In this blog series, Colin W. Maguire, JD, SP, recounts his drafting of the legal article The Imposing Specter of Municipal Liability for the Exclusive Promotion of Green Building Certification Systems, 1 University of Baltimore Journal of Land & Development 157 (2012).

Is this whole analysis an overreaction? Many people do not think so, and you might not think so if you start to see the green building certification industry for what it is – a marketplace. Nobody doubts that LEED created the market, but LEED now faces competition. Imagine if I was writing on behalf of Behr brand paint. Further imagine that numerous municipalities passed ordinances which required or promoted Glidden brand paint’s use on buildings. I think almost everyone would find such an ordinance ridiculous and illegal. Even if the reason for the ordinance was that Glidden had an environmentally friendly line of paint, Behr could make the same or similar product…and maybe at a fraction of the cost. 

The ordinance would clearly be designed to better Glidden’s bottom-line. Yet, LEED is the standard bearer. Though USGBC is a non-profit itself, that means very little in an analysis of marketplace competition because 1) when you mix the terms “Washington, D.C.-based” and “non-profit” there is usually a ton of money involved, and 2) the LEED APs who promote the certification are all in it to make a living, many of them generating profit as a direct result of their LEED AP status through fees on LEED projects.

Perhaps municipalities have taken notice. When I first began researching this issue, there were LEED-based programs in 27 states. I looked into two such programs – one in my hometown of East Lansing, Michigan (also where SERF is located) and one in Charlotte suburb of Matthews, North Carolina. The Matthews ordinance was especially perplexing because North Carolina had a non-exclusive green building certification statute. Sometime between when my article came out and now, those LEED-specific ordinances are gone, just vanished.  Is there any proof that my article had anything to with this? No, there is no proof other than a few words and a copy of the article that may have been floated to people associated with the City of East Lansing.

But I did have a conversation with a representative from East Lansing’s neighbor Meridian Township. Meridian Township has since published Sec. 86-440. – Mixed use planned unit development (MUPUD) & Sec. 86-444. – Commercial planned unit development (C-PUD). These ordinances define the following as conservation amenities:

Activities or technologies listed for Leadership in Energy and Environmental Design (LEED) certification by the U.S. Green Building Council or certification criteria of organizations with similar goals; for example, American Society of Landscape Architects’ (ASLA) Sustainable Sites Initiative (SITES) or Society of Environmentally Responsible Facilities (SERF).

If a municipality is going to have an ordinance which utilizes private green building certification systems, then you do it in a non-exclusive manner. I am pleased that SERF is on Meridian Township’s list, but that is not the critical point. The critical point is that businesses and citizens are protected from state-sponsored monopolistic activity. As I stated earlier, LEED started the market and probably deserve top-billing. What pleases me the most about this outcome is that thoughtfulness and reasoned scholarship appears to have made an impact in the real-world.

I cannot say that I started some kind of trend with my article, but I hope there is a trend nonetheless. I sincerely hope that municipalities are starting to see that LEED is not law. Rather, LEED is a lot like SERF, Green Globes, or any other green building certification: a group of business people with good intentions trying to run an effective, green building certification brand. I can recall engaging with a LEED AP on a Linkedin group message board some years ago. He claimed that he was there from the start with USGBC and LEED. He remarked that USGBC never wanted LEED to become law, but the proliferation of LEED APs took it in that direction. To that end, perhaps the eradication of LEED-exclusive laws is what is best for the soul of USGBC. SERF merely wants the ability to compete. The law does not tolerate such evasions of its power and neither does common-sense.

Part 6 of a 6-part blog series

In this blog series, Colin W. Maguire, JD, SP, recounts his drafting of the legal article The Imposing Specter of Municipal Liability for the Exclusive Promotion of Green Building Certification Systems, 1 University of Baltimore Journal of Land & Development 157 (2012).

So that is how a company could go after a municipality, but what about an individual or a company? You may also have heard of the Equal Protection Clause. This clause it gives citizens equal protection of the law. The Equal Protection Clause is generally used to protect individuals from discrimination.  If a law is not obviously discriminatory, then the person challenging a law under the Equal Protection Clause has to prove that there is no rational basis for the law.

Suppose that a municipality passed the same ordinance previously referenced – you need to buy a LEED certification to receive Brownfield assistance. Assume that a basic LEED certification, including the additional costs of hiring a LEED AP and complying with the certification, is $100,000. So, who is going to pay $100,000 for a green building certification? Only property owners who can afford it will get government support. Assume for a moment that local property owners are only willing to apportion 5% of project costs to specific green building costs.  That would mean that only projects costing $2 million or more.

If you are operating in many real estate markets, then that would preclude a significant amount of building projects from receiving a government benefit and discriminate against lower-cost project and low-income property owners. But is there really no rational basis for promoting this LEED certification as part of an ordinance? The purpose of LEED is to support sustainability in building design and development. Therefore, the goal of a municipality must be to promote green building and sustainable development to the greatest extent in its community. Because no municipal official could remotely fathom that the goal of promoting LEED through law is to line the pockets of local LEED APs.

LEED is a premium product. As the hypothetical illustrates, there are property owners and developers who simply cannot afford it. Therefore, the best ways for a municipality to promote the highest level of green building certification are 1) creating a municipal-specific standard for green buildings, or 2) offering a variety of competitively priced green building certifications on a non-exclusive list. If a municipality is not doing this, then the municipality is not rationally promoting green building and sustainable development. Therefore, the municipality is discriminating against a large number of property owners and developers for no rational reason. There is reason to think municipalities have caught on.

Part 5 of a 6-part blog series to be continued.

In this blog series, Colin W. Maguire, JD, SP, recounts his drafting of the legal article The Imposing Specter of Municipal Liability for the Exclusive Promotion of Green Building Certification Systems, 1 University of Baltimore Journal of Land & Development 157 (2012).

What federal/Constitutional issues could come up in a lawsuit based upon a municipality’s exclusive endorsement of a private green building certification? You have probably heard of the Commerce Clause in the Constitution.  But have you heard of the Dormant Commerce Clause?

This doctrine states that individual states or local governments may not set up barriers to competition in private markets which may affect out-of-state businesses. Classic example: a local ordinance states that you can only use the trash collection services of X private company. That is a violation of the Dormant Commerce Clause if an out-of-state trash collector wants to collect trash but cannot due to the ordinance. There are exceptions to this rule, such as the market participant exception. Example: a local ordinance states that only Y collector can collect trash, but Y collector is actually a unit of city government.  Now, the municipality is participating in the market and can give itself an advantage while regulating trash collection.

As I hypothesized in my article – suppose that a Michigan municipality passes an ordinance which requires any developer to buy a LEED certification in order to qualify for Brownfield credits. This is very distressing news to Shamrock Green Buildings of South Bend, Indiana. Shamrock is attempting to certify a building in the municipality. Yet, the property owner needs to clean up its development site. It could really use that public funding, possibly in excess of $100,000!

That makes the choice to buy LEED an obvious one. Therefore, Shamrock could sue as an out-of-state competitor trying to come into the Michigan market but cannot operate in this municipality.  That is why the Dormant Commerce Clause exists – to stop this type of unfair anti-competition. Even if Shamrock merely sought injunctive relief (the ability to declare the ordinance unconstitutional), the municipality may incur great cost defending this claim. The same municipality could pass an ordinance which states that each municipal-owned building must have a LEED certification. That would be fine because the government unit was acting as a market participant.

Part 4 of a 6-part blog series to be continued.

In this blog series, Colin W. Maguire, JD, SP, recounts his drafting of the legal article The Imposing Specter of Municipal Liability for the Exclusive Promotion of Green Building Certification Systems, 1 University of Baltimore Journal of Land & Development 157 (2012).

By now, you may have asked yourself “but don’t some states have a green building statute?” Illinois passed the Green Building Act in July of 2009. The statute is non-exclusive. If you want state funding for your building in Illinois, then you must have a certification from “LEED, Green Globes, or [an] equivalent certification.” Again, the state government explicitly mandates that multiple green building certifications be considered. Also, the statute requires the state to reassess the green building industry every five years and add names to the list as needed. North Carolina has a very similar statute.

The structure of existing green building laws caused me to think that state legislatures had quietly considered the very issue I chose to publicize in my article. But if states were only concerned about lawsuits based upon existing state law, then the state legislatures could simply change the green building statute to exclusively promote one or two private green building certifications because state can always create its own permissible government function or state action. State and Federal anti-trust law is somewhat cyclical. For instance, most state laws point to federal law to interpret anti-trust law. Then, federal lawmakers point to the “State Action Doctrine” and try to assess whether the state is properly engaging in monopolistic activity.

So why wouldn’t Illinois and North Carolina write their own rules and make LEED and/or Green Globes a requirement, or allow municipalities to do the same? Take SERF for example and suppose that Illinois made a state law that allows Chicago to require all buildings to obtain LEED Silver certification. SERF loses a deal in Chicago. The best that SERF could do is run to Illinois State Court, sue Chicago under Illinois’ anti-trust statute, and lose really badly because the State of Illinois specifically approved Chicago’s activity in statute…right?

Not necessarily. This is where the Constitutional issues become involved and a municipality could easily find themselves in federal court. If X sues Y in federal court under a federal claim (like a violation of the U.S. Constitution), then X can bring related state claims under the same federal lawsuit. Therefore, you could envision a situation where a company or individual could sue a municipality in federal court for a violation of a state claim and a federal claim.

Part 3 of a 6-part blog series to be continued.

In this blog series, Colin W. Maguire, JD, SP, recounts his drafting of the legal article The Imposing Specter of Municipal Liability for the Exclusive Promotion of Green Building Certification Systems, 1 University of Baltimore Journal of Land & Development 157 (2012).

When we left off, I was arguing that municipalities open themselves up to liability by exclusively promoting green building certification systems.  We start with the liability problem at the state level.

States routinely immunize themselves from lawsuits. In my article, I used the example of Michigan – perhaps among the most vigorous of self-immunizers. Still, the general rule of self-immunization for tort liability holds true across almost any jurisdiction. A noteworthy exception to lawsuit immunization also holds true across the states – you can sue state governments for improper monopolistic activity. One reason that anti-monopoly or anti-trust laws present a common exception to government liability immunization is that state anti-trust issues are so often associated with federal anti-trust issues. The goal is to protect consumers from the monopolistic intentions of large businesses, but also the unconditional support of those businesses by governments.

Are there proper state monopolies? A state department or a local municipality may actually say “we are going to support X Company and no other.” However, you need a legitimate “government function” directly supported by a state statute. Therefore, it is useful to ask the question “does a state law allow a government or government unit to act this way?”

If you research relevant cases, then you would find that a local government can pick one ambulance company to contract with because a few state statutes empower all Michigan municipalities to provide ambulance service. Similarly, the Department of Corrections has a statutory mandate to manage and control prisons facilities. Therefore, the Department can choose a collect-call service that will service the phones in those facilities. But in Michigan, there is no green building statute.

There is the Stille-Derossett-Hale Single State Construction Code Act. Part of that law is designed to promote the use among municipalities of leading national standards for materials, modern technologies, and energy-efficiency standards. But every single reference in that law is plural. The only state law remotely relevant to promoting optimum construction and energy-efficiency in design (which could sound like green building technology) promotes a plurality of standards. In other words, there is no government function which indicates a municipality can exclusively promote one private green building certification. However, that does not mean that other states have not expressly addressed green building certifications in statutes.

Part 2 of a 6-part blog series to be continued.