Archive for the 'Green Building & Sustainability' Category

50 Shades of Green: Indiana’s Greenwash Lawsuit

By: William E. Kelley, Jr., LEED AP BD+C

Defining what products or services are “green”, and how “green” those products or services really are, can be daunting tasks.  The rise in popularity in products and services that purport to positively impact the environment has given rise to a new term:  “greenwash”.  The concept of greenwash generally relates to use of deceptive, unsupported, or misleading statements or claims made for the purpose of portraying one’s business, product or service as having a positive effect on, or benefit to, the environment.

The term “greenwash” is not a legal term of art.  There is no official cause of action or lawsuit that can be brought for “greenwashing”.  However, acts giving rise to what is known as “greenwash” can have legal consequences.  For example, the Federal Trade Commission (FTC) recently released an updated version of its green marketing guidelines, known as the “Green Guides”, in order to “help marketers ensure that the claims they make about the environmental attributes of their products are truthful and non-deceptive.”  As businesses clamor to be a part of the emerging “green” industry, there is more potential for false or misleading claims to unsuspecting consumers.

The mere presence of exaggerated claims or “puffery” in advertising materials does not automatically result in liability to the seller.  The basis of the bargain between seller and consumer is predominantly found in the terms of the contractual agreement—not the pre-sale advertising materials.  In those instances, disappointed expectations by the consumer may not be actionable.  However, in some instances, the pre-contract sales materials and representations can give rise to liability to the seller, despite contrary language in the contract.  The Indiana Court of Appeals recently addressed these concepts in the context of the sale and installation of a residential wind turbine system.

In Wind Wire, LLC v. Finney, 2012 WL 4903026 (Ind. Ct. App. 2012), the seller/installer of a residential wind turbine system was sued by homeowners for fraud in the inducement relating to advertising materials containing misleading information about the potential benefits of a residential wind turbine.  The evidence at trial indicated that in 2008, the seller/installer distributed brochures claiming that (1) residential owners could see a cost savings of “75% to 100% of current electric service”; (2) residential owners could see a complete return on investment within three to four years; and (3) residential owners could receive a “substantial refund” on their taxes for the installation of the wind turbine system.  The brochure also stated, “With a savings of approximately $160 plus per month and a payoff span of 3–4 years you would control 75% to 100% of your electric supply utilizing nature and doing your small part for the ecology? (sic)”

In addition to the statements in the sales brochures, a sales representative from seller/installer told the homeowners that the local utility provider would purchase excess energy produced by their wind turbine, and that the homeowners would be entitled to a tax credit equal to a percentage of the purchase price.  In reliance upon the sales materials and the statements from the sales representative from seller/installer, the homeowners purchased the wind turbine for their residence.

According to the lawsuit, the wind turbine failed to live up to expectations.  It did not produce any excess power, and it had no effect on the homeowners’ electric bills.  In fact, the evidence at trial indicated that the wind turbine actually consumed energy while it sat idle.  Further, the local utility provider testified that it would not be possible for the wind turbine to pay for itself in three to four years, but rather it would typically take twenty-five years for such a wind turbine to pay for itself.

The homeowners sued seller/installer for fraud in the inducement.  The homeowners argued that the sales brochures and statements from the sales representative were knowingly and falsely misleading, and were allegedly made for the sole purpose of inducing the homeowners to enter into a contract for the purchase and installation of a wind turbine.  The seller/installer argued that the sales materials were not part of the contract, and therefore could not be considered as part of the contractual agreement with the homeowners.  In support of its argument, the seller/installer pointed out that the contract had an integration clause that provided that the entire agreement between the parties was contained in the contract, and that the terms of the contract superseded any prior discussions or communications about the products or services to be provided.  In other words, if the sales materials were not part of the agreed upon services or products, the homeowners could not sue over mere disappointed expectations in performance of the wind turbine.

The trial court ultimately entered judgment in favor of the homeowners, and the Indiana Court of Appeals affirmed the judgment.  Specifically, the Indiana Court of Appeals found that the integration clause in the contract did not preclude evidence of the sales material since the core issue was whether the allegedly fraudulent statements induced the homeowners into signing the contract originally.  The Court of Appeals held that the trial court properly considered evidence of the sales materials and the representations made in those materials, and the Court of Appeals upheld the finding of fraud in the inducement against the seller/installer.

The Wind Wire case is a strong reminder to all businesses to closely monitor the representations and statements made in advertising materials.  However, for those businesses involved with products or services in the “green” industry, the Wind Wire case is also a reminder of the potential consequences for statements that are later deemed to be unsupported or unverified.  Businesses in the green industry should take due care to review not only the statements in their marketing materials, but also their contract forms, to ensure that the agreements capture a full understanding of the expectations of the parties and the entire agreement between the parties for the products or services at issue.

Meet the Extended Family: New AIA Contracts for Sustainable Projects

By: William E. Kelley, Jr., LEED AP BD+C

In 2011, the American Institute of Architects (AIA) released its AIA D503-2011 Guide for Sustainable Projects to assist Owners, Contractors, and Architects with drafting contracts for projects seeking some form of sustainable project goal, whether it is certification under LEED or other non-certification based sustainability goals.  The D503-2011 contains an overview of legal and practice issues that can arise on green building projects, as well as model contract language that can be added to AIA contract forms to address sustainable project goals. 

As follow-up to the D503-2011 Guide for Sustainable Projects, AIA released new contract forms in May 2012 to address these same issues.  These new contract forms include the A101-2007 SP (Owner-Architect Agreement); A201-2007 SP (General Conditions); A401-2007 SP (Contractor-Subcontractor Agreement); B101-2007 SP (Owner-Architect Agreement); C401-2007 SP (Architect-Consultant Agreement); and B214-2012 (Scope of LEED Certification Services for Architect).  All of these forms—with the exception of the B214-2012—are essentially modified versions of the already familiar 2007 AIA contract forms, with additions relating specifically to sustainable project goals. 

The new AIA contract forms contain several new defined terms that project participants will need to learn and familiarize themselves with, including, “Sustainable Objective”, “Sustainable Measure”, “Sustainability Plan”, “Sustainability Certification”, “Sustainability Documentation”, and “Certifying Authority”.  In essence, the “Sustainability Objective” is the defined sustainable goal for the project, which could include third-party certification or other sustainable goals not involving project certification or registration.  Once the “Sustainability Objective” is defined, the “Sustainable Measures” are identified, including specific design elements or construction means or methods that are necessary to achieve the “Sustainability Objective”.  The “Sustainability Plan” is the document that specifically identifies and describes the “Sustainability Objective” and that allocates roles and responsibilities for individual achievement of the “Sustainable Measures”. 

As part of the conventional family of AIA contract documents, the new sustainable project versions of the A101, A201, A401, B101, and C401 contract documents relate only to projects utilizing a design-bid-build project delivery method.  Projects utilizing other delivery methods, such as design/build, do not yet have AIA contract forms addressing these issues.  However, the model contract language outlined in the D503-2011 Guide for Sustainable Projects may be utilized for these types of projects in order to address the same type of sustainability process. 

As for the B214-2012, this document is an update from AIA’s prior LEED Certification exhibit, which was originally released as the B214-2007.  The B214-2012 document can be used as an addendum to the B101 Owner-Architect Agreement, where the Architect is also going to perform the services relating to LEED Certification.  However, the B214-2012 could also be used as the basis for a separate agreement between Owner and an independent LEED consultant for the project.  Unlike the other new sustainable contract forms, which can apply to a broad range of sustainable project goals, the B214-2012 is specifically designed for a project that is seeking certification as a LEED project.

Project participants involved in any aspect of green building or sustainability—no matter whether the projects actually seek LEED certification or not—should familiarize themselves with these new contract forms and evaluate whether these contracts are right for their particular projects.  Even if you choose not to use the new contract documents, these new forms should nonetheless serve as a good excuse to dust off your old contract forms and see whether those forms effectively address the unique aspects of projects incorporating sustainability goals. 

 

Three Green Building Developments to Watch in 2012: The 6 Month Check Up

By: William E. Kelley, Jr., LEED AP BD+C

At the beginning of this year (posted here), I highlighted three green building developments to watch in 2012: (1) the continued development of LEED 2012; (2) the planned release of the 2012 International Green Construction Code (IgCC); and (3) the planned release of new AIA contract forms for sustainable project goals.  Now that we are nearly six months into the year, it is time to check up on those three developments to see where they stand.

  • LEED 2012 is dead, but LEED v4 is alive.  After going through the third and fourth public comment periods for LEED 2012, the U.S. Green Building Council (USGBC) announced on June 4 that it is delaying ballot on LEED 2012 until June 1, 2013.  Since LEED 2012 will no longer be released in calendar year 2012, the USGBC has also renamed this new iteration “LEED v4”.  What are the reasons for the delay?  Rick Fedrizzi (President, CEO, and Founding Chairman of the USGBC) says that as the USGBC has gone through the public comment process for LEED 2012, “we have heard repeatedly that while our [LEED] community continues to fully embrace our mission, they need more time to absorb the changes we’re proposing and to get their businesses ready to take the step with us.”  However, in recent days, there also have been questions raised from the chemical industry about LEED 2012’s proposed credit for avoiding “chemicals of concern” (including PVC), which concerns were voiced in a letter signed by fifty-six (56) members of Congress to GSA, urging GSA to stop using the LEED rating system unless these proposed credits were not reconsidered or removed by the USGBC.  We likely have not heard the last of the reasons for the delay in releasing the newest version of LEED, but one thing is clear: LEED 2012 is gone, and green building professionals should now focus on the newly named LEED v4.
  • The IgCC is here. Will it gain momentum?  In March, the International Code Council (ICC) released its final version of the 2012 International Green Construction Code (IgCC).  As I explained in a prior post here, the IgCC is a model code intended for adoption by state or local jurisdictions.  It provides baseline code provisions for jurisdictions that want to mandate certain green building requirements, and it is a departure from other forms of legislation that have been based on LEED or other green building rating systems, in that it is solely administered and enforced by the adopting jurisdiction—not a third-party certification body.  The ICC reports that several states and local jurisdictions have already adopted the IgCC in some form, most commonly the form of a voluntary compliance path for other, already existing green building programs.  We will continue to monitor the IgCC to see how—and in what form—jurisdictions adopt the IgCC this year.
  • AIA announces new contract forms for sustainable project goals with a press release quoting…me.  This past year, I had the opportunity to review the draft forms of the new AIA contract forms for sustainable project goals, as well as to submit comments, proposed revisions, and questions.  These contract forms are predominantly based on the model contract language outlined in the AIA D503-2011 Guide for Sustainable Projects (discussed here).   AIA released the final forms for these contracts during its national convention on May 17, and I was honored to be part of the press release from AIA announcing the release of these new contract forms.  The new contract language dealing with sustainable project goals clearly fills a void that was present in the prior AIA contract forms.  For example, in the 2007 version of the contracts, LEED was only mentioned as (1) an additional service for Architects; and (2) as part of the B214-2007 LEED addendum to the Owner-Architect agreement.  Prior versions of the contracts did not include language involving sustainable project goals for contractors, subcontractors, or in the general conditions for the project.  I will discuss these new contract forms in more depth in a future post, but for project participants involved in projects with any type of sustainability goals, strong consideration should be given to using these new contract forms to more thoroughly address sustainable project goals in the contract documents.            

Legislating Green: So, You Want to Be Sustainable. Now What?

By: William E. Kelley, Jr., LEED AP BD+C

Spring is in the air, Earth Day is around the corner, and green is on everyone’s mind.  So, let’s suppose that you are a city, town, or maybe even a state looking to encourage green building and sustainable design and construction practices in your jurisdiction.   You have a wide range of options available to you, but your legislative efforts likely will fall into one of two categories: (1) a mandate (i.e., requiring all covered projects to comply with the legislation); or (2) an incentive (i.e., providing some benefit, like tax credits or rebates, to projects that comply with sustainable project goals).  Within these two categories, jurisdictions further have the option of setting baseline requirements for the mandates or incentives with reference to codes (e.g., energy codes, green building codes, the IgCC, etc.), green building rating systems (e.g., LEED, Green Globes, Energy Star, etc.), or green building standards (e.g., ASHRAE 189.1, ICC 700, etc.), all of which have different benefits and potential challenges.

How do you figure out what path is right for you?  It depends on the goals that are you trying to advance in your jurisdiction.  What is it that you are seeking to encourage in your jurisdiction?

  • Universal recycling programs for private businesses and residents?
  • Incorporation of energy efficiency measures in all new construction projects?
  • Developing a mechanism for requiring some level of sustainable retrofits for existing buildings?
  • Encouraging development of alternative or renewable energy sources?
  • Creating a plan to add more bike and pedestrian trails connecting residential developments to local amenities?
  • Finding ways to lower utility bills for publicly owned facilities through system upgrades and facility management procedures?
  • Looking for ways to encourage redevelopment of vacant lots, underutilized buildings, or challenging building sites?

It is easy to get bogged down in the myriad of available options for legislating green, but jurisdictions should first undergo a goal-setting process.  Goals should take on the form of short-term, middle-range, and long-term goals for sustainability.  The goal setting process should also include key stakeholders in the jurisdiction, including internal agencies (e.g., economic development, purchasing departments, facility managers, planning & zoning, code enforcement, etc.), as well as private entities and individuals (e.g., developers, owners, business leaders, contractors, architects and engineers, residents, etc.).  Ideally, those goals should then be incorporated into a “master sustainability” plan, outlining a comprehensive plan for the direction the jurisdiction wants to head on the sustainability front.  A “master sustainability” plan also helps set the stage for identifying how future developments, ordinances, laws, and policies are addressed, and how each of those future items fits into the overall sustainability plan for the jurisdiction.

The idea of beginning with a goal setting process seems basic, but jurisdictions often seem to take the opposite approach, by trying to first legislate green, and then figuring out how that legislation fits into the master plan for the jurisdiction.  While state or local governments may successfully adopt a green building law, the piecemeal approach may leave it without a real vision as to how that legislation fits into the overall development plan for the area.  Further, jurisdictions may be at a loss to figure out how to encourage use of the incentive program or even how to develop a successful enforcement program for mandates, unless there is a comprehensive plan in place.  How will you finance an incentive program?  How will you enforce green building requirements that may not materialize until after project completion?  A little planning can help you effectively answer these questions.

More importantly, without a master plan or vision, how will you know if your sustainability efforts are successful?  The master plan is the key.  With it, jurisdictions can begin evaluating all decisions on future development of the community in terms of how those developments will help reach the desired sustainability goals, instead of taking a piece meal approach to sustainability efforts.  No matter where you are in the process, we can help you navigate the process, assist you in the weighing of the multiple options available, and work with you to evaluate the legal processes, procedures, and considerations involved as you develop your sustainability plan and implement green legislation.

An Introduction to the International Green Construction Code (IgCC)

By: William E. Kelley, Jr., LEED AP BD+C

As has been discussed in several prior blog entries here, the 2012 International Green Construction Code (IgCC) is set to be released this spring.  What is the IgCC, and what impact will it have for the construction industry?  I recently had the opportunity to address these questions during a webinar hosted by the Associated Contractors & Builders (ABC) National Green Building Committee.  The presentation was titled, “What Contractors Need to Know About the International Green Construction Code (IgCC)”.  Although the live version of the webinar was held on March 20, you can access an archived version of the webinar, along with the presentation materials, by clicking here.

At its core, the IgCC can be described in three ways:

  • First, it is a “model” code, meaning that it provides a roadmap for jurisdictions interested in implementing a green construction code.  However, as a model code, it is not mandatory or enforceable until a jurisdiction elects to actually adopt it in that particular area.
  • Second, it is an “adaptable” code, insofar as jurisdictions have the option of adopting some or all of the code, or even adopting the whole code and then applying jurisdiction-specific amendments.  This gives jurisdictions some flexibility to shape the IgCC to meet their specific needs.
  • Third, it is an “overlay” code.  The IgCC cannot serve as a standalone green building code.  Instead, it specifically relies upon the existence of other codes and standards.  For example, the provisions relating to Energy Conservation, Efficiency and Atmospheric Quality make specific reference to the International Energy Conservation Code (IECC).  Because of the interrelation between the IgCC and other codes and standards, adopting jurisdictions will have to undergo a comprehensive review process in order to determine how existing codes will be affected by the IgCC, as well as determining whether any amendments or changes to those existing codes will be necessary in order to fully implement the IgCC.

Will the IgCC find universal acceptance among jurisdictions looking to implement green building legislation?  How will the IgCC affect projects seeking to go “above code” with LEED and other rating systems?  What challenges are there for jurisdictions, owners, contractors, and design professionals in relation to the IgCC and similar green building codes?  Look for future posts here with more details as we delve deeper into the IgCC and its potential effect on the industry.

Three Green Building Developments to Watch in 2012

By: William E. Kelley, Jr., LEED AP BD+C

In the Indiana General Assembly, it was not an overly productive year for sustainability legislation, as efforts to enact laws for PACE bonds and mass transit both failed to gain traction.  Regardless, from a broader perspective, we are not even two full months into 2012, and already this year appears to be shaping up to be a big year for green building and sustainability—at least in some respects.  Consider the following developments on the horizon in the green building industry:

On March 1, the third public comment period will open for the next iteration of the LEED rating system, dubbed LEED 2012.  What will LEED 2012 bring in terms of changes?  For starters, we may be looking at new credits for “Integrative Process”, “Location and Transportation”, and “Performance”, not to mention a rebalancing of existing credits.   Time will tell what changes make the final cut for LEED 2012.  For more information check out the USGBC’s website on the LEED 2012 Development process.

  • Also sometime in March, the International Code Council (ICC) is expected to publish its 2012 International Green Construction Code (IgCC).  Will the IgCC become the model green building code for states and local jurisdictions?  Will the IgCC, and green building codes in general, have any negative impact on the number of projects utilizing voluntary green building rating systems, such as LEED?  Check out the ICC’s website for more information, and keep a look out on this blog for more updates on the IgCC in the coming weeks.
  • After releasing its Guide for Sustainable Projects in 2011, the American Institute of Architects (AIA) is expected to release updated versions of some of its contract forms to include processes and provisions for sustainable project goals.  This is a significant development, especially given the large number of owners, contractors and design professionals who still do not adequately address sustainable project goals in their project contracts.  The AIA indicates that the contract documents will be available in the first quarter of 2012.

 

The impact of these developments will depend, in no small part, on how fast the construction industry can turn things around as it emerges from a prolonged period of economic difficulty.  In addition, it will be interesting to see whether (and how quickly) states and local jurisdictions are willing to adopt the IgCC, and how these jurisdictions may use and adapt the IgCC to suit their needs.  Further, questions remain as to whether the states and corporations who have thus far been “slow adopters” finally make this the year to initiate broader sustainability policies for design, construction, purchasing, maintenance, and operation of their properties and facilities, or whether they continue to take a “wait and see” approach due to economic conditions.

So will 2012 be a big year for the green building industry?  We will “wait and see” ourselves, and continue to update you on these developments.

AIA to Release Model Green Contract Documents in 2012

By: William E. Kelley, Jr., LEED AP BD+C

During Greenbuild 2011 in Toronto, the American Institute of Architects (AIA) announced that it is releasing five AIA contract documents with model language to be used on sustainable design and construction project.  The contract documents will incorporate the model contract language and concepts outlined in AIA’s D503-2011 Guide for Sustainable Projects, which was discussed in more depth in prior blog posts here (Introduction), here (What Architects Need to Know), and here (What Contractors Need to Know).

The new contract documents for use on sustainable projects will include modified versions of (1) the A101-2007 Owner-Contractor Agreement; (2) the B101-2007 Owner-Architect Agreement; (3) the A201-2007 General Conditions; (4) the C401-2007 Architect-Consultant Agreement; and (5) the A401-2007 Contractor-Subcontractor Agreement.  As we mentioned in relation to the Guide for Sustainable Projects, the inclusion of model contract language for green or sustainable projects is an important tool for any project participant involved in these types of projects.  For example, the model contract language will provide a process for defining sustainable project goals, addressing those goals in the Contract Documents, allocating responsibility among the project participants for achieving those goals, and addressing the issue of what damages, if any, may be recoverable in the event that the project fails to meet the targeted sustainable goals.

The new contract documents are expected to be available in the first quarter of 2012.  Prudent Owners, Architects, Contractors, Subcontractors, Engineers, and others involved in green or sustainable projects should take time now to download the free AIA Guide for Sustainable Projects in order to familiarize themselves with these new concepts and model contract provisions.  Of course, for those already involved in green and sustainable projects, now is the perfect time to review your current contract forms to evaluate how those contracts address sustainable project goals.


Daniel M. Drewry

Daniel M. Drewry

Daniel M. Drewry

About This Blog

The DSV Construction Law Blog is hosted by Daniel M. Drewry. Dan is a Partner with the law firm Drewry Simmons Vornehm, LLP and concentrates his practice in the areas of Construction Law and Litigation, and Labor & Employment Law.

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