The USGBC Case, The Lanham Act And More

Friday, October 21, 2011 - 14:35

Editor: Please tell us about your professional background.

Weinstein: After graduating from NYU School of Law in 1978, I clerked for a year for Judge James Hunter III of the U.S. Court of Appeals for the Third Circuit. I went from there to private practice, eventually becoming a partner at a now-defunct intellectual property boutique called Milgrim Thomajan, where I became an intellectual property litigator. 

While at Milgrim in the late 1980s, I started litigating false advertising cases. What started as a small aspect of my practice grew as I began working for more clients involved in such disputes. It’s primarily a litigation practice; however, I also regularly do counseling with clients. 

For the past two decades, advertising litigation has been a mainstay of my practice. A major focus of my practice is Lanham Act litigation. The Lanham Trademark Act is a federal statute that provides causes of action not only for trademark infringement but also for false advertising.

I also spend a lot of time defending consumer class action cases that allege deceptive advertising or unfair competition. These state law class actions can be brought in either a state or federal court. In addition to Lanham Act and consumer fraud litigation, I also have a steady diet of cases before the National Advertising Division of the Council of Better Business Bureaus, which goes by the acronym NAD. I am involved with matters before the FTC and the FDA and occasionally other regulatory bodies. I also am involved in foreign advertising disputes, where I work with our clients and foreign counsel in Europe, Asia and the Pacific. 

Editor: You recently had a victory defending the U.S. Green Building Council (USGBC), the developer of the Leadership in Energy and Environmental Design (LEED) rating system for environmentally sustainable commercial and residential buildings. What is the LEED rating system?   

Weinstein: The primary business of USGBC involves the rating of commercial and residential buildings using the LEED rating system, which has become by far the most popular system for rating the environmental sustainability of the design of buildings in the United States and increasingly abroad. 

Most buildings that obtain LEED ratings are new construction, but more recently a LEED rating system was introduced for existing buildings and the redesign of old buildings. LEED certification is a very good way of informing the public that there has been independent third-party verification that the building has been designed with an eye towards sustainability in a variety of respects. These include sustainable building sites, indoor environmental quality, energy conservation, water efficiency, and use of sustainable building materials and resources, among other things. 

Editor: Please tell us about the litigation against USGBC.

Weinstein: The lawsuit against USGBC was the brainchild of Henry Gifford, who is involved in the real estate business in New York City. It started as a class action alleging violations of RICO and of the Sherman Act and false advertising in violation of the Lanham Act and New York state law.  Ultimately Gifford dropped the class claims, but found several other individual plaintiffs to join his suit. These other individuals worked in various aspects of the construction business, ranging from architects to HVAC specialists, mold remediators and energy consultants.

The amended complaint alleged in essence that the LEED certification system was fraudulent because it did not measure how buildings actually performed but only measured how they were designed to perform. On its merits, we felt that it was an entirely baseless lawsuit because the USGBC has always been utterly clear on its website and in its other communications to the public about what LEED is and isn’t. With regard to new buildings, LEED  is by necessity, and is explicitly claimed to be, a measurement of how a building is designed, not how it will perform. That is because for new construction, the LEED certification is based on design, and the award of the LEED certification is made preoccupancy, before actual energy and other environmental performance can be measured. 

Before a building is occupied and is in operation, nobody knows how it will actually perform. Performance is a feature that is substantially impacted by design but also is impacted by how the building is run by the building staff and utilized by the occupants. This is made entirely clear in the USGBC website and in other materials about LEED that the USGBC disseminates -- so there was nothing false or deceptive about any of the challenged USGBC statements. However, the judge, Hon. Leonard Sand of the U.S. District Court for the Southern District of New York, never had to reach the underlying merits of the case.  We recognized early on that the amended complaint was fatally defective because the plaintiffs lacked standing to sue. It became clear to us, and Judge Sand agreed, that this defect was incurable. As a result, Judge Sand granted USGBC’s  motion to dismiss with prejudice. 

Editor: What defenses did you employ in the USGBC case to successfully effectuate the dismissal of the litigation?

Weinstein: We had two principal defenses. The one that prevailed was the argument that none of the plaintiffs had standing to sue under the Lanham Act. It has long been recognized that consumers do not have standing to sue for false advertising under the Lanham Act, and that is hornbook law in every federal circuit in the country.  

There is some uncertainty, however, concerning what businesses have standing to sue for false advertising under the Lanham Act. In certain circuits, only direct competitors of the advertiser have standing. In other circuits, standing is a little bit broader; even a non-competitor may sue if it can demonstrate that it has suffered a commercial as opposed to a consumer injury. 

The law in the Second Circuit with regard to standing is a bit unsettled because different judicial panels of that Circuit have adopted different approaches. A few Second Circuit decisions appear to limit standing to direct competitors, whereas other Second Circuit decisions extend standing to non-competitors who suffer a business injury.  

We argued in the USGBC case that dismissal with prejudice for lack of standing was warranted regardless of which standard the court applied. We maintained that none of the plaintiffs was a direct competitor of the USGBC because the plaintiffs did not market an environmental rating system and USGBC was not a builder, developer or installer of building systems. It was simply an organization that provided ratings for buildings and certifications of LEED expertise for various real estate professionals who desired that certification. We also argued that there was no standing under the broader, commercial injury test, because the cases applying that test required allegations of injury directly caused by the alleged false advertising. The amended complaint did not contain any such allegations.  

A key aspect of the argument before Judge Sand was whether the defective allegations of standing in the amended complaint were curable. We argued that this lawsuit was nothing but a policy diatribe and that there was no possibility that any of the plaintiffs could argue that they suffered any business injury as a direct result of anything USGBC ever said. We were very gratified that the court agreed and dismissed the Lanham Act claims with prejudice.   

We also had a second argument, which was the insufficiency of the amended complaint under Rules 8 and 9 of the Federal Rules of Civil Procedure and the recent decisions of the U.S. Supreme Court in the Twombly and Iqbal cases interpreting Rule 8. We have used these cases in a number of successful motions to dismiss over the last year and a half. They are very good tools for defendants in any kind of federal case. Here, though, the court did not reach that issue because of the court’s dismissal on standing grounds. I should also point out that the plaintiffs’ time to appeal has recently expired, so I think we can comfortably say that the case is now over and done with.

Editor: The dismissal of the USGBC turned on an element of the Lanham Act, which creates a two-part test to assess whether the plaintiff has standing to bring the case. Who can bring these types of actions, and why did the plaintiffs in this case lack standing?

Weinstein: The plaintiffs lacked standing first because they were not competitors of USGBC. They were not offering a competing rating system. Second, they had not pled facts that would allow a court to conclude that they either had or could suffer any injury as a result of LEED’s advertising.

Our position was that there is nothing preventing these plaintiffs from becoming LEED professionals if they wished, and there is nothing preventing any developer of real estate from hiring non-LEED-certified professionals. It was clear that the plaintiffs were making policy arguments against certain aspects of the LEED rating system. There was no allegation in the complaint that the plaintiff had suffered any injury from the alleged false advertising. The plaintiffs in the briefing process had not offered any explanation of how the complaint could be amended to allege that the plaintiffs were likely to suffer any injury from LEED advertising in the future.

In our brief, we pointed out that the process by which the LEED system was developed and is routinely modified is a very public system in which the USGBC takes into consideration the views of all interested members of the building community, including those of the plaintiffs in this case. 

Editor: What does it mean when a company claims it is “green” or “sustainable?”

Weinstein: If that is all that a company claims, it may be in trouble because the FTC’s revised draft of its green guidelines discourages broad generalities describing environmental performance such as “green” or “sustainable.” It instructs advertisers to make very specific claims about the way in which a product or service benefits the environment and to back up such claims with adequate substantiation.

Editor: How can a company that positions itself as “green” avoid liability for engaging in false advertising or other deceptive practices?

Weinstein: Don’t make vague statements about environmental benefits. Don’t overstate the environmental benefits of your product or service, and make sure that any environmentally related advertising statement is backed by good scientific evidence based on sound testing or measurement principles.

Editor: What are the typical remedies in a false advertising case?

Weinstein: It depends on whether it’s based on state law or the Lanham Act. Under the Lanham Act, there are a variety of possible remedies ranging from injunctive relief (either temporary, preliminary and/or permanent) to plaintiff’s lost profits resulting from the false advertisements to disgorgement of profits. The prevailing party can also obtain attorneys’ fees and costs in an appropriate case under the Lanham Act. As a practical matter, damage awards are relatively rare in Lanham Act cases since causation in false advertising cases is frequently difficult to prove, although it is certainly not impossible. State law remedies differ from state to state so they are more difficult to categorize, but each of the remedies that I mentioned is available in at least some states. 

 

Please email the interviewee at lweinstein@proskauer.com with questions about this interview.