Class Action Lawsuit Filed Against US Green Building Council Assailing LEED Certification Process

October 14, 2010
by TODD D. KANTORCZYK
MGKF Special Alert

Last week, Henry Gifford, a self-described building energy efficiency expert, filed a federal class action lawsuit in the Southern District of New York, against the U.S. Green Building Council ("USGBC"), alleging that the USGBC's marketing efforts touting its Leadership in Energy and Environmental Design ("LEED") Green Building Rating System are inaccurate and actionable under federal and state statutes, as well as common law. This action will undoubtedly be followed closely by the green building industry, and the associated proceedings, if not the ultimate result, could have wide ranging impacts on how the USGBC and the industry approach LEED and other green building certification issues going forward.

The plaintiff class defined in the lawsuit includes four groups: (1) all persons who paid the USGBC for LEED certification in reliance upon the USGBC's statements about the benefit of LEED certification; (2) all persons who design energy-efficient buildings who have been injured by deceptive USGBC marketing practices; (3) all taxpayers whose tax dollars are spent on costs associated with obtaining LEED certification for public buildings; and (4) tradespersons who "lose money and valuable time" to comply with LEED standards. In the complaint, Gifford alleges violations of the Sherman Anti-Trust Act, the Lanham Act, the Racketeer Influenced Corrupt Organizations Act ("RICO"), and sections of the New York State General Business Law, plus a claim of unjust enrichment. The suit seeks compensatory damages of $100,000,000, punitive damages, and injunctive relief that prohibits the USGBC from making certain claims about the USGBC and LEED certification.

The factual allegations of the complaint primarily focus on two marketing statements made by the USGBC concerning LEED certification. First, the complaint takes issue with a 2008 study performed by the New Building Institute (and commissioned by the USGBC) that studied the energy use performance of LEED certified buildings. Based on the results of this study, the USGBC has argued that LEED certified buildings on average perform 25-30% better than non-LEED buildings in terms of energy use. Second, the complaint alleges that the USGBC's statement that its LEED system provides "third-party verification that a building or community was designed and built using strategies aimed at improving performance across all the metrics that matter most" is misleading in that the USGBC does not verify actual energy use data submitted by an applicant in support of LEED certification.

Whether the claims alleged in the Gifford lawsuit survive motion practice will depend on a number of factors. The class allegations seem overbroad and difficult to establish, and the Sherman Act and RICO claims seem to be more sensational than substantive. At the same time, taking the allegations at face value, the Lanham Act and New York statutory claims may be harder for the USGBC to dispose of depending upon how discovery proceeds (if it proceeds at all).

Interestingly, the Gifford complaint follows on the heels of the Federal Trade Commission issuing proposed revisions to its "Green Guides," which attempt to prevent companies from making unfair or deceptive environmental claims (for an article about the proposed Green Guides revisions, click here). One of the specific items addressed by the FTC revisions concerns third-party certifications, such as the USGBC's LEED system. While the FTC's action and the Gifford lawsuit are unrelated, both illustrate the increased amount of scrutiny that green marketing claims have been receiving recently and how companies that attempt to market their products or services based on environmental attributes should do so understanding the potential compliance and litigation risks associated with such claims.

If you have any questions about the Gifford lawsuit, the proposed FTC Green Guide revisions or green marketing generally, please contact Todd D. Kantorczyk (tkantorczyk@mgkflaw.com) or (484) 430-2359, or any other member of our Sustainability Practice Group.