Association Certification And Accreditation Programs: Minimizing The Liability Risks

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. Overview 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. 1. Antitrust. 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...