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On Thursday, May 5, 2011 by Melody Smith and Mary Rose Brusewitz posted in Environmental Law Blog
What began as a dream to be the biggest and most environmentally friendly man-made structure on Earth is likely becoming a bell-weather for green litigation. Heralded as a “new kind of destination,” the Destiny USA project involves the expansion of a pre-existing shopping center located in upstate New York into one of the largest retail, entertainment and shopping destinations in the country. The developer, in exchange for promises of LEED certification and certain renewable energy features, received $228 million in tax-exempt green bonds to finance the first phase.
So what happens if the developer fails to hold up its end of the bargain?  The answer to that question may soon be known. The mega-project, said to be 90% complete, failed to incorporate the green building components it had promised to the federal government, including LEED certification. Now enters the IRS, which announced an audit of the bonds. Should the IRS determine the developer did not comply with the green bond program, the developer may face a penalty of $2.3 million, not to mention the loss of tax exempt status for the bonds, and its credibility.
This may be only the beginning of a new chapter in green-related litigation. If the non-green buzz surrounding the project turns out to be confirmed, this may be a springboard for a litany of litigation nightmares when “guaranteed” LEED certification is not delivered.
The fate of the contractors and design professionals associated with this and other similar purportedly green projects may also prove to be useful to follow.  Putting aside reputational risk, these participants in projects also may be added as defendants in similar suits. Parties linked with such projects may need to develop tools for monitoring and confirming compliance with green promises or otherwise find ways to protect against the potential liability if green commitments go unmet.
Melody Smith is a litigator who focuses on environmental and governmental law issues.  Mary Rose Brusewitz practices corporate, finance, and international law, with a focus in sustainable energy and related industries. For more information on this article, please contact the authors at melody.smith@strasburger.com or maryrose.brusewitz@strasburger.com.