Originally posted 2010-12-31 09:00:58.
For this week’s year end Guest Post Friday here at Musings, we welcome Michael Anschel. Michael is the owner of Otogawa-Anschel Design-Build, a member of BATC, lead the development of and serves as a board member to MN GreenStar, the CEO of Verified Green, Inc., and writes the green blog for Remodeling Magazine Online.
If you have been following the sad state of affairs in Minnesota recently (no not the elections) you might be scratching a bald spot on your head in amazement. To my knowledge it is the only state in which the local builders association [www.batconline.org] has actually sued the local Green building program (MN GreenStar [www.mngreenstar.org]; going as far as filing a restraining order to keep them from certifying any new homes in the state.
This is, in my opinion, a tragic move in the wrong direction for everyone; builders and homeowners alike.
The builders group widely know for The Parade of Homes claims to have no interest in using the program or the brand MN GreenStar, so why seek to shut the program down? Even the lawyers have been scratching their heads trying to make sense of this bizarre and highly aggressive move. And things just get more bizarre from there.
The Builders Association of the Twin Cities claims Intellectual Property rights over the new homes program, but their entire case hinges on a single paragraph in an MOU from 2007 with The Green Institute (a local environmental organization) that was hired to modify the remodeling program to address new homes. The remodeling program on which the new homes program is based was built with a combination of State funds and around a million dollars of in-kind volunteer time from builders, remodelers, architects, designers, manufacturers, suppliers, utilities, the University of Minnesota, and the MN Office of Energy Security. In short, the design, algorithm, look, feel, shape, scoring, values; the expression of the idea, were all created outside of BATC’s narrow scope of work and small $50K investment. The two programs differ by fewer than 60 lines of text, and the remodeling program clearly precedes the new homes program from inception to launch. A thin platform on which to rest one’s case.
Messy Ethics
But the twists don’t end there. BATC signed an MOU with the local chapter of the National Association of the Remodeling Industry (NARI) and The Green Institute (TGI) to facilitate the operations of the two certification programs. They then worked together to create MN GreenStar the non profit which manages, develops, modifies, oversees, certifies, and promotes the certification programs. BATC brought in their lawyers at Felhaber, Larson, Fenlon, and Vogt, to assist in the formation of the corporation and negotiations with the State on the copyright and use of the name MN GreenStar (The state has a Green Star recognition program for businesses), as well as copyrights on the programs, and Intellectual Property releases from authors of the programs. The IP rights of BATC in the formation of the non profit as it relates to the assets (the program) of MN GreenStar are not addressed anywhere in the bylaws or any other documents after the 2007 MOU. This suggests that either Felhaber, Larson was acting in bad faith in his representation of the two entities, or BATC acted in bad faith and intentionally hid the MOU from counsel. More likely BATC had forgotten about it until now and their current counsel was unaware of the role Felhaber, Larson had played previously. Needless to say it is a messy situation and rife with ethical conflict.
Misleading money trail
Part two of the lawsuit revolves around money, or at least that is what one might think at first glance. BATC is calling their loan note of $300K on the grounds they don’t believe MN GreenStar can pay the …wait for it… $500 per month payments. The suit was filed in December of 2010 and the first payment is due in January 2011. We are talking about $6000 a year. Not exactly an extreme burden, and again pretty weak grounds given the organization pulls in sponsorships of over $50K annually. In reading the suit, it is evident that BATC believes the sponsors will cease to fund MN GreenStar. This begs the question, how would they know. If BATC were to have approached current or even potential sponsors and intimate their intentions to eliminate MN GreenStar, ‘poisoning the well’ as it were, they could be paving the road to a substantial counter suit.
So why call in the note? MN GreenStar doesn’t have $300K sitting in their account, so what is the purpose? To bankrupt MN GreenStar? The loan will take 50 years to pay back under its current terms, so perhaps the organization sees the lost funds as an acceptable loss? But then why sue? It doesn’t make sense, unless BATC sees a revenue producing opportunity once MN GreenStar is out of the way.
At the hearing in Ramsey County on 12/13/2010 the MN Attorney General’s office appeared alongside MN GreenStar to the apparent surprise of the BATC lawyers. After some discussion the judge made the following rulings:
1. BATC must serve the State of MN
2. MN GreenStar can continue to use the new home program and certify homes
3. BATC must post a $150K bond or the entire restraining order will be dismissed (the portion restricting MN GreenStar from selling or altering the program remains in effect).
And then…
The law firm representing BATC in this case, Larkin, Hoffman, Daly & Lindgren, Ltd, has put significant effort into positioning themselves as advocates for Green Building; offering class to the community and even serving on USGBC local chapter’s board of directors. Choosing to represent BATC in the undermining of legitimate green building seems to run counter to their public rhetoric and PR efforts.
In summary:
The state funds the development of a green remodeling standard, BATC decided to piggy back on their work, assists in creating an independent non-profit, loans the non-profit money and serves on its executive board. Then BATC decides to leave, call the note, sue the non profit on claims they own the program. The judge isn’t buying it and tells BATC to put some skin in the game. The next day in court is 1/24/2011, but expect BATC to pull something before then.
But Why?
If you are still with me and your brain hasn’t tied a knot itself trying to keep all this straight, you are no doubt asking why would a Builders Association with such a successful consumer facing brand like The Parade of Homes make such aggressive moves and expose itself to so much risk.
I had the opportunity sit down with the Executive Director of BATC David Seigel, Board president Gary Aulik, and Public Policy Director James Vagle just before BATC left MN GreenStar. I was, up until their departure, the appointed BATC and NARI MN joint representative to MN GreenStar. In that meeting Mr Seigel made it exceedingly clear that he intended to have BATC pursue the development of their own green building certification and that it would allow SELF CERTIFICATION at the lower levels. He and Mr. Vagle stated that the requirements of the current program were too hard and the levels of performance set too high.
They also indicated a desire to “de-couple” the core components of the program (Energy Efficiency, Resource Efficiency, Water Conservation, Indoor Environmental Quality, Site Impact, and Community Impact) with two purposes: 1. Allow a builder to certify without taking a whole systems approach. 2. As a tool to counter EnergyStar v3.0 (which Seigel and Vagle indicated was too expensive, too hard, and would not be supported by Xcel Energy (something Xcel has not said publicly).
This represents a giant step backwards for the residents of Minnesota, and damages the reputations of builders. If we have learned anything over the last decade, it is that industries and corporations should not be allowed to write their own standards and perform their own audits (Arthur Anderson, Enron, Lehman Brothers).
Are Builders to blame?
I think it is important to note that while BATC is a builders association and represents the industry, there are plenty of builders who are furious with BATC of the recent turn of events. They believe, as do I, that the actions BATC has taken only generate negative PR for builders, and moreover is not representative of what the entire membership wants. The vast majority of BATC members most likely have no idea that their organization is suing MN GreenStar and spending valuable resources because BATC has not issued any statement to their membership. One builder speculated that the BATC executive committee was a “run-away-train” run by “a bunch of badgers.”
The cost of certifying a new home with MN GreenStar at the bronze level is between $1200-2000. Fees to MN GreenStar are minimal ($150 + $0.10 per sf) and testing is subsidized by local utilities. The additional costs come from tracking, recording, and managing the process properly and minor material upgrades. When Builders are struggling to sell any homes, it is understandable that they might want a marketing device that may cost $1000, but doesn’t require all the time and change in thought process that green building requires. And yet, as homeowners become more savvy doesn’t it make sense to prepare for a new market?
Stronger and stronger
I believe that MN GreenStar will come out of this escapade stronger and more visible to the public than ever. Already the controversy has generated news articles and main stream media presence. More than ever, MN GreenStar is seen as the true measure of Green building in MN, and certification as a serious achievement. I expect as public awareness of MN GreenStar increases, the interest and demand for legitimate affordable green building certification through MN GreenStar will rise. As for the precedent that BATC is setting in the legal community… I’ll leave that to the lawyers to debate.
MN GreenStar is represented by Patrick Burns, Burns Law Firm PLLP and Bruce Little, Lindquist & Vennum P.L.L.P)
As always, Michael and I welcome your comments below. Please subscribe to keep up with this and other Guest Post Fridays at Construction Law Musings.
