Certification and accreditation programs (collectively referred to herein as "certification" programs) sponsored by trade and professional associations are increasingly common. Whether it is the certification of individuals, products or services, the credentialing of professionals, or the accreditation of programs, services or institutions, these programs confer an array of valuable benefits not only to associations and association members, but also to industry, government, and the general public. However, as the recent litigation involving the National Spa and Pool Institute and other associations remind us, standard-setting and certification programs are not without liability risk – potentially significant risks.
Fortunately, proper care in establishing and operating certification programs can go a long way toward minimizing those risks. As association certification programs continue to play an increasingly important role in our society, it is more critical than ever to ensure that associations are not deterred from sponsoring such programs as a result of legal risks that can be effectively managed. This article is designed to outline the principal liability risks facing most association certification programs, and to suggest steps to limit these risks.
In general, courts are extremely reluctant to interfere with certification programs operated by trade and professional associations. Courts generally are hesitant to second-guess the reasonableness of association standards, policies or decisions, recognizing that professionals in associations have far greater experience than judges in formulating and applying standards of industry or professional excellence. Associations have prevailed in the vast majority of certification disputes. Moreover, courts often have found in favor of associations at the summary judgment stage – in other words, the association prevailed based on a motion at the close of discovery and thus avoided the risk and expense of trial.
However, despite associations' impressive track record of success in certification-related litigation, the significant risks of litigation cannot be ignored. Even if an association ultimately prevails in court, the costs, burdens and distractions of mounting a defense can be overwhelming. Although clearly in the public interest and beneficial to members and others, self-regulation programs such as certification programs raise risks of legal liability under the antitrust laws, under the Americans with Disabilities Act ("ADA"), and under common law theories of negligence, warranty, due process, and defamation, among others. Fortunately, there are steps associations can take in structuring and administering a certification program to minimize the risk of being sued in the first instance, and, if a lawsuit does materialize, to ensure that the association will prevail. In addition, appropriate errors and omissions insurance can help protect the association against the financial costs of such litigation.
Areas of Liability Risk
Following is a brief discussion of the five principal areas of liability risk for associations in connection with the operation of certification programs: antitrust, negligence (liability to third parties), due process, defamation, and ADA compliance. Other theories of liability exist as well – such as theories of warranty and enterprise liability – but these five areas make up the majority of claims filed against association certification programs.
Unsuccessful applicants for certification or those whose certification is revoked may seek to use the antitrust laws to obtain certification or to obtain damages for the failure to certify. An association could be held liable under those laws if the challenger can demonstrate (i) that certification is essential in order to effectively compete in the market, and (ii) that the program's exclusion was the result of unreasonable or invalid standards or criteria or of unfair or inappropriate procedures. In addition, certification programs that require membership in the sponsoring association as a prerequisite to obtaining certification may be challenged as an illegal "tying" arrangement, among other antitrust theories. Certification programs that are anticompetitive, discriminatory, unrelated to objective standards, or implemented without fair procedures are most likely to attract antitrust challenges. Moreover, certification programs that charge an unreasonably high price to apply for or receive certification or recertification similarly are subject to and likely to attract antitrust challenge.
As with all antitrust actions, the key factor in an antitrust challenge to an association's certification program or decision is whether the association's actions are unreasonably "anticompetitive" within the meaning of the antitrust laws. In other words, courts will look at all of the facts and circumstances to determine whether the certification program, on balance, restrains competition in the relevant market more than it promotes it. A certification program that, in purpose and effect, is designed to, and does in fact, further, protect and promote the economic health of, or consumer welfare within, a particular industry will generally be deemed to be more procompetitive than anticompetitive – even though those who fail to achieve certification may find it more difficult to compete in the market.
Certifying bodies generally have broad discretion in setting and implementing certification requirements. Courts are particularly reluctant to second-guess technical standards – such as those used as the basis for certification decisions – as long as the standards are objectively established and substantively justifiable. Courts also recognize that certification programs are generally procompetitive in nature. Most importantly, court decisions in this area suggest that taking the steps set forth below in structuring and administering certification programs will significantly limit the antitrust risk arising from such programs.
2. Negligence (Liability to Third Parties).
Reliance on the certification of a professional, entity, product, or service can, in some cases, cause the association that granted the certification to be held liable when a patient, client or customer suffers harm (physical, financial or otherwise) at the hands of the certified individual, entity, product, or service. The most common claim is that the certifying association was negligent in granting the certification and should therefore be liable for resulting injuries.
This liability risk to third parties generally means negligence liability (a form of tort liability), but is sometimes couched in claims such as misrepresentation, failure to warn, warranty, strict liability, and enterprise liability. For instance, the injured party may allege that the association warranted or guaranteed the individuals, entities, products, or services certified by the association, and therefore should be responsible (under a breach of warranty theory) for resulting injuries to those who purchase, utilize or participate in them.
Fortunately, court decisions holding certifying bodies liable in tort for loss or injury caused by the certified individual, entity, product, or service remain a rarity. This type of liability is subject to a number of conditions and remains infrequent. In short, the certifying body generally will be found liable under the tort of negligence only if the injured party can prove all of the elements of negligence liability – duty, breach of duty (negligence), reliance, and causation, along with proof of damages (injury). If any one of these four elements cannot be established, then liability will not result.
Duty. The first question courts ask is whether or not the certifying association owed a duty of care to the third party (the injured plaintiff who utilized the services of a certified vendor, for instance). While there is generally no duty of care owed to third parties, some courts have held that once an organization undertakes to set standards or inspect, test or otherwise certify individuals, entities, products, or services, it should reasonably know that third parties might rely on those standards or certifications, and therefore must exercise reasonable care in doing so.
Breach of Duty (Negligence). The court will next determine whether the certifying body failed to act with reasonable care (i.e., acted negligently) in granting the certification or in setting a particular standard. In other words, the association is obligated to use due diligence and reasonable care in promulgating the certification standards and in applying them to applicants for certification. For instance, a "mail-order" certification program that establishes no meaningful standards or that exercises no real scrutiny in evaluating applicants could be at risk for breach of its duty of care.
Reliance. It must be proven that the plaintiff relied upon the association's certification in utilizing the certified individual, entity, product, or service. It generally is not sufficient for a plaintiff merely to show that the association certified a vendor, for instance, and later an injury occurred; the plaintiff must establish that it was because of the association's certification that the vendor's products or services were utilized. If the association can establish that the plaintiff did not know of the association's certification or that the certification was not a material factor in the decision to utilize the vendor's product or service, then it may be able to avoid liability.
Causation. The negligence of the certifying association must be considered to be a "proximate cause" of the injury to the ultimate user (the plaintiff). While the most direct cause of the plaintiff's injury generally is the negligence of the certified party or product – not the certifying association – where the certifying body expects the public to rely upon the certification, and the injured party does just that in selecting the certified party or product, the causation and reliance criteria both may be met. In other words, if reliance is established, causation likely will be as well.
Damages (Injury). There must be measurable injury (physical, financial or psychological) to the plaintiff for any damages to exist.
3. Due Process.
Certification bodies must provide fair procedures in both setting and implementing standards. It is critical to carefully establish and strictly, consistently and objectively follow written rules and procedures for the administration of the certification program. Certifying bodies are legally bound to follow their own rules and regulations in making certification decisions. While this duty is sometimes described in contractual terms, the obligation is more often labeled as a matter of common law due process or fundamental fairness.
Common law due process has two elements: (i) substantive fairness, and (ii) procedural fairness. Substantive fairness requires the use of objective standards reasonably related to a legitimate organizational purpose. Procedural fairness refers to the procedures of decision-making.
Courts are much more likely to defer to substantive standards established by a certifying association. However, standards and decisions by a certifying association may be overturned if they are arbitrary, capricious or discriminatory, or where they are influenced by bias, prejudice or where they lack good faith. Courts are more likely to scrutinize the fairness of the procedures more closely because these are matters with which they are more familiar.
There is no definitive rule as to what due process requires, but at a minimum it would include notice and an opportunity to respond to an adverse certification decision. In addition, fundamental fairness requires that similarly situated persons and entities be treated the same.
The recommendations below set forth more detailed guidelines for ensuring the satisfaction of common law due process requirements.
Defamation is the oral utterance (slander) or written publication (libel) of false or misleading facts, or false or misleading implied facts, that are derogatory or damaging to an individual's, entity's or product's reputation. Accusing someone of dishonesty or other moral deficiency, or of professional or business deficiency, raises particularly significant risks of defamation liability. In the certification context, this risk is most likely to arise: (i) when an individual or entity is denied certification, and then damaging statements are made (to one or more third parties) by a representative of the certifying body about the individual or entity and the failure to be certified; or (ii) when sensitive, potentially damaging, information about an applicant for certification becomes known to the certifying body during the certification process, and that information is subsequently disclosed to one or more third parties (intentionally or unintentionally).
Generally, defamation may be committed even by those who believe they are communicating the truth. For a statement to be defamatory, it must be actually communicated to a party other than the speaker or author. Anyone who republishes a defamatory statement can be equally responsible with the original speaker or author. The defamed individual or entity may sue anyone who publishes, prints or repeats the defamation, and, depending on the circumstances, may recover from the speaker(s) or author(s) money damages to compensate for the harm to reputation, and to punish the speaker(s) or author(s) as well. Truth is an absolute defense to virtually any defamation claim.
In some circumstances, legal "privileges" apply that may protect the speaker or author from liability even where a statement might otherwise be defamatory. The three principal privileges in the ./ association context are: (i) where the speaker takes reasonable precautions to ensure accuracy in every derogatory detail, including making reasonable inquiry; (ii) where the statement concerns a public official or figure, the speaker will not be liable unless the speaker actually knew the accusations were false and made the statement in reckless disregard of its truth or falsity; and (iii) publication or communication of a derogatory statement within an association – at least within the governing body or bodies of an association – for the purpose of promoting a common interest may be protected by a "qualified privilege." For example, deliberations among a certification board concerning certification-related proceedings are likely protected by this qualified privilege. Where this privilege applies, derogatory statements may give rise to defamation liability only if motivated by spite or ill-will, or if communicated to persons outside of the management or governing group.
The recommendations below set forth guidelines for avoiding defamation liability, as well as ensuring protection of the qualified privilege.
5. Americans with Disabilities Act Compliance.
Private, nonprofit organizations generally are subject to the requirements of the federal Americans with Disabilities Act with respect to their general operations – including the sponsorship and administration of certification programs. The requirements of the ADA of most relevance to certifying bodies are the specific and extensive standards contained in the law for private entities that conduct examinations and courses relating to applications, licensing and certification, or credentialing for educational, professional or trade purposes. The U.S. Department of Justice's regulations require that certifying bodies "offer such examinations or courses in a place and manner accessible to persons with disabilities or offer alternative accessible arrangements for such individuals."
Note that the ADA does not apply if an individual seeking certification does not have a covered disability. For instance, recent U.S. Supreme Court decisions have clarified that available corrective and mitigating measures, such as medication or medical aids, must be considered in determining whether or not an individual has a disability under the ADA. Thus, for example, the Court held that correctable myopia is not a disability, nor is high blood pressure controlled with medication.
A certifying body is responsible for selecting and administering the certification examination in a place and manner which ensures that the examination tests what the examination purports to measure, rather than testing the individual's disability, such as impaired sensory, manual or speaking skills (unless those skills are what the examination is designed to test). This means ensuring that: (i) testing places are accessible to individuals with disabilities; and (ii) auxiliary aids and services are made available to enable individuals with disabilities to take the examination, in accordance with the ADA's requirements.
For example, for individuals with hearing impairments, oral instructions or other orally-delivered materials could be provided through an interpreter, assist of listing device, or other applicable means. For individuals with visual impairments, the examination and answer sheets could utilize large print or Braille, could be provided via audiotape, or could be provided through the use of qualified readers and transcribers to read questions and record answers.
A certifying body does not have to provide auxiliary aids and services in all cases. If providing a particular auxiliary aid or service would fundamentally change the examination or result in an undue burden on the certifying body, it does not need to be provided. This determination is case-specific.
Regarding who decides what type of auxiliary aid or service should be provided, when possible, the individual with the disability should be consulted to determine the type of aid or service that may be needed. When more than one type of auxiliary aid or service will enable a person with a disability to participate effectively, a certifying body may choose what aid or service to make available.
Aside from auxiliary aids or services, other types of modifications may be required. For instance, it may be necessary to modify the manner in which the test is administered. For example, if an individual has an impairment that makes writing difficult, it may be necessary to give that individual more time to complete the exam or to permit the typing of answers.
The individual with a disability may not be required to bear the cost of the aid or modification. The certifying body must bear the cost of the aid or modification. However, a certifying body is required only to provide auxiliary aids or modifications that do not pose an undue burden on a certifying body and do not fundamentally change the examination.
Examinations must be administered in facilities that are accessible to disabled individuals or alternative accessible arrangements must be made. If the facility in which the examination is offered is not accessible, it may be administered to an individual with a disability in a different room or another location. The alternative location should provide comparable conditions to the conditions in which the test is administered to others.
All testing locations need not be accessible and offer specially designed exams, however, if an examination for individuals with disabilities is administered in an alternative accessible location or manner, it must be offered as often and in as timely a manner as other examinations. Examinations must be offered to individuals with disabilities at locations that are as convenient as the location(s) of other examinations.
Individuals with disabilities cannot be required to file their applications to take the examination earlier than the deadline for other applicants in order to enable accommodations to be made. However, a certifying body may require individuals with disabilities to provide advance notice to the certifying body of their disability and of any aids and/or modifications that might be required – so long as the deadline for doing so is not earlier than the deadline for others applying to take the examination.
A certifying body may require applicants to provide documentation of the existence and nature of the disability as evidence that they are entitled to an aid or modification – so long as the request is reasonable and limited to the need for the modification or aid requested. Appropriate documentation might include a letter from a doctor or other health care professional, or evidence of a prior diagnosis or accommodation (such as eligibility for a special education program). The applicant can be required to bear the cost of providing such documentation, but he or she cannot be charged for the cost of any modifications or auxiliary aids provided for the examination.
Finally, the rules for courses are similar to those for examinations. They generally require that modifications be made in courses offered by private entities to ensure that the place and manner in which the course are given are accessible to individuals with disabilities. The most significant difference is that the general rule for courses applies to all individuals with disabilities – not just those with "impaired sensory, manual, or speaking skills." Modifications in courses may include changes in the length of time allowed for completing the course, substitution of course requirements, or adapting the manner in which the course is conducted or materials are distributed. Advance notice of the opportunity to obtain materials in alternative formats must be provided to disabled individuals. Appropriate auxiliary aids also must be provided, unless to do so would fundamentally alter the course or create an undue burden. If courses cannot be administered in a facility accessible to individuals with disabilities, comparable alternative arrangements must be made. Such arrangements may include offering the course through videotapes, cassettes, CD-ROM, the Internet, or prepared notes. The selection or choice of courses available to individuals with disabilities may not be restricted.
Guidelines for Minimizing Liability Risks.
Court decisions involving association certification programs suggest that taking the following steps in establishing and administering certification programs will significantly limit the association's liability risks for such programs:
- Certification standards should be clear and unambiguous, reasonable, fair, and objectively grounded – care should be taken to ensure that valid, objective bases support each certification standard. Standards should be based on data or on a respected body of industry or governmental opinion linking each particular standard to the qualities that the certification purports to measure. Where possible, standards should be directed at and focus on the ends, not the means. Where the means are specified, they must be legitimately, demonstrably and directly related to the objectives. Alternative means to achieve a given objective should be permitted where possible. Standards should never be arbitrary or capricious, or vague or ambiguous, and procedures should be developed that document the development and reasonableness of, and the objective basis for, proposed standards.
- Certification standards should be no more stringent or rigid than necessary to ensure that minimum competency or quality levels have been attained.
- Certification programs should be open both to association members and non-members on the same terms and conditions. Moreover, nothing in excess of a reasonable price should be charged to apply for or receive certification or recertification.
- Specific commercial or economic considerations should play no role in the setting or application of the certification standards. In addition, certification programs should never be created or used for the purpose of raising, lowering or stabilizing prices or fees, excluding competitors from the market, or limiting the output or supply of products or services.
- Prior to finalizing certification standards, provide interested parties with notice of the proposed standards and an opportunity to comment. Fairly and objectively consider such comments in finalizing the standards.
- Where appropriate and feasible, consider utilizing and participating in the standard-setting procedures of the American National Standards Institute ("ANSI"), and, where a certification program is involved, consider obtaining accreditation of the certification program by ANSI.
- Establish equivalent standards or alternative paths to certification wherever possible. As with the standards themselves, the determination as to whether the standards have been satisfied should focus on the ends, not the means. There must be valid, demonstrable and reasonable bases upon which to determine that applicants for certification have met the standards.
- Periodically review and update all certification standards to ensure that they are current and reflect new legal, technological and other developments. Provide appropriate opportunities for public notice and comment whenever standards are modified, and carefully consider such comments in the revision process. In addition, document any and all complaints or concerns about the standards and revise the standards accordingly if appropriate.
- Ensure that participation in and use of the certification program is completely voluntary.
- Widely publicize the availability of the certification program and permit application by all who choose to apply. Do not limit participation in the certification program to only members of the sponsoring association. However, fees charged to non-members for certification may be higher than those charged to association members to reflect any membership dues or assessments that contribute to funding the program.
- There must be no bias, partiality or inconsistency in establishing or operating the program. The certification process must be objectively and uniformly administered, without subjectivity, favoritism or discrimination. The rules of the certification process must be scrupulously, consistently and objectively followed by those administering the program.
- Due process should be built into the program. Before certification is denied or revoked, those who seek the certification should be provided with: (i) notice of an adverse decision and a meaningful opportunity to respond to the notice, (ii) a hearing before a panel of peers, none of whom has a direct economic or personal interest in the outcome of the proceeding, (iii) the right to be represented by another person, including an attorney, and to submit evidence and arguments in defense, (iv) the right to examine the evidence and to cross-examine witnesses (if applicable), (v) the right to a written decision explaining the reasons underlying it, and (vi) the right to appeal an adverse decision to a higher-level decision-making body within the association. Proceedings of this nature should remain strictly confidential.
- Require full disclosure by those involved in the certification process of any factor that might be considered bias or a conflict of interest. Require recusal or removal if a bias or conflict is particularly severe or pervasive. Full disclosure and appropriate checks and balances generally are effective mechanisms for safely managing most potential conflicts of interest. Generally, reduced volunteer involvement and increased association staff involvement may assist in objectivity and the absence of bias.
- All certification decisions should be based completely and exclusively on the record of the review and not on extraneous, anecdotal, subjective, or other outside sources of information.
- "Grandfathering" of those who do not meet all current certification standards generally should be avoided.
- Require regular recertification as appropriate to ensure that those who are certified continue to meet the program's standards. In addition, review the certification process itself on a periodic basis to ensure it is being properly administered.
- While nothing prevents a certification program from publicizing the names of, and information about, those who are certified, care should be taken to avoid any explicit or implicit disparagement of those who are not certified. Maintain strict confidentiality with respect to all adverse allegations, complaints, actions, and proceedings that arise in connection with the certification program. While it is acceptable for a certifying association to verify that an entity is not currently certified, no further details should be provided.
- Ensure that all certification examinations – as well as all courses that prepare applicants for certification exams – are administered in strict compliance with the specific requirements imposed by the federal Americans with Disabilities Act and implementing regulations.
- Maintain strict security regarding all aspects of the certification process. Any missing, stolen or copied examination booklets, for instance, can have a severe impact on the integrity of the certification process.
- To minimize the risk of copyright infringement, maximize copyright rights, and facilitate enforcement of such rights, use a copyright notice on all certification program materials (e.g., standards, applications, brochures) and register such materials with the U.S. Copyright Office. Be sure that the association owns or has the right to use the entire contents of such materials. In addition, as listings of certified entities generally are not protectable under U.S. copyright laws, use a "shrinkwrap" license or other form of contractual commitment to place explicit, binding limits and conditions on the use of the list. The shrinkwrap license also can be a useful vehicle to disclaim any endorsement or guarantee of the certified entities by the association.
- To minimize the risk of trademark infringement, maximize trademark rights, and facilitate enforcement of such rights, use a trademark notice in connection with the certification logo or seal and register the mark with the U.S. Patent & Trademark Office (either as a certification mark or as a service mark). Be sure the association's use of the mark does not infringe anyone else's trademark rights. In addition, codify the terms and conditions of, and limitations on, use of the mark by certified entities in a written agreement, possibly as part of the certification application form or in connection with distribution of the mark. Be sure to include provisions, among others, designed to prevent false or misleading use of the mark and to prohibit any further use upon decertification. Note that the federal Lanham Act, and similar state laws, prohibit the use of any false or misleading terms, names or symbols, or any other false or misleading descriptions or representations, that are likely to deceive the public with respect to the affiliation of the user with a particular organization.
- Include binding limitation of liability and indemnification provisions in the certification application form (or other document) to absolve the association from liability to those who are certified, and to hold the association harmless from lawsuits by those injured by the acts or omissions of certified entities.
- Avoid any implicit or explicit guarantee or warranty of certified products, services, individuals, or entities. To this end, avoid "puffery," do not overstate how a product, service or professional performs, and do not use superlatives such as "never fails" or "safest" in describing those that are certified.
- Use written disclaimers where appropriate – such as on marketing materials, in the application form, and on the association's Web site – to clarify the association's limited role with respect to, lack of responsibility for, and absence of guarantees or warranties of, certified products, services or entities. If and where appropriate, require use of similar disclaimers by those that receive certification.
- Maintain sufficient insurance to cover the liability risks of the certification program. Some association professional liability insurance ("APLI") policies provide coverage for certain claims arising from certification programs as part of the basic policy, although some with coverage sublimits. Other APLI policies will not cover such programs without an endorsement to the policy. Importantly, APLI policies do not cover bodily injury or property damage claims arising from these programs. Stand-alone certification insurance policies are available and necessary to insure against these risks. Adequate insurance should be a prerequisite to the operation of any association certification program.
For more information, contact Mr. Tenenbaum at 202.344.8138 or at firstname.lastname@example.org.