Burying the LEED

Gifford v. U.S. Green Building Council, 10 Civ. 7747 (S.D.N.Y. Aug. 15, 2011)

Plaintiffs were “professionals in the environmental engineering and design industry,” including “a consultant who provides advice about how to reduce energy costs,” a licensed architect, an engineer specializing in heating and cooling systems, a specialist in moisture barrier design and mold remediation, and a company that provides energy saving heating and cooling system designs.

Defendant is a nonprofit that operates the Leadership in Energy and Environmental Design (“LEED”) certification system, “which purports to certify buildings as being designed and constructed in an environmentally friendly manner.” Defendant also represents about 140,000 design professionals it’s accredited as qualified to advise real estate developers and other consumers on how to design LEED-certified buildings. Defendant receives fees from those seeking LEED certification for their buildings and from the professionals it accredits.

Defendant advertises LEED, and plaintiffs alleged that one particular claim was false: a statement in a press release that the results of a 2008 study “indicate that new buildings certified under the [USGBC’s] LEED certification system are, on average, performing 25–30% better than non-LEED certified buildings in terms of energy use.” Plaintiffs alleged that consumers were therefore diverted from their business to LEED-accredited professionals.

The Lanham Act is “extremely broad,” Famous Horse Inc. v. 5th Ave. Photo Inc., 624 F.3d 106, 111 (2d Cir. 2010), but not broad enough for these plaintiffs. The first prudential test discussed in Famous Horse is the “strong categorical” test requiring competition between plaintiff and defendant along with competitive injury. The second is the “reasonable commercial interest” test, under which competition is important but not dispositive as an indication of why the plaintiff has a reasonable basis for believing that defendant’s false advertising will damage its commercial interests. When the parties aren’t obviously in competition, a plaintiff has to make a more substantial showing of injury and causation to have standing.

Here, plaintiffs plainly didn’t compete with defendant for certification or accreditation, nor did they allege that defendant directly referred to their products or services in its advertising.

Instead, plaintiffs alleged competition in the “market for energy efficient building expertise,” but the court found that this broad label didn’t obscure the clear differences between their “products.” Unlike plaintiffs, defendant doesn’t provide clients with advice about energy-efficient design, nor does it provide design services. It reviews and rates designs created by others. This was different from Famous Horse, because there the parties operated on different levels of a supply chain for the same product.

Thus, plaintiffs didn’t adequately allege a reasonable commercial interest that is likely to be damaged by USGBC’s alleged false statement. The allegation of likely injury was “entirely speculative.” The plaintiffs design and consult on specific elements of individual buildings, including heating and cooling systems. But they didn’t allege that LEED-certified buildings don’t require those services or that such services must be provided by a LEED-accredited professional for the building to be certified. “Because there is no requirement that a builder hire LEED-accredited professionals at any level, let alone every level, to attain LEED certification, it is not plausible that each customer who opts for LEED certification is a customer lost to Plaintiffs.” (Given this analysis, I do wonder about the potential standing of, say, real estate developers with non-certified buildings.)

Even if plaintiffs could allege that a particular developer chose LEED-certified consultants over Gifford, that wouldn’t establish the required causal nexus, which requires reliance on the allegedly false statement. Such reliance isn’t plausible in light of the proffered statement that the developer chose a LEED professional “because everyone has heard of LEED, but not everyone has heard of Henry Gifford,” and because the developer will “get more credibility by simply saying we’re going to build a LEED-rated building.”

Because the court dismissed the Lanham Act claims with prejudice, it declined to exercise jurisdiction over the coordinate state law deceptive trade practices claims.