By J. Wylie Donald, Partner, McCarter & English
One of the more infuriating things about lawyers is that often, if they do their job right, their client wins and no one else benefits from it. This is what happened on August 15 before Judge Sand in the Southern District of New York in the closely followed green building case, Gifford v U.S.Green Building Council (click for lexis.com enhanced decision). The judge, in a short Memorandum & Order barely over seven pages (free download of unenhanced decision attached below) dismissed Mr. Gifford's case on procedural grounds. So we are left to wonder about the merits.
Mr. Gifford and his co-plaintiffs are building engineering professionals. They assert that the USGBC's LEED standard is false and misleading and has injured them in their business. Specifically, "LEED-certified buildings are no more energy-efficient than non-LEED certified buildings. USGBC's own study data on the subject indicate that, on average, LEED buildings use 41% more energy than non-LEED buildings. There is no objective empirical support for the claim that LEED buildings consume less energy. LEED buildings are less efficient because the criteria that USGBC purportedly uses to certify buildings do not correlate with energy efficiency." First Amended Complaint ¶ 4 (free download attached below); also id. ¶ 32 (providing more detail). As a result of the LEED claims made by USGBC, customers purchase LEED services rather than plaintiffs' design services.
These injuries, according to plaintiffs, entitled plaintiffs to proceed in court for injunctive relief and damages under the federal Lanham Act for commercial misrepresentations and parallel state law claims.
USGBC defended on the ground that the plaintiffs had no standing to assert Lanham Act injury. The court agreed. Memorandum & Order at 7.
There are two tests for standing in the Second Circuit. Under the first test, the parties must be competitors. Id. at 4. Plaintiffs did not certify green buildings or accredit professionals, as USGBC did. Accordingly, they failed the first test. The second test, the reasonable commercial interest test, was more forgiving. There "a plaintiff must demonstrate (1) a reasonable interest to be protected against the alleged false advertising, and (2) a reasonable basis for believing that the interest is likely to be damaged by the alleged false advertising." Id. (citation omitted). Where the parties are not direct competitors a plaintiff must make a "more substantial showing of injury and causation.". Id. at 5 (citation omitted).
Mr. Gifford and his co-plaintiffs could not satisfy that test either. The court found the allegation that plaintiffs' professional services would be "subsumed" by USGBC was "speculative". It commented that "there is no requirement that a builder hire LEED-accredited professionals at any level, let alone every level, to attain LEED certification, ..." Id. at 6. (While technically correct, my LEED AP colleagues confirmed that as a practical matter they can't imagine a LEED project would proceed without a LEED AP on the project team. At the very least, having a LEED AP on the team entitles one to points toward certification.)
As to the specific allegation of misrepresentation regarding building efficiencies, there was no allegation that anyone relied on that statement to decline to hire Mr Gifford. So the plaintiffs lacked standing under the second test too. Id. at 7.
The absence of standing was fatal to the federal claims, which the court dismissed with prejudice. Id. As to the state law claims, it declined to assert supplemental jurisdiction and dismissed those claims as well (but without prejudice). Id. at 8.
The blogosphere reports that Mr. Gifford is considering his appeal. A press release by USGBC, Court Dismisses Lawsuit Against U.S. Green Building Council, states: "This successful outcome is a testament to our process and to our commitment to do what is right."
What the rest of us want to know, however, is whether there was any substance to any of Mr. Gifford's allegations. This is important and not only for the decision of whether it is sensible to build a LEED-certified building. One has to think about plans that go awry. Should a green building project fail and investors and lenders lose money (and it is a statistical certainty that this will happen), the injured parties will cast about looking for a place to lay the blame. Mr. Gifford might assert that false hopes raised by USGBC's claims are at the root of the problem.
20110815 Memorandum & Order (of Dismissal), Gifford v. U.S. Green Building Council.
Gifford v U.S. Green Building Council - First Amended Complaint February 7, 2011.
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Additional writings by J. Wylie Donald on the LexisNexis Communities:
The Debt Ceiling Furor Will Change the Climate of Climate Change Responses.
Coal Exports to China and Rising Temperatures.
Predicting Sea Level Rise - The Arctic Council Raises the Ante.
Looking Forward and Looking Back - Some Climate Change Response Perspectives and Predictions.
McCarter & English LLP on Insurance Coverage for Greenwashing Claims: It Depends on the Packaging.
J. Wylie Donald and Jocelyn G. Hill of McCarter & English LLP on Covering the Green Roof -- With Insurance.
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What the rest of us want to know, however, is whether there was any substance to any of Mr. Gifford's allegations. This is important and not only for the decision of whether it is sensible to build a LEED-certified building. One has to think about plans that go awry. Should a green building project fail and investors and lenders lose money (and it is a statistical certainty that this will happen), the injured parties will cast about looking for a place to lay the blame. Mr. Gifford might assert that false hopes raised by USGBC's claims are at the root of the