  Instead, he ended up with the most energy-efficient option -- the Navy didn’t want any air conditioning.  'The other side is, we lose LEED points,' [James Robbins, principal at RJC Architects Inc.] said."

• "On another project at a Marine Corps base, he said he ran into a different dilemma. An inexpensive option for gaining points would be adding a bike rack to the development, he said. But those Marines tended not to ride bicycles." 

• "Robbins cited a boiler system at Camp Pendleton that repeatedly faced problems from the hard water. He said the military could not accommodate the necessary upkeep and preventative measures needed to use the new system."

I was surprised that another conflict between military construction and green building rating systems was not mentioned.  On Wednesday, we will look at that conflict and an interesting study on the topic.

Any idea what conflict I am talking about?

Related Links:

LEED standards not perfect fit for MILCON; change possible (San Diego Source)

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When I prepare construction claims for clients, one of the first steps is to gather the facts and develop potential legal bases for the claims.  There is one legal basis that clients seem to know, and argue for, more than any other:  Differing Site Conditions. 

A Differing Site Condition is essentially an unanticipated physical condition encountered by a contractor at a project site, which requires additional work by the contractor. Most federal contracts contain a Differing-Site-Condition clause.  As described in Foster Constr. C.A. & Williams Bros. Co. v. U.S.:

"The purpose of a [differing site] conditions clause is thus to take at least some of the gamble on subsurface conditions out of bidding.  Bidders need not weigh the cost and ease of making their own borings against the risk of encountering an adverse subsurface, and they need not consider how large a contingency should be added to the bid to cover the risk."
 

1.  The contractor expected certain labor conditions in the surrounding area.  When he started the project, labor conditions had changed due to a competing project.

2.  The contractor properly relies on site boundaries in preparing its bid.  When the project starts, the site boundaries change.  

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Last Thursday, during a webinar on green building legal issues, I stated the following:

"I really believe schools will be a hotbed for green defect claims, in terms of energy efficiency, and other green building components.  Schools rely on tight budgets. . . .  Be careful what you are promising on these green school projects."

On Friday, I read an article titled "Construction Delayed at West School," which led with the following paragraph:

"Construction is at a stand-still at Washington-Nile School, where issues surrounding state-mandated LEED (Leadership in Energy and Environment Design) elements have placed the new middle school building project over-budget. Now attorneys working for the school are researching the equity of LEED funding for schools in Ohio; the outcome of which could also affect building projects at New Boston and Clay."

I was close.  

In Ohio, the Ohio School Facilities Commission (OSFC), administers the state’s Kindergarten through 12th Grade public school construction program and helps school districts fund, plan, design, and build or renovate schools.  In a previous post, we highlighted the OSFC's green buiding requirement for Ohio schools:

"OSFC Resolution 07-124 . . . mandates that all newly constructed or substantially renovated school buildings that are state funded achieve a minimum of Silver certification in the US Green Building Council's LEED-Schools (Leadership in Energy and Environmental Design) rating system with emphasis in energy conservation."

As highlighted in the article, the OSFC accepted the Washington-Nile School (tiny red dot in the photo to the left) as a special-needs project.  Because of the district’s low wealth base, the OSFC agreed to provide 98 percent of the funding for a new $16 million middle school. The remaining 2 percent (about $320,000) was paid from the school’s General Fund.

By accepting the OSFC funds, the school district is required to build the new Washington-Nile School to LEED Silver certification.  But the bids for the school were over-budget despite numerous changes made to the design:  

"'We knew a little about LEED. We didn’t know much, so they (the OSFC) educated us and they did a very good job. We bought into that and we designed accordingly. We made sure we had some educational LEED credits,' Washington-Nile Superintendent Patricia Ciraso said. She explained that while striving to meet these LEED requirements, the school had to give up other features they had hoped to add. By choosing to cut-back on windows, the school had change its lighting system, which means redesigning the entire electrical system — and what they ended up with still was estimated at least $1.2 million over-budget."

On Friday, we will look at allegations by the Washington-Nile school district that the OSFC is not properly funding the necessary LEED-certification costs.  You will want to check back, as these allegations include a creative legal challenge to the state's funding of green schools, which could have broad implications for other state green building programs. 

Related Links: 

Sensible Interview:  OSFC (GBLU)

Live Webinar (GBLU)

Construction Delayed at West School (Portsmouth Daily Times)

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The green building industry is entering an interesting period. In 2009, the green building movement was embraced as a solution to economic and environmental problems. "Green jobs" were touted as a way to improve the economy while reducing unemployment. Investment in renewable energy and energy efficiency measures was championed as a way to reduce greenhouse gas emissions and increase energy security.

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Geothermal heat pumps continue to gain popularity as an alternative energy source.  This energy technology doesn't come without uncertainties though.  In fact, as ENR recently described it, there are significant problems with the geothermal industry:  "[M]any of these systems are not performing as touted, especially cleverly hyped geothermal heating systems that are plagued with inflated savings claims and deficient designs."

The article goes on to describe three primary problems with the geothermal industry:

• "Their performance often is only superficially studied by equipment insiders whose main interest is selling more systems. As a result, the construction industry lacks a trusted set of independently audited best practices for design, installation and maintenance. This issue is becoming increasingly important as engineers scale up geothermal systems for larger buildings."

• "In particular, the coefficient of performance (COP) rating for a heat pump usually does not take into account the efficiency of the entire system. During design and installation, many variables can creep into that equation, such as the amount of electricity needed to pump water through piping loops, heat escaped through poorly built ductwork and seasonal imbalances in how much heat is dumped or pumped out of the ground. These all can compromise the COP and extend the payback time for systems."
   
• "Industry promoters working for owners, architects, engineers and contractors have done a poor job of educating consumers on the benefits and drawbacks of geothermal HVAC. There are large variations in average ground temperatures by region, but geothermal advocates would have potential customers believe ground temperature is a constant 55°F."

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We previously reviewed a green building contract that can be used to manage the architect-owner relationship. But what about contractors?

As a member of the AGC ConsensusDOCS committee, I had the pleasure of collaborating on the ConsensusDOCS 310 Green Building Addendum, which was recently released:

On Nov. 10, ConsensusDOCS released the construction industry's first and only comprehensive standard contract document addressing the unique risks and responsibilities associated with building green projects -- the ConsensusDOCS 310 Green Building Addendum. The Addendum incorporates contractual best practices to identify the project participants' roles and responsibilities, as well as the implementation and coordination efforts critical to achieving a successful project using green building elements, particularly those seeking third-party green building rating certification. It was drafted to work well not only with the other ConsensusDOCS contract documents, but also with other form contracts.

If you have an opportunity to review or work with ConsensusDOCS 310, I would like to hear your thoughts. Based on conversations with owners, contractors and architects, there seems to be a real need for standardized green building contracts. Simple modifications to your existing contracts are not enough.

What other relationships exist on a green building project that require a contract?

Related Links:

ConsensusDOCS 310 Green Building Addendum (AGC)

What Does A Green Building Contract Look Like (GBLU)

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In order to manage risk associated with a design and construction project, it is important to draft an appropriate contract. There are a number of standard contracts available for the construction industry. The American Institute of Architects (AIA) publishes the AIA construction contracts to manage the architect-owner relationship. The Association of General Contractors (AGC) has also created ConsensusDOCS contracts that are used between contractors and owners.

With the emergence of green buildings, new risks must be accounted for in contracts. The AIA has released AIA B214 to manage green building risks between an architect and owner:

B214–2007 establishes duties and responsibilities when the owner seeks certification from the U.S. Green Building Council’s Leadership in Energy and Environmental Design (LEED®).

Among other things, the architect’s services include conducting a pre-design workshop where the LEED rating system will be reviewed and LEED points will be targeted, preparing a LEED Certification Plan, monitoring the LEED Certification process, providing LEED specifications for inclusion in the Contract Documents and preparing a LEED Certification Report detailing the LEED rating the project achieved.

Next time, I will look at a new green building contract that can be used between contractors and owners.

What are your experiences with green building contracts?

Related Links:

AIA - B214 (2007) Standard Form of Architect’s Services: LEED® Certification (AIA)

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Sec. 13. Recommendations for Vendor and Contractor

 

Emissions. Within 180 days of the date of this order, the General Services Administration, in coordination with the Department of Defense, the Environmental Protection Agency, and other agencies as appropriate, shall review and provide recommendations to the CEQ Chair and the Administrator of OMB's Office of Federal Procurement Policy regarding the feasibility of working with the Federal vendor and contractor community to provide information that will assist Federal agencies in tracking and reducing scope 3 greenhouse gas emissions related to the supply of products and services to the Government. These recommendations should consider the potential impacts on the procurement process, and the Federal vendor and contractor community including small businesses and other socioeconomic procurement programs. Recommendations should also explore the feasibility of:

 

(a) requiring vendors and contractors to register with a voluntary registry or organization for reporting greenhouse gas

emissions;

 

(b) requiring contractors, as part of a new or revised registration under the Central Contractor Registration or other tracking system, to develop and make available its greenhouse gas inventory and description of efforts to mitigate greenhouse gas emissions;

 

(c) using Federal Government purchasing preferences or other incentives for products manufactured using processes that minimize greenhouse gas emissions; and

 

(d) other options for encouraging sustainable practices and reducing greenhouse gas emissions.

Related Links: 

President Obama signs an Executive Order (White House)

Energy Reductions in the Navy (GBLU)

Does Executive Order Signal Shift in Green Building Regulations (GBLU)

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The primary theme of Green Building Law Update is green building litigation will develop.  To date, one of the rare examples of green building litigation is Shaw Development v. Southern Builders, a case that involved a project's failure to achieve LEED certification in a timely matter.  Other examples of green building disputes are sparse.

But I am confident the litigation will develop.  A recent article, "'Green' projects create new exposures", suggests others agree:

“There is certainly going to be litigation coming out soon around (green buildings) and insurance companies are waiting to see” the loss results before developing coverage products, (David) Cohen, [senior product director for commercial insurance at Fireman's Fund Insurance Co. in Novato, Calif.], said.

Fireman's Fund Insurance Co. (FFIC) was the first company in the United States to offer green building commercial insurance in 2006.  The availability of this type of policy further suggests the inevitability of green building litigation.

What factors do you think will eventually result in more green building litigation?

Related Links: 

Shaw Development v. Southern Builders (GBLU)

"Green" Projects Create New Exposures (Business Insurance)

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The American Recovery and Reinvestment Act (ARRA) projects have resulted in extremely low bids.  These low bids could be the result of improved efficiency in the construction industry; or the low bids could be the result of cut throat competition.  

“These days, there are more companies competing for comparatively fewer contracts, and that means contractors are facing downward pressure on their bids,” McBrady said. “The key for contractors is that it is OK to be competitive, but that bids should accurately reflect the cost to execute the work. Government officials are going to be on the lookout for contractors who make false claims, such as inflating costs for work conducted under change orders.”

• GAO
• Agency IGs
• RAT Board
• National Procurement Fraud Task Force
• Congress
• DOJ Antitrust Division 
• State and local auditors
• Whistleblowers
• The Public 

Photo:  zenosparadox

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When I first read about Energy Ace's LEED certification guarantee, I thought it was nuts.

Then I read a Co-Star article and realized Energy Ace's guarantee was brilliant.   

When I read a green building regulation, I always look at the enforcement mechanism.  And when I look at a green building contract, I always focus on the potential damages.  Energy Ace's LEED certification guarantee is brilliant because it limits potential damages if certification is not achieved:

"If a project misses its LEED target level (like Silver or Gold) or fails to earn certification altogether, Energy Ace would refund its LEED administration fee, which is between 30 percent and 45 percent of its total fees, Robertson said.

Simply brilliant.  Energy Ace provides a LEED certification guarantee that reassures owners while simultaneously limiting Energy Ace's potential damages. 

The potential damages stemming from a project's LEED certification failure are much greater than the limit described by Energy Ace.  For example, in Shaw Development v. Southern Builders, the owner sued for $635,000 when the project failed to achieve certification by a certain time.  I have never heard of a triple digit LEED administration fee. 

Brilliant, right? 

By the way, I can help you write a similar contract...

Guaranteeing LEED Certification (CoStar)
Southern Builders v. Shaw Development: Green Building Damages (GBLU)

Photo: ejpphoto

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Reminder:  Don't forget to register for Green Building Law Update's Birthday Happy Hour this Thursday! 

Energy Ace Inc., an Atlanta-based sustainability consulting firm, has publicly announced it will guarantee LEED certification for its projects.  Of course, there are limitations to the guarantee:  

"Energy Ace is guaranteeing LEED™ certification on projects where the firm is able to oversee LEED™ administration, Fundamental Commissioning and Energy Modeling, and where the project team is committed to LEED success."

Let's go through those conditions one at a time:  

1.  "The firm is able to ovesee LEED administration"

Since Energy Ace is a LEED consulting firm, I assume "LEED administration" means overseeing LEED certification paperwork.  Energy Ace doesn't appear to serve any design or construction role.  Remember, important decisions are made at both the design and construction stages that impact achieving LEED certification.  How can Energy Ace be comfortable that LEED administration is enough? 

2.  "The firm is able to ... oversee Fundamental Commissioning and Energy Modeling."  

This one makes sense.  Commissioning and modeling are key components of buildings that eventually achieve LEED certification.  

3.  "The project team is committed to LEED success."  
As a construction attorney, this sentence makes my stomach roll.  Please, seriously, someone explain this to me.  How do you define "committed to LEED success"?

Despite all of this, Energy Ace knows what they are doing.  Check back on Friday and I will explain why.     

Links: 

Energy Ace Inc. to Offer the Industry’s First Guarantee for LEED

Photo:  misterbisson

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Reminder:  Don't forget to register for Green Building Law Update's Birthday Happy Hour this Thursday!  

This week, we are going to be looking at an issue near and dear to me: guarantees of LEED certification.  Two publications from last week made clear to me the wide variety of views on the issue:

(1) Washington Business Journal's On Site, "Hot Potato" by Vandana Sinha (print only):

For the most part, these players have come together time and again to score a LEED designation and plaque.  But what happens when one of the parties comes up short, and the project misses its LEED goal?  Who's at fault?
...

Green building mandates make the question even more important. . . . "As more LEED mandates come out that require certification, this becomes a bigger deal," says Cheatham, a LEED-accredited D.C. construction attorney with Watt, Tieder, Hoffar & Fitzgerald LLP, where his primary job is to worry about risks associated with green building and things like the D.C. performance bond.  "That's actual cost.  That's money.  The owner will recognize that risk and more likely want to hold somebody accountable at the end."

(2)  CoStar, "Guaranteeing LEED Certification" by Andrew C. Burr:  

Energy Ace Inc., an Atlanta-based energy services and LEED consulting firm headed by Wayne Robertson, is offering what it calls the industry's first LEED certification guarantee.

At a time when many cities and states have begun mandating LEED-certified buildings, “We can offer clients a certainty that their project is going to be certified and remove that anxiety,” Robertson said.

...

“One of the senior architects was saying that these mandates are putting us in a position to offer a guarantee, and we can’t do that,” Robertson said. “And I’m thinking, yes we can.”

Who is right?  Is my concern about LEED guarantees warranted?  Or are companies like Energy Ace Inc. able to avoid issues surrounding LEED guarantees?  Are we both right?  

Photo: Wade Roush

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I have previously speculated that stimulus green building projects will be at risk of underbidding.  Now we have real evidence.  Remember the $5.5 billion that the General Services Administration received from the stimulus to fund green building construction and retrofits?

"Bids came in far lower than we expected, but the upside is that because of that, we have been able to fund more projects," said Paul Prouty, acting administrator for the General Services Administration.

You may recall that the GSA requires that all new construction projects achieve LEED certification and prefers that its projects achieve LEED Silver certification.  With the fierce competition for GSA projects, you can bet that the winning bids will include LEED Silver certification promises. 

Underbidding these GSA projects with promises of LEED certification is bound to lead to problems.  Underbidding makes it more difficult to deal with changes to the design and construction.  Underbidding makes it more difficult for contractors to deal with changes in design and construction plans:

[Paul Shaughnessy, president of BSI Constructors in St. Louis] warned that some contractors are bidding so low they could find themselves unable to cover even the slightest unexpected construction costs.

"The risky side is you're seeing some very thinly capitalized companies making low bids out of desperation," he said. "Their bids are so thin that should something go wrong, they would have very little capital to fix things."

Simply put, the stage is set for LEEDigation.   

Photo:  Our Hero

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[Today, I am bringing you a guest post from Mark Rabkin.  I have been on Mark for awhile to write a guest post.  He is doing a tremendous job looking at the insurance and surety concerns related to green building.  Back when I was looking at alternatives for the D.C. Green Building Act bond requirement, I leaned on Rabkin's knowledge of the surety industry.  You may recognize Rabkin's post, which highlights surtey and insurance implications from LEED de-certification, because it was originally a comment last Friday.  Check out other posts from Rabkin over at Konstructr.com.]

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Love might be too strong of a word but you get the point.  The idea of LEED de-certification has touched off a firestorm of comments, some in support and others in objection.  I think a follow up post is warranted. 

First, I want to clarify one important piece of information as I noticed some were heading down the wrong path.  The LEED 2009 Minimum Project Requirements (MPR) require, among other things, that projects report energy performance data.  If projects do not report energy data, then LEED certification may be revoked (i.e. de-certification).  The USGBC has not stated that LEED certification will be revoked for poor energy performance itself.  Go take a look at the USGBC's MPR webpage if you get a moment.

Furthermore, the USGBC's decision to require energy reporting and threaten LEED de-certification makes sense.  Why?

The number of people complaining about LEED certified projects that were not reporting energy performance reductions was growing everyday.  Ever heard of Henry Gifford?  He actually engaged in an open debate with the USGBC in March 2009 about the merits of LEED certification.  This was not good press.  This was  not a good development for the USGBC.  

In response, the USGBC took a dramatic step to fix the problem.  The USGBC has taken what I think is only the first step to ensure improved energy performance.  Additionally, the USGBC used the only "stick" (i.e. enforcement mechanism) it had available:  LEED de-certification. 

On Wednesday, there was a great piece in ENR regarding the LEED energy reporting and de-certification.  Both an American Institute of Architects representative and a Building Owners and Managers Association representative came out in favor of the reporting requirements.  Of course, there was some criticism in the ENR article regarding LEED de-certification: 

The “bottom line” is, these conditions “may end up doing more harm than good for the future vitality” of LEED, says attorney Edward B. Gentilcore, a partner of Duane Morris LLP, Pittsburgh. “This would be a significant loss in light of the accomplishments to date,” he adds.

Mr. Gentilcore is a fellow construction attorney.  Us attorneys are going to be worried about any new requirement that creates additional risk and liability.  That is why we are here.  We are here to worry about your risks and liability.

The moral of the story?  As LEED 2009 changes are implemented, your contracts need to change as well.  Let us do the worrying for you.

Photo:  JonBen

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Disclaimer:  If you are sensitive to or frightened by new risks and liabilities in the green building industry, please skip this post.

On Monday, I highlighted the USGBC's decision to create requirements to ensure a building's performance matches modeled energy savings.  I finished the post by asking, what happens to projects that do not comply? 

Okay, brace yourself: 

NOTE: CERTIFICATION MAY BE REVOKED FROM ANY LEED PROJECT UPON GAINING KNOWLEDGE OF NON-COMPLIANCE WITH ANY APPLICABLE MPR.  IF SUCH A CIRCUMSTANCE OCCURS, REGISTRATION AND/OR CERTIFICATION FEES WILL NOT BE REFUNDED. 

It is time to introduce a new word into your green building vocabulary:  de-certification. 

Everytime I start thinking about the implications from de-certification, my head starts spinning and I have to sit down. 

It just happened again. 

I have definitely not uncovered all of the potential issues, but here are three that immediately jump to mind:

1.  De-certification makes regulations tied to LEED certification very difficult to enforce.  What does a jurisdiction do if a project is de-certified?

2.  Insurers and sureties are going to be extremely concerned about coverage issues after design and construction work is complete.  Could an architect or contractor remain on the hook for potential de-certification long after a project has been completed? 

3.  For you owners out there, the commitment to provide energy data must carry forward if a building or space changes ownership or lessee.  How in the world do you write this into a contract? 

The room is starting to spin again.  Please elaborate on any additional risks and liabilities implicated by de-certification in the comments.

Photo:  Kevin (iapetus)

Update:  Also check out Stephen Del Percio's detailed analysis of the Minimum Project Requirements. 

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As I mentioned in my June 24 post, starting June 26, the USGBC eliminated public CIRs in order to improve the functionality of the LEED rating system.  The USGBC's Peter Templeton provided the following explanation for eliminating the public CIRs:

Under the new LEED certification model, standards development and project certification responsibilities are divided between USGBC and GBCI respectively to improve capacity and timeliness. CIRs will be issued by certification bodies under the guidance of GBCI and will continue to fulfill their primary purpose of providing project-specific clarifications regarding the LEED requirements. An unavoidable consequence is that rulings will no longer be made by the LEED Technical Advisory Groups and, therefore, cannot be applied universally.

In short, LEED certification became so popular that the USGBC had to begin allowing certification through independent certification bodies.  Vandana Sinha, over at the Washington Business Journal, recently highlighted the LEED backlog that had resulted in 5 month waits for certification determinations.  

The USGBC responded to the backlog by delegating certification to the Green Building Certification Institute (GBCI), which will then be responsible for ten additional "certification bodies."

With that change, the council employees who touched every LEED design and construction application will turn the job over to 150 trained reviewers who will manage the process from first draft to final award for an expected 3,000 certifications this year. The affiliates foresee ramping up by an additional 50 to 75 people next year, when projections call for up to 3,600 new certification requests.

The USGBC no longer controls certification responsibilities.  Instead, ten independent companies will interpret LEED credits and apply them to projects seeking certification.  Since the USGBC will not  directly oversee the ten companies, the USGBC could not review the CIRs.  As a result, the USGBC was no longer comfortable with universal application of CIRs.

The Washington Business Journal also reported that the GBCI calculated that the LEED backlog will be wiped out by June 26. 

That was last Friday!  Did this happen? 

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If there was a LEEDigation doomsday clock, I would move it up about 5 minutes towards midnight based on the following decision by the USGBC.* 

Real Life LEED recently reported that the USGBC has decreed that, starting June 26, 2009, Credit Interpretation Requests (CIRs) will no longer be applicable to all projects: 

"Effective June 26, 2009, credit interpretation requests (CIRs) submitted by any registered project will no longer be vetted by USGBC or its LEED Technical Advisory Groups. As a result, CIR rulings will now be applicable only to the project that submitted them. For LEED version 2 projects, rulings on CIRs submitted prior to June 26, 2009, will be honored until they are retired by USGBC or incorporated into general USGBC-issued project guidance, such as through errata or addenda."

All you non-practitioners out there may be wondering what the heck a CIR is and why this matters.  The best way for me to explain a CIR is to compare it to case law. 

When you are talking to a client that is thinking about a lawsuit, one step you may undertake is reading up on case law.  You read case law to find a factually analogous situation to determine if your client has a good chance of winning. 

CIRs function the same way as case law.  To achieve LEED certification, a project must achieve a certain number of credits.  But the requirements for each credit are often open to interpretation.  To resolve this uncertainty, a technical advisory board evaluates each CIR to determine whether or not a credit should be granted.  Historically, USGBC has published these credit  interpretations to inform other builders and designers in future projects.  The first comment after the Real Life LEED post really hits at the importance of CIRs:

Wonder why they decided to do this, public CIRs help project teams immensely. They give good information on how the USGBC look at and interpret credits so that we could submit proper documentation or know what is and isn't acceptable strategies to meet the credits. I don't think LEED is in the stage where it is clear enough to not be interpreted several different ways.

You probably already see why LEEDigation is more likely without public CIRs.  Without public CIRs, architects, engineers and contractors are going to have more trouble interpreting credits and determining strategies that will successfully achieve a LEED credit.  As a result, the likelihood that projects will fail to achieve LEED certification increases dramatically.  As we've discussed, failure to achieve promised LEED certification leads toLEEDigation.

On Monday, we will look at why the USGBC had to do away with public CIRs.

But what do you think about this change? 

*To be clear, the USGBC had to make this business decision.  My post on Monday will go into more detail as to why this decision was necessary.

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Over the weekend, while writing a response to a Summary Judgment Motion, I was reminded of the most important legal principle in construction law.  Under the Spearin Doctrine:

"If [a] contractor is bound to build according to plans and specifications prepared by the owner, the contractor will not be responsible for the consequences of defects in the plans and specifications."

United States v. Spearin, 248 U.S. 132, 39 S.Ct. (1918).*

What does this have to do with green building? 

Generally speaking, if a contractor agrees to build a green building project according to the plans and specifications and it does so, the contractor will not be responsible for any subsequent problems. 

Of course, this won't always be the case.  Some contractors will also guarantee LEED certification.  If a contractor were to guarantee LEED certification, that contractor might be required to achieve LEED certification regardless of the project design.  The contractor could build according to the plans and specifications, not achieve LEED certification due to some design error or omission, and the contractor might still be on the hook for the failed certification. 

Do you see the problem there? 

*Today marks what I believe is the first case law ever cited on Green Building Law Update.  We are 150 entries in and I managed to never cite to case law.  That is either extremely impressive or embarrassing. 

Photo:  SnoShuu

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Last week, I gave a presentation on green building law to legal counsel for D.C metropolitan jurisdictions.  One of the things that I said, and have repeated to other groups, is that green schools will be a hotbed for initial LEEDigation (see slide 25).  

Want to see an example of what I am talking about? 

The one-year delay in the opening of a new elementary school in Upper Marlboro was largely caused by school system planners' struggles to meet state-imposed environmental standards that were established last year, a school development officer said.

 

The Prince George's County Public Schools' Capital Improvement Program office submitted a final building permit for approval later than expected because designers had to incorporate changes in Leadership in Energy and Environmental Design standards, said CIP officer Rupert McCave.

 

"It changes over the year because everyone is still growing and learning the new requirements," McCave said. "You can talk to any school district in Maryland and they'll tell you it's a learning curve."

"Economically, [the delay] concerns me," said Board of Education member Donna Hathaway Beck (At-large), who said she asked the school system's chief operating officer, Lawrence Fryer, about the delay at a CIP meeting early in April. "We're paying money now, but we're not going to be using the building until next year."

"It's just disappointing, and you remind them that this doesn't happen again," she added.

Disappointed owners of green buildings result in LEEDigation.  How are you managing green building expectations? 

Photo:  Dean Terry

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Today, we run Part II of the Eric Corey Freed interview.  I divided up the interview into two posts because the interview was long and Eric does a great job illuminating green building legal issues in Part II:   "Architects would not be able to guarantee LEED certification because the architect is not the one providing the LEED certification. . . .  I also don't think given the science of building technology that we can guarantee anything about energy usage."    

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My friends over at Sensible City recently offered me the opportunity to interview Eric Corey Freed.  It's not everyday I get to interview someone who was just interviewed by the New York Times so I jumped at the chance.  Even better, Eric is an "organic architect" and studied under a former student of Frank Lloyd Wright.  I am getting married in October at Wright's Arizona home, Taliesin West, so I couldn't pass up this opportunity. 

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Update:  For a rundown of green building provisions in the stimulus pacakge, see this post.

Thank you to everyone who attended Rutherfoord's "Trends in Green Building" seminar yesterday and listened to my "Green in the Stimulus" presentation.  It was great to recognize so many faces in the crowd.  If you came up and spoke to me about speaking engagements or green building legal programs offered by my law firm, please follow up with me so we can make it happen.  For those of you who missed the event, I will post the powerpoint I presented to Green Building Law Update (hopefully with a voiceover) on Monday. 

Now for the bad part. 

The stimulus package is going to result in increased levels of green building litigation. I hope I am wrong, but I think it is inevitable. 

In my "Green in the Stimulus" presentation, I highlighted three factors that will contribute to an increase in green building litigation.  The first factor is an influx of inexperienced parties attempting to build green.  There are many state and local governments that, to date, have not been substantially involved in the green building industry.  These entities, with the help of the stimulus funding, are now going to require green building projects through regulation.  Here is an example.  These state and local governments will be required by the timelines of the law to fast track these green building developments.  Do you see the problems that can arise from this scenario?

The second factor will be the requirement that projects attain LEED certification.  The website of the General Services Administration states:

As of 2003, all new GSA building projects must be certified through the Leadership in Energy and Environmental Design (LEED) Green Building Rating System of the U.S. Green Building Council, and Silver LEED rating is encouraged. 

The GSA will not be the only entity requiring LEED certification for projects.  Who will be responsible for achieving the LEED certification?  What happens if the project fails to achieve the LEED certification?

Finally, the third factor that will result in more green building litigaiton is the emphasis on energy efficiency.  The drive to build green primarily centers around the desire to reduce building energy use.  However, it is very difficult to anticipate how a building will actually perform.  Under the LEED rating system, energy efficiency is modeled through ASHRAE.  Buried deep in a ASHRAE appendix (ASHRAE 90.1, Appendix G, Section G1.2, Note 2) is the following disclaimer:

"Neither the proposed building performance, nor the baseline building performance are predictions of actual energy consumption or costs for the proposed design after construction. Actual experience will differ from these calculations due to variations such as occupancy, weather, energy use not covered by this procedure, changes in energy rates between design of the building and occupancy, and the precision of the calculation tool."

Not every government or municipality will see or understand this caveat.  Heck, many of the entities requiring certification don't even understand the acronym for the LEED rating system.  What happens when the new green buildings don't actually reduce energy usage? 

I am not the only one concerned about these issues.  Real Life LEED initially raised factor three.  Are we wrong?  Tell me. 

Related Links:

• LEED Risk Management:  Crossing the Model/Reality Chasm (Real Life LEED)
• "The Stimulus:  Now for the Hard Part" (GBLU)
• The Stimulus:  Green Building Provisions (GBLU)
• The Stimulus:  "LEEDS"ing the Way (GBLU)
• The Stimulus:  FedBizOpps Has Green (GBLU)
• The Stimulus:  States Have Green Too (GBLU)
• The Stimulus:  Build Relationships Now (GBLU)

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[As part of the evolution of Green Building Law Update, I like to try out new post topics and formats.  Today I am beginning a new feature at Green Building Law Update:  “Sensible Interview.”  Please let me know what you think.]

Back in December, Kimberly Miller of Sensible City provided me with a press pass to EcoBuild, which is a fantastic event for those interested in discussing green building policy.  At EcoBuild, I was able to interview some brilliant people that have been involved with green building much longer than myself. One such individual was Marvin Malecha, the 2009 American Institute of Architects (AIA) President. I hope you enjoy the interview. 

Chris:  The topic of your keynote speech at Ecobuild was "Inheritance & Responsibility."  How does inheritance and responsibility tie into the current green building industry?

Marvin Malecha:  Perhaps our greatest inheritance is the environment. But it is important to understand that inheritance does not always imply that an abundance was given. In fact many times inheritance has also been defined as the debts of another generation to be paid by the next and the next. In the case of the environment we are in a position of both. We have inherited a world with areas still pure. Areas that contain within them the memory of a planet that was a pure habitat. A planet that nurtured life.

We have also inherited a planet with grave problems that have evolved over time causing toxic sites to be established and levels of carbon in the air that threaten life. Our recognition of both the unspoiled and the spoiled must lead us to a strategic action plan for the environment. Our responsibility is to protect that which is yet unspoiled and to save those species soon to be lost forever if we do not act. It is our responsibility to restore in as timely a fashion as possible those systems we have placed under duress. 

The current green industry provides the tools for both actions. We do have the technology to utilize building materials that are in harmony with the land. We do have the capability to purify water through natural systems that can be established in opposition to traditionally engineered water purification plants. We can plan settlements with a greater density to preserve open tracts of land and protect wildlife habitats. New building materials can utilized recycled materials. they can be produced utilizing manufacturing techniques that minimize carbon emissions in the manufacture and reduce waste. New systems can help to regulate building operations reducing the power necessary to operate a building and thereby reduce carbon emissions and more buildings can be constructed of local materials establishing the sense of region while minimizing the energy expended in delivery.

Chris:  Green Building Law Update tends to focus on the legal aspects of the green building industry.  As you know, the AIA recently incorporated new duties for architects related to green building.  Can you discuss these duties? 

Marvin Malecha:  The AIA has established a sustainability requirement for annual continuing education by members. Four hours out of a required eighteen hours are now necessary to maintain membership in the AIA. It is the intention of the Board to insure that every AIA member is knowledgeable about questions of sustainability and able to employ these ideas in architectural work. It is important to note that the AIA also considers sustainability course work as meeting the health, safety and welfare requirements of the institute.

Also, the Board of Directors has included a provision on sustainability in the institute Code of Ethics. The connection between environmental well-being and human health is essential and it recognizes the most fundamental responsibility of the architect. 

Chris: How do architects manage the risk associated with green building projects?

Marvin Malecha:  The management of risk in contemporary society is a reality of professional practice. Such risk is simply unavoidable and therefore several steps must be taken by the institute on behalf of its members and by members individually.  It is necessary for the institute to foster significant research on the subjects related to sustainability and environmental well-being so that members will be able to act from a basis of knowledge.  It will also be necessary to encourage research on the subject of building performance so that architects will be able to act from a body of knowledge rather than unconfirmed opinions.

Certainly, it is also necessary that to address the design of a truly environmentally responsible project a diverse team of professionals must be engaged. Diverse teams like a diverse natural environment are healthy, even vital in this age of heightened awareness. The Institute makes no assertion that it is the only source of knowledge on this subject. We are reaching out to a broad spectrum of partners from all of the associated professional disciplines and related professional associations. Our commitment is to a carbon neutral target not to any specific rating system. We encourage this same commitment to integrated teams by our members.
 

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I like categories.  I like to categorize ideas, issues and thoughts in order to develop my understanding.  The same is true for green building law; I like to think of this emerging practice in terms of categories.

The other day I was asked "what is green building law?" by an environmental attorney.  I had never really been asked that question before so I reverted to my categories.  This is what I told the environmental attorney, almost word for word:

Green building law has both front-end and back-end components.  At the front end, you have the contract.  Additionally, you have to deal with financing, land use and real estate legal issues.

At the back end, green building law deals with potential disputes.  These potential disputes fall into one of three categories:  

(1) Certification - Disputes arise from green building certification when a project fails to achieve certification.  Which party will be responsible for the failed certification?

(2) Regulations - Regulations refer to those green building regulations that require or incentivize green building development.  Failure to comply with these regulations can result in green building litigation.

(3) Green building strategies -  Specific components of a green building  that can result in litigation.  The example I give is a green roof that leaks.  Who will be responsible for the leaking green roof?

Do these categories properly define green building law?  What am I forgetting?  Most importantly, do you have a better understanding of what a green building attorney can do for your business?  

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One of Green Building Law Update's favorite topics in 2008 was the Shaw Development v. Southern Builders case. You may recall that the Shaw Development v. Southern Builders complaint was one of the first examples of green building litigation, which resulted from  a project's failure to obtain green building tax incentives.

After recently research the condominium project, I was stunned, but not all that shocked to read the following headlines:

Crisfield Condo Sales Slump; Captain's Galley Restaurant Closes

Condominium auction sale canceled

The first article describes the struggling Shaw Development project:
 

Twenty-three condominiums sit along the water in Crisfield. So far only six have been sold. At the bottom of the condominium is the empty Captain's Galley restaurant. It closed on Monday. Shaw said the operators have not paid rent in a couple of years.

The second article describes the results of the condominium project's struggles:

A foreclosure sale planned for the waterfront Captain's Galley Condominiums was called off Friday after the owner filed for Chapter 11 bankruptcy. The renewed interest in the condo units is due in part to recent price reductions. Two bedroom units now start at $247,000 and a three-bedroom listed at $369,000 will probably be reduced to $359,000, she said.

"They're huge reductions -- less than half the original price," she said.

If the Shaw Development v. Southern Builders case had gone to trial, it would have resulted in very messy green building litigation.  A good attorney would have argued that the condominium sales slump and the restaurant closing was the result of the project's failure to achieve LEED Silver certification.  A good attorney would have argued that the failure to achieve certification not only resulted in the lost tax incentives, but also resulted in the slumping sales and restaurant closing. 

Do you think Shaw Development could have successfully recovered these damages?

Related Links:

• Crisfield Condo Sales Slump; Captain's Galley Restaurant Closes (WBOC)
• Condominium auction sale canceled (DelmarvaNow.com)
• Shaw Development, LLC Files for Chapter 11 Bankruptcy Protection (GRELJ)
• Shaw Development v. Southern Builders (GBLU)

Photo Credit:  WBOC

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sarasweeney: Working on LEED application. Totally confused myself. Had 1 pt down for LEED Energy & Atmosphere Credit 1, when we had 6. Phew. All is right with world again.

 

chrischeatham: Glad you fixed that. Makes me wonder what happens when someone doesn't actually catch this type of mistake...

 

sarasweeney:  Yes, was wondering what I was going to tell the client for about 15 minutes. Um, we actually are Silver now...

*If you would like to learn more about twitter, watch this video.  You can also follow my twitter stream here.  Twitter is going to be all the rage in 2009, you should jump on board now.

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Green Building Law Update came across an interesting lawsuit in Texas challenging a green cement regulation.  First, here's a little background on green cement regulations: 

Green cement resolutions put pressure on wet kiln operators to either update their smog-causing pollution controls to the level of dry kilns, or replace their wet kilns with new dry ones. They do this by incorporating state emissions standards as specs in bids for cement purchasing. These specs favor more aggressive pollution controls.
 

Late in the afternoon on the day before Thanksgiving, lawyers for Kansas City-based Ash Grove Cement filed suit in federal court against the cities of Dallas, Ft. Worth, Arlington, Plano, The Dallas County School District and Tarrant County for adopting “green cement” resolutions that favor modern, less polluting dry kilns over older, dirtier wet kilns - like the three the company operates at its 43-year-old Midlothian plant, south of Dallas.

 

“This is not a case about air quality; rather, it is about whether the defendants, however well intentioned but misguided their goals might be, may ignore laws they do not wish to follow, may pass resolutions which are unfair, unwise and unlawful, and may take property away from Ash Grove in an arbitrary and capricious manner,” Ash Grove’s complaint states.

• Group Condemns Ash Grove Lawsuit Against Texas Green Cement Cities, Predicts Backlash (Dallas Green Zine)
• Ash Grove sues over Texas green cement resolutions (KC Star)

 Credit:  Thanks to Rich Cartlidge for originally sending me this story. 

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Sorry, I won't be answering this rhetorical question today.  Instead, a group of construction, design and surety legal experts will attempt to address this difficult question at an upcoming symposium: 

What:  Trends in Green Building Seminar

Who:  Tom Mawson - The USGBC and Trends in Green Building; Chris Cheatham - The Emergence of Green Building Litigation; Bryan Phillips - Green Construction: A Legal Perspective, Dan Knise - Designing Green - With Reward Comes Risk, Geoff Delisio - A Surety Perspective on Green Building

When: Tuesday, December 2, 2008  9:00 - 12:00 AM

Where:  4301 Wilson Boulevard, Arlington, VA 22203

You can also download a complete invitation here. 

I will be speaking about the emergence of green building litigation with a focus on the Shaw Development v. Southern Builders case.  Other speakers will address green building issues from a construction, design and surety perspective.  Seating is limited so please RSVP by November 21 to Nancy Shipley at nancy.shipley@rutherfoord.com. 

Let me know if you have any questions regarding the event.  If you are going to attend let me know (chris@greenbuildinglawupdate.com) -- I would love to meet some of my readers!  
 

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Over the weekend, we here at Green Building Law Update had some green building epiphanies.  So let’s start with epiphany number one.  As I was driving into my law firm’s office in Tyson’s Corner on Saturday, I looked out at the construction and thought to myself, why am I not writing about that? 

This isn’t any regular construction I am referring to either.  The construction I see everyday is the beginning stages of the Tyson’s Land Use Task Force Recommendations.  While I have been perusing the Internet for green building stories, there is a green building story happening in my backyard! 

The first time I read about the Tyson’s Corner redevelopment project was in this post  from Kaid Benfield’s NRDC blog.  Kaid describes the current design of Tyson’s Corner:

an absolute mess of a place that would be hard-pressed to function worse environmentally or even as a place to navigate in a car.  You'd have to be suicidal to try it on foot. 

Kaid is right – I have worked in Tyson’s for three years and walked to lunch once.  Thankfully, the Tyson’s Land Use Task Force Recommendations are aiming to fix these problems by focusing on “smart growth.”  Smart growth generally is an urban planning and transportation theory that concentrates growth in the center of a city to avoid urban sprawl.  

Maybe you are wondering, what does this have to do with green building?  Next time we discuss the Tyson’s Corner redevelopment, we will look at the Task Force Recommendations, which include green building regulations.  

Related Links

• Retrofitting suburbia for the 21st century (Kaid Benfield)
• Smart Growth (Wikipedia)

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Today we are going to take a hiatus from the discussions of green building in the current financial markets and, instead, wrap up what potentially could have been major green building litigation.  On October 17, 2008, the Lerner family and the D.C. Government resolved litigation stemming from the LEED-Silver certified Washington Nationals Stadium. 

In previous Green Building Law Update posts, we focused on the stadium's certification and discussed the “green” stadium scoreboard that incorporated “high-definition LED technology that the Lerner family paid to have upgraded beyond the basic specifications called for in the ballpark's design.”  During negotiations over the protracted stadium dispute, it came out that Lerner representatives were unhappy, in part, about the lighting on the scoreboard that they paid for through an apparent change order.

Based on the published Settlement Agreement, the dispute over the LED-lit scoreboard remained a sticking point throughout the negotiations.  On page 1 of the Settlement Agreement, the Lerner Family agreed to withdraw and irrevocably waive “its demands for credits . . . for disputed scoreboard change orders.”  What were the final results of the negotiations?  The City will pay the Nationals $4 million to resolve the disputes and, in return, “the team will pay $3.5 million in rent that was due to the city last spring.”

With this settlement, the green building industry dodges what would have been the most substantial green building litigation to date.  But the day is coming.  Are you convinced that you need to have a rock solid green building contract?

Related Links

• Washington Nationals to pay overdue rent (BizJournal)
• Giving you the Score, Plus a Whole Lot More (Wash. Post) 
• Litigation Involving "Green" Nationals Stadium (GBLU)
• Stadium LED Lights Strike Out? (GBLU)
• Giving You the Score and A Whole Lot More (Wash. Post)
• Nationals Park Revenue Falls Short of the Mark (Wash. Post)
• Some Council Members Criticize Nats Settlement (Wash. Post)

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To finish off the week at Green Building Law Update, we are going to attempt to answer another reader question with the help of all the readers out there. In a previous post, Anna MacLeod posted the following question: 

I need to find some DC-based architect, commercial building development companies, etc… Anyone who would be affected by the requirement described in the article below.

"Washington, D.C., was among the early cities to require privately owned buildings to meet LEED standards. Now, it is requiring the city government as well as private building owners to benchmark their buildings using the Energy Star Portfolio Manager tool and to submit performance data to the City, which will then publish it for the public.'

If anyone can help me by sending me any contacts or websites it would mean a lot to me.

I am glad Anna asked about this issue because I have been meaning to post on this topic. Back on July 15, 2008, the D.C. City Council unanimously passed The Clean and Affordable Energy Act of 2008.  Among the provisions in the Act is a requirement for Energy Star benchmarking:

Beginning in 2010, it would require commercial property owners to generate an Energy Star efficiency "score" for their buildings using free online tools provided by the Energy Star program. That score would be made available to the public by the District Department of the Environment (DDOE).

You may be asking yourself, what is the point of this benchmarking program? According to Cliff Majersik, the program director for the Institute for Market Transformation, the benchmarking program will create “a market-based demand for energy disclosure.” If the D.C. Government’s plan works, there will be increased demand for green buildings. In short, you might want to think twice about developing a non-green building in the District of Columbia. 

So can anyone out there help out Anna? If you are currently using the Energy Star benchmarking tool or The Clean and Affordable Energy Act of 2008 will affect you, please drop a note in the comment section below with more details and contact info for Anna. Thanks!  

Related Links:

• The Clean and Affordable Energy Act of 2008 (DC Council)
• In Washington, DC, Energy Star Benchmarking Law Arrives (CoStar Group)

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Today we are wrapping up our discussion of Shaw Development v. Southern Builders, one of the first examples of major green building litigation.   On Monday we discussed the basic facts of the case; on Wednesday we looked at the contractual green building requirements between the two parties; and on Friday we looked at Shaw Development’s stated causes of action. We conclude our discussion today by looking at the damages alleged by Shaw Development. 

Parties that bring claims or lawsuits based on a green building project’s failure to achieve certification must also prove damages. Often, owners seek green building certification to obtain government incentives or comply with regulatory mandates. In Shaw Development’s counter-complaint, damages were based on the owner’s failure to obtain green building tax credits: 

Shaw Development demands judgment in its favor and against Southern Builders for . . . Six Hundred Thirty-Five Thousand Dollars ($635,000.00) in tax credits for failing to construct the Project in conformance with a (LEED) “Silver Certification . . . .”

The tax credits for which Shaw sought damages were part of a State of Maryland green building tax incentive program. Many cities throughout the country have enacted similar tax incentives to entice developers to build green. Failure to achieve anticipated incentives can result in litigation similar to this case. Additionally, many cities, including Washington, D.C., New York, Los Angeles and San Francisco, have adopted mandatory green building laws and codes that will require the incorporation of green building strategies into all construction projects. Failure to comply with green building laws and codes creates additional liability risks for contractors. 

As inexperienced parties undertake green building projects, unmet expectations will result in disputes and lawsuits. Parties must protect themselves from the start by clearly stating all parties’ understanding of the green building certification process and what is to be achieved. Furthermore, parties must fully understand the specific requirements of the green building incentives and mandates that apply in their locality. While Shaw Development v. Southern Builders was apparently settled without a trial, further green building litigation is just around the corner and is unlikely to be as easily settled.   Check back with Green Building Law Update as we continue to discuss how to mitigate your green building risks.   

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Today, Green Building Law Update continues a discussion of the Shaw Development v. Southern Builders case, which demonstrates the emergence of green building litigation.  On Monday, we reviewed basic facts related to the legal case and on Wednesday we looked at the contract between the two parties to determine green building responsibilities.  Today we focus on the causes of action alleged by Shaw Development in the counter-complaint.  

When owners and developers move forward with green building projects, they often do so with the goal of achieving a specific green building certification.  What happens if a building fails to achieve the anticipated level of green building certification?  

The owner may blame the designers, engineers, contractors and subcontractors for such a failure and sue one or all of the parties. Based on the counter-complaint and Project Manual, Shaw Development anticipated that the Project would achieve LEED Silver Certification and brought an action for breach of contract and negligence against Southern Builders when the certification was not obtained.  

The liability of parties for failure to achieve a green building certification will be determined by the relevant contracts or related promises, which were reviewed on Wednesday.  If a contractor guarantees a specific green building certification, the contractor will be responsible for the failure to achieve certification.  The contractor should only commit to constructing the building per the approved design and using the approved materials.  If the contractor performs in accordance with the contract, design and specifications, there should be no liability even if the building does not achieve the desired certification level.  The contractor also needs to make sure that potential liabilities flow down to its subcontractors.  The owner, on the other hand, may have valid reasons for requiring that the contractor guarantee green building certification.  For example, the project may have to achieve certification to comply with green building codes or regulations. 

On Monday, we will review the related damages alleged by Shaw Development and finish the discussion of this case.  In the meantime, check your green building contract! 

Related Links

• The Anatomy of America's First Green Building Litigation (gbNYC)
• The First LEED Lawsuit...Great.... (Real Life LEED)
• Open the Floodgates:  The Era of Green Building Litigation (Greener Buildings)

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This week at GBLU, we are focusing on the Shaw Development v. Southern Builders case, the first significant example of green building litigation.  On Monday, GBLU explained the importance of the case and reviewed the basic facts.  Today GBLU will review the most important part of the case, the contract between the parties and accompanying green building responsibilities.  

Why is the contract the most important part of this case?  The contract is the primary means for dictating a contractor’s green building obligations.  Shaw Development and Southern Builders relied on an AIA A101-1997 Standard Form of Agreement Between Owner and Contractor as their general contract, which did not include green building requirements.  Additional requirements were incorporated through a Project Manual that made specific reference to green building certification:  

Project is designed to comply with a Silver Certification Level according to the U.S. Green Building Council’s Leadership in Energy and Environmental Design (LEED) Rating System, as specified in Division I Section “LEED Requirements.” 

Shaw Development’s AIA contract and incorporated Project Manual lack clarity in articulating Southern Builders’ responsibility for constructing a LEED Silver certified project.  While the Project Manual does state that the project was designed to comply with LEED Silver certification, it does not assign the contractor responsibility to construct the project according to LEED Silver certification.  Instead, as stated in A101-1997, the contractor is responsible for building according to the designs and specifications.  Thus, the contractor could be liable if it failed to build according to plans and specifications, which resulted in a failure to achieve LEED certification. 

Owners and contractors are well served to clearly describe the contractor’s responsibilities related to the construction of a green building project.  If your green building contract looks anything like the contract from Southern Builders v. Shaw Development, you should think about revising it. 

Related Links

• The Anatomy of America's First Green Building Litigation (gbNYC)
• The First LEED Lawsuit...Great.... (Real Life LEED)
• Open the Floodgates:  The Era of Green Building Litigation (Greener Buildings)

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Way back on August 13, GBLU’s inaugural post focused on the impending green building litigation and factors that would cause the litigation.  One of the factors that was described focused on parties’ financial expectations:  “Parties undertaking green building projects for purely financial reasons will expect to make a profit.”  In order to make a profit from a green building, the project typically has to be certified.  Thus, it was anticipated that green building litigation would most likely occur when a project failed to achieve certification.  

Not surprisingly, we now have an example of green building litigation arising from this very scenario.  On February 16, 2007, Shaw Development, L.L.C. (Shaw Development) filed a counter-complaint against Southern Builders, Inc. (Southern Builders) in the Circuit Court of Somerset County, Maryland arising from, in part, the projects failure to achieve LEED Silver certification.  While the case never proceeded to trial, Shaw Development’s counter-complaint is instructive as to the future of green building litigation.  Our next three GBLU posts will look at the Shaw Development v. Southern Builders case in detail:  

•    Monday we will review the facts
•    Wednesday we will review the contract
•    Friday we will review the causes of action
•    Next Monday we will review the damages and provide some tips to avoid this type of litigation

The facts are similar to most construction projects.  Prior to the lawsuit, Shaw Development purchased property in Somerset County, Maryland and retained Southern Builders to construct a condominium project on the property.  In the counter-complaint, Shaw Development alleged, among other things, that Southern Builders failed to construct the condominium project in a good and workmanlike fashion and, as a result, the project did not achieve USGBC LEED Silver certification.

The contract between two parties is key to determining liability between two parties undertaking a green building project.  Check back Wednesday when we review the contract between Shaw Development and Southern Builders.  

Related LInks

• The Anatomy of America's First Green Building Litigation (gbNYC)
• The First LEED Lawsuit...Great.... (Real Life LEED)
• Open the Floodgates:  The Era of Green Building Litigation (Greener Buildings)

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Back in August, GBLU discussed protracted disputes between the Washington D.C. Government and the Washington Nationals owners over the construction of the Nationals’ new stadium.  The dispute centers on when the LEED certified stadium was substantially complete.  To date the Lerner family, the team owners, have withheld payment of $3.5 million as a result of the dispute.  It appears the dispute is not going away either: 

In negotiations with the D.C. Sports and Entertainment Commission, which oversaw stadium construction, Lerner representatives have cited problems with the ballpark, including the quality of the sound system and the lighting on the scoreboard, according to sources familiar with the talks who spoke on condition of anonymity because of the dispute. 

What does this have to do with green building?  The lighting on the Nationals’ scoreboard is “made possible by high-definition LED technology that the Lerner family paid to have upgraded beyond the basic specifications called for in the ballpark’s design.”  LED lighting uses significantly less energy than traditional lights and is an increasingly popular green building strategy in stadiums, like the Beijing Olympic Basketball Gymnasium.  In this case, it appears the Lerner family’s expectations of the LED scoreboard lights were not met.  

Could this result in significant green building litigation between the D.C. and the Lerner family?  The City seems to think so:

Matthew Cutts, chairman of the D.C. Sports and Entertainment Commission, which oversaw stadium construction, said the agency is in the process of hiring the law firm Seyfarth Shaw to handle the case.   

Related links:

• Litigation Involving "Green" Nationals Stadium (GBLU)
• Nationals Park Revenue Falls Short of the Mark (Washington Post)
  
• 7 Amazing Olympic Green Buildings (Jetson Green) 

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If you are in green building and worried about associated risks, this may be a post you do not want to read.  On September 11, the Journal Record published an illuminating, but chilling, article regarding green building litigation.  The opening sentence really says it all: 

As LEED projects proliferate, lawyers foresee an era of green-construction lawsuits.

The article also highlights one of the foremost experts on green building litigation, Frank Musica.  Musica is a risk-management lawyer with Victor O. Schinnerer & Co. Inc., a professional liability insurance underwriter.  Musica’s slideshow presentation “Don’t Let Green Design Cause Red Ink” provides over twenty actual green building claims involving architects.  Musica points how green building litigation will most likely develop:

“When a developer has a problem with a project, he’s going to claim a number of things,” Musica said, “including, ‘You told me I’d get a certification, and I’m not getting it.’”

In the article, many attorneys provide great advice on how to avoid green building liability.  For example, parties should not promise a “green building” but should instead provide detailed specifications that incorporate green building strategies.  After the sage advice, though, the article again turns ominous:

From the plaintiff’s perspective, Murano said, it won’t be necessary to identify who’s responsible when a building doesn’t get its anticipated certification or doesn’t perform up to snuff.

“You don’t have to pick among the carnage,” he said. “You just throw everybody into the mill and say, ‘You didn’t collectively perform. You guys flesh it out. All I know is that I asked for a LEED platinum building, you said OK, and you didn’t meet that.’”

Attorneys are starting to pay attention to green building in growing numbers.  GBLU will continue to review green building legal developments to keep you better informed.  In the meantime, maybe you should review those green building contracts again.

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