The 4th Circuit Reaffirms Judicial Deference to Accreditation Agencies

Date: July 28, 2015

This article originally appeared in the 2015 Q2 edition of “ICE Digest” a publication of Institute for Credentialing Excellence.

On March 24, 2015, the United States Court of Appeals for the Fourth Circuit issued a published opinion in Professional Massage Training Center, Incorporated (PMTC) v. Accreditation Alliance of Career Schools and Colleges, d/b/a Accrediting Commission of Career Schools and Colleges (ACCSC), in which PMTC filed a civil lawsuit against ACCSC for alleged violation of due process after ACCSC denied PMTC's application to renew its accreditation. As further explained below, the Fourth Circuit's ruling is significant for both accreditation and certification organizations, as it affirms judicial deference to decision making by credentialing bodies. The opinion is available online.

ACCSC is a nonprofit corporation recognized by the Department of Education as a national accrediting agency. PMTC is a school for massage therapists that sought and received initial accreditation from ACCSC in 2000, and then received renewed accreditation in 2005. When PMTC sought to renew its accreditation again in 2010, PMTC's renewal application was ultimately denied by ACCSC, and the lawsuit followed.

PMTC's primary claim against ACCSC is that PMTC was entitled to due process under 34 C.F.R. §602.25 and that ACCSC denied that due process. The District Court judge went through a four-day bench trial, received depositions and live testimony during the trial, and included detailed information regarding his disagreement with the ACCSC's accreditation standards in the District Court's memorandum opinion dated April 17, 2014. Moreover, the District Court awarded PMTC more than $400,000 in damages and reinstated PMTC's accreditation. ACCSC filed an appeal to the U.S. Court of Appeals for the Fourth Circuit. Given that the District Court ruling could establish problematic precedent against other accrediting organizations, 22 accreditation organizations submitted a joint amicus brief in support of ACCSC on appeal.

In its opinion, the Fourth Circuit ruled that the District Court erred in not providing deference to the decision of the accreditation agency. In analyzing PMTC's due process claim, the Fourth Circuit affirmed the standard of review for common law due process claims against private accreditation associations. That is, the court is authorized to consider only whether the decision of an accrediting agency is arbitrary and unreasonable or an abuse of discretion, and whether the decision is based on substantial evidence.

The Fourth Circuit held that ACCSC did not act in an arbitrary and capricious manner for a number of reasons. First, the Fourth Circuit noted that ACCSC provided PMTC with significant procedural opportunities over the course of two years prior to the revocation of accreditation, including issuance of a probation order and an appeal procedure before an independent appeals panel. Second, the court noted that ACCSC measured PMTC's performance against substantive standards embodied in the Standards of Accreditation. In addition, the Fourth Circuit ruled that ACCSC's denial of PMTC's accreditation was supported by substantial evidence, including the documented discrepancies concerning PMTC's operations and constant turnover and questionable qualifications of PMTC's management staff. Further, the Fourth Circuit pointed out that the District Court conducted an impermissible de novo review by holding a multiday bench trial as the primary investigator and fact-finder, then overturning the judgment and expertise of ACCSC that rested on a supportable basis.

In regards to PMTC's claim that there was bias against PMTC on the part of ACCSC's staff, the Fourth Circuit cited a Supreme Court case, Withrow v. Larkin, 421 U.S. 35 (1975), which reasoned that the probability of actual bias would be high if the adjudicator has a pecuniary interest in the outcome, and if the adjudicator has been the target of prior personal abuse or criticism from the party before him. Noting that neither situation was present, the Fourth Circuit rejected PMTC's claim that frustration and dislike of PMTC's owners by the ACCSC staff influenced the record on which the commission relief when casting its vote for revocation of PMTC's accreditation.

In conclusion, the Fourth Circuit determined that ACCSC did not act arbitrarily or capriciously and grounded its revocation on substantial evidence. As such, ACCSC did not deprive PMTC of its right to due process of law. The appeal was affirmed in part concerning the District Court's dismissal of PMTC's claims based on tort and contract theories; reversed in part concerning the due process claims; and remanded to the District Court with directions to enter judgment in ACCSC's favor on PMTC's due process claim and to dismiss the case.

This is an important decision clearly confirming prior judicial precedent that accrediting organizations do have legal obligations to confer accreditation in a fair and reasonable manner consistent with common law due process principles. The decision also confirms that courts will defer to accreditation bodies unless their conduct is arbitrary, capricious or not based on adequate evidence. This decision can be seen as also supporting judicial deference to proper decisions of certification organizations.