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New York Judge Dismisses False Advertising Suit Against USGBC

Date: Aug 19, 2011

A New York federal judge has dismissed a lawsuit against the U.S. Green Building Council ("USGBC"), involving claims for false advertising under the Lanham Act for lack of standing.

In Gifford et. al. v. U.S. Green Building Council, No. 10-cv-07747 (S.D.N.Y. Feb. 7, 2011) (amended complaint), Plaintiffs alleged that the USGBC fraudulently misrepresented that its Leadership in Energy and Environmental Design ("LEED") certified buildings are more energy efficient than conventionally-built buildings. Plaintiffs are professionals in the environmental engineering and design industry who provide real estate developers and other clients advice about how to design and construct energy efficient buildings.

Plaintiffs claimed that USGBC's false advertising caused consumers to utilize a LEED-certified professional instead of Plaintiffs because consumers mistakenly believe that LEED-certified professionals will design a building that is more energy-efficient than professionals who are not certified. The initial complaint, filed on October 8, 2010, alleged violations of the Lanham Act, RICO, the Sherman Act, and related New York state laws and requested class action status. On February 7, 2011, the Plaintiffs filed solely as individuals, dropping all but the Lanham Act and state law claims.

On August 15, 2011, the Southern District of New York ruled that Plaintiffs lacked standing to bring the false advertising claims. In assessing standing under the Lanham Act, courts have used the "strong categorical" and the "reasonable commercial interest" tests. Under both tests, the Second Circuit has consistently stressed the importance of competition between litigants in evaluating Lanham claims. In this case, the District Court reasoned that Plaintiffs could not establish standing under either test. Plaintiffs, the court said, plainly did "not compete with USGBC in the ‘certification' of green buildings or the accreditation of professional." Purporting to compete only in a market for "energy efficient building expertise" was not enough. Likewise, the court ruled that Plaintiffs did not adequately allege a reasonable commercial interest that was likely to be damaged by USBGC's alleged false statements. A copy of the court's order can be found here.

The proliferation of environmental marketing claims has generated new false advertising challenges in the courts, before self-regulatory bodies, and before agencies like the Federal Trade Commission ("FTC"). While in this matter the initial antitrust claims were ultimately dropped, as environmental certification programs expand, the potential for antitrust and other legal challenges to the certifiers may also increase.

For more information on green claims and green certifications, contact Sheila A. Millar at 202 434-4143 or via e-mail at millar@khlaw.com, J.C. Walker at 202 434-4181 or at walker@khlaw.com, Peter L. de la Cruz at 202 434-4141 or via e-mail at delacruz@khlaw.com, or Tracy P. Marshall at 202 434-4234 or via e-mail at marshall@khlaw.com.