Legal Considerations When Building Green J. Catherine Kunz, Esq. Stephen McBrady, Esq. Christopher Cheatham, Esq., LEED AP

Copyright © 2009, Chris Cheatham. All Rights Reserved. Green Building Investments Are Working...

Copyright © 2009, Chris Cheatham. All Rights Reserved. But Green Building Liability Issues Are Emerging...

Copyright © 2009, Chris Cheatham. All Rights Reserved. Legal Considerations: Building Green Copyright © 2009, Chris Cheatham. All Rights Reserved. What Will You Learn? Significant green investments, regulations Some regulations problematic Failure to achieve certification a risk Building performance is difficult to control

Copyright © 2009, Chris Cheatham. All Rights Reserved. Legal Considerations: Building Green Copyright © 2009, Chris Cheatham. All Rights Reserved. Agenda Green Building Basics Green Government Legal Considerations Green Building Regulations LEEDigation Green Defects Copyright © 2009, Chris Cheatham. All Rights Reserved.

What is Green Building?

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How do you measure “green”?

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Construction Completed

Copyright © 2009, Chris Cheatham. All Rights Reserved. How has the government supported green building?

The American Recovery and Reinvestment Act (ARRA) Copyright © 2009, Chris Cheatham. All Rights Reserved. Green Government Copyright © 2009, Chris Cheatham. All Rights Reserved. $4.5 billion for high- performance, green buildings $3.6 billion for energy efficiency and modernization $6.3 billion for the State Energy Program and EECBG Copyright © 2009, Chris Cheatham. All Rights Reserved. $5 billion for weatherization of homes

Most ARRA Green Building Funds Not Spent... Copyright © 2009, Chris Cheatham. All Rights Reserved. Green Government Copyright © 2009, Chris Cheatham. All Rights Reserved. February 17, 2010

Copyright © 2009, Chris Cheatham. All Rights Reserved. Green Government Copyright © 2009, Chris Cheatham. All Rights Reserved. But Early Problems are Emerging...

Copyright © 2009, Chris Cheatham. All Rights Reserved. Green Government Copyright © 2009, Chris Cheatham. All Rights Reserved. 26% improvement in water efficiency by 2020; 50% recycling and waste diversion by 2015; 95% of all applicable contracts will meet sustainability requirements; Implementation of the 2030 net-zero- energy building requirement; Implementation of the stormwater provisions of the Energy Independence and Security Act of 2007, section 438 Executive Order – October 5, 2009 Copyright © 2009, Chris Cheatham. All Rights Reserved.

Green Government Copyright © 2009, Chris Cheatham. All Rights Reserved. “Recommendations should also explore the feasibility of... (c) using Federal Government purchasing preferences or other incentives for products manufactured using processes that minimize greenhouse gas emissions....” Executive Order – October 5, 2009 Copyright © 2009, Chris Cheatham. All Rights Reserved.

Green Government Copyright © 2009, Chris Cheatham. All Rights Reserved. GSA Makes Changes to Bolster Sustainability Efforts “The Office of Federal High-Performance Green Buildings will expand its reach to provide federal agencies with measurement tools and policies to meet its sustainability mandates.” Copyright © 2009, Chris Cheatham. All Rights Reserved. February 22, 2010

Copyright © 2009, Chris Cheatham. All Rights Reserved. Green Government Copyright © 2009, Chris Cheatham. All Rights Reserved. One of first LEED certified projects in 2002 – Nathaniel R. Jones Federal Building Building portfolio includes 40 LEED certified buildings GSA Office of Federal High-Performance Green Buildings Copyright © 2009, Chris Cheatham. All Rights Reserved. “[A]ll GSA new construction projects and substantial renovations must achieve Silver certification through the Leadership in Energy and Environmental Design (LEED®) Green Building Rating System of the U.S. Green Building Council. Projects are encouraged to exceed LEED® Silver and achieve LEED® Gold.”

Copyright © 2009, Chris Cheatham. All Rights Reserved. Green Building Regulations

Green Building regulations are prevalent: 45 states 132 cities 35 counties 28 towns 34 state governments 13 federal agencies Copyright © 2009, Chris Cheatham. All Rights Reserved. Green Building Regulations Copyright © 2009, Chris Cheatham. All Rights Reserved.

- U.S. Mayors Conference, Mainstreet Economic Recovery Report Are green building regulations properly drafted?

DC Green Building Act: what’s the enforcement mechanism? Vancouver Catch 22: is there a conflict? FTC Complaint: are LEED regulations anti-competitive? Copyright © 2009, Chris Cheatham. All Rights Reserved. Green Building Regulations Copyright © 2009, Chris Cheatham. All Rights Reserved.

What’s the enforcement mechanism?

Copyright © 2009, Chris Cheatham. All Rights Reserved. Green Building Regulations Copyright © 2009, Chris Cheatham. All Rights Reserved. DC Green Building Act of 2006 January 1, 2012 Private construction > 50K SF LEED certified Copyright © 2009, Chris Cheatham. All Rights Reserved.

“(b) On or before January 1, 2012, all applicants for construction governed by section 4 shall provide a performance bond” “(g) All or part of the performance bond shall be forfeited to the District and deposited in the Green Building Fund if the building fails to meet the verification requirements described in sections 3 and 4.” Copyright © 2009, Chris Cheatham. All Rights Reserved. Green Building Regulations Copyright © 2009, Chris Cheatham. All Rights Reserved. DC Green Building Act of 2006 Copyright © 2009, Chris Cheatham. All Rights Reserved.

D.C. Green Building Act of 2006 Copyright © 2009, Chris Cheatham. All Rights Reserved. Green Building Regulations Copyright © 2009, Chris Cheatham. All Rights Reserved. Surety and Fidelity Association of America and Surety Bond Producers: “The new law incorrectly uses the term ‘performance bond.’ In short, the performance bond assures that the construction contract, and therefore, the project will be completed.” Copyright © 2009, Chris Cheatham. All Rights Reserved.

D.C. Green Building Act of 2006 Copyright © 2009, Chris Cheatham. All Rights Reserved. Regulatory Compliance Copyright © 2009, Chris Cheatham. All Rights Reserved.

Is there a conflict?

Copyright © 2009,Chris Cheatham. All Rights Reserved. Green Building Regulations Copyright © 2009, Chris Cheatham. All Rights Reserved.

Green Building Regulations Copyright © 2009, Chris Cheatham. All Rights Reserved.

Are LEED regulations anti- competitive?

Copyright © 2009, Chris Cheatham. All Rights Reserved. Green Building Regulations Copyright © 2009, Chris Cheatham. All Rights Reserved. Federal Trade Commission Complaint October 20, 2009 “The favoritism shown FSC-certified products by USGBC is inconsistent with the American National Standards Institutes's (“ANSI”) due process requirements and OMB Circular No. A-119, which establishes the principles that voluntary, private sector standards must meet if federal agencies wish to use them, including openness, balance, due process, an appeals process, and consensus.”

D.C. Green Building Act of 2006 Copyright © 2009, Chris Cheatham. All Rights Reserved. Regulatory Compliance Copyright © 2009, Chris Cheatham. All Rights Reserved.

LEEDigation = LEED + litigation

Copyright © 2009, Chris Cheatham. All Rights Reserved. Legal Considerations: LEEDigation Copyright © 2009, Chris Cheatham. All Rights Reserved. Shaw Development v. Southern Builders Shaw retained Southern Builders to construct $7 million condo project Shaw sought LEED Silver certification Copyright © 2009, Chris Cheatham. All Rights Reserved.

Legal Considerations: LEEDigation Copyright © 2009, Chris Cheatham. All Rights Reserved. Shaw Development v. Southern Builders The Contract Copyright © 2009, Chris Cheatham. All Rights Reserved.

Legal Considerations: LEEDigation Copyright © 2009, Chris Cheatham. All Rights Reserved. Shaw Development v. Southern Builders The Contract Copyright © 2009, Chris Cheatham. All Rights Reserved.

Shaw Development v. Southern Builders Copyright © 2009, Chris Cheatham. All Rights Reserved. Legal Considerations: LEEDigation Copyright © 2009, Chris Cheatham. All Rights Reserved. Allegation: Breach of Contract Copyright © 2009, Chris Cheatham. All Rights Reserved.

Shaw Development v. Southern Builders Copyright© 2009, Chris Cheatham. All Rights Reserved. Legal Considerations: LEEDigation Copyright © 2009, Chris Cheatham. All Rights Reserved. Allegation: Negligence Copyright © 2009, Chris Cheatham. All Rights Reserved.

Legal Considerations: LEEDigation Copyright © 2009, Chris Cheatham. All Rights Reserved. Shaw Development v. Southern Builders The Damages Copyright © 2009, Chris Cheatham. All Rights Reserved.

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.” Copyright © 2009, Chris Cheatham. All Rights Reserved. Legal Considerations: LEEDigation Copyright © 2009, Chris Cheatham. All Rights Reserved. Hypothetical Copyright © 2009, Chris Cheatham. All Rights Reserved.

Legal Considerations: LEEDigation Copyright © 2009, Chris Cheatham. All Rights Reserved. Project will be constructed 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.” Hypothetical Copyright © 2009, Chris Cheatham. All Rights Reserved.

Legal Considerations: LEEDigation Copyright © 2009, Chris Cheatham. All Rights Reserved. Project will 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.” Hypothetical Copyright © 2009, Chris Cheatham. All Rights Reserved.

Legal Considerations: LEEDigation Copyright © 2009, Chris Cheatham. All Rights Reserved. Bid Protest – DePonte Investments, Inc. “DePonte also asserts that the [Board] unreasonably assigned its proposal a weakness with regard to experience on the basis that its proposed architect lacked LEED experience.” Copyright © 2009, Chris Cheatham. All Rights Reserved.

Legal Considerations: LEEDigation Copyright © 2009, Chris Cheatham. All Rights Reserved. Bid Protest – DePonte Investments, Inc. “The evaluation in this area was reasonable. LEED experience was significant because the [solicitation] required the building here to meet specific LEED requirements.” Copyright © 2009, Chris Cheatham. All Rights Reserved.

How are green building defects different?

Copyright © 2009, Chris Cheatham. All Rights Reserved. Legal Considerations: Green Defects Copyright © 2009, Chris Cheatham. All Rights Reserved. Energy Efficiency Copyright © 2009, Chris Cheatham. All Rights Reserved.

Legal Considerations: Green Defects Copyright © 2009, Chris Cheatham. All Rights Reserved. Energy Efficiency Some Buildings Not Living Up to Green Label “The Federal Building in downtown Youngstown, Ohio... has LEED certification, the country’s most recognized seal of approval for green buildings. But the building is hardly a model of energy efficiency. According to an environmental assessment last year, it did not score high enough to qualify for the energy star label.... The building’s cooling system, a major gas guzzler, was one culprit. Another was its design....” Copyright © 2009, Chris Cheatham. All Rights Reserved. One of first GSA LEED certified projects from 2002 – Nathaniel R. Jones Federal Building

Cpyright © 2009, Chris Cheatham. All Rights Reserved. Copyright © 2009, Chris Cheatham. All Rights Reserved. Legal Considerations: Green Defects Copyright © 2009, Chris Cheatham. All Rights Reserved. “NOTE: CERTIFICATION MAY BE REVOKED FROM ANY LEED PROJECT UPON GAINING KNOWLEDGE OF NON- COMPLIANCE WITH ANY APPLICABLE MPR.” Copyright © 2009, Chris Cheatham. All Rights Reserved.

Cpyright © 2009, Chris Cheatham. All Rights Reserved. Copyright © 2009, Chris Cheatham. All Rights Reserved. Legal Considerations: Green Defects Copyright © 2009, Chris Cheatham. All Rights Reserved. Mr. Horst, the LEED executive, said that LEED may eventually move toward the E.P.A.’s Energy Star model, which attests to energy efficiency only for the year the label was given, similar to restaurant ratings. “Ultimately, where we want to be is, once you’re performing at a certain level, you continue to be recertified,” Mr. Horst said. LEED De-certification is on the Horizon…

Copyright © 2009, Chris Cheatham. All Rights Reserved. Legal Considerations: Solutions Copyright © 2009, Chris Cheatham. All Rights Reserved. What do we recommend? GSA as a green building clearinghouse Move away from LEED codification Avoid LEED certification guarantees

Cathy Kunz – Steve McBrady - Chris Cheatham - How can we help? Copyright © 2009, Chris Cheatham. All Rights Reserved.