Fourth Circuit Recognizes Limited Federal Common-Law Due Process Review of Accreditation Decisions

limits of contracts
The Fourth Circuit recently recognized that higher-education accreditation agencies have a federal common-law duty to employ fair procedures when making accreditation decisions.  In reversing the U.S. District Court for the Eastern District of Virginia for its failure to show appropriate judicial deference to the accrediting agency’s denial of re-accreditation, the Fourth Circuit also emphasized the degree of judicial deference required when considering federal common-law challenges to such decisions and laid out a road map for what kinds of challenges might succeed in the future Although it did not reach the question whether the federal common law preempts state-law claims challenging accreditation decisions, the Fourth Circuit leaves little room for employing such claims to expand judicial review beyond the limited review afforded to federal common-law due-process claims. In Professional Massage Training Center, Inc. v. Accreditation Alliance of Career Schools and Colleges, No. 14-1086, slip op. at 13 (4th Cir. Mar. 24, 2015) (“PTMC v. ACCSC”), the Fourth Circuit joined the D.C., Third, Fifth, Sixth, and Eighth Circuits in recognizing a federal common-law duty on the part of private accrediting agencies to “employ fair procedures when making decisions that affect their members.”   This duty derives from the quasi-public function played by these private agencies as gatekeepers to a school’s participation in various federal-funding programs and the enormous power that this function gives such agencies over their member schools.  Although these private organizations are neither state actors subject to constitutional due-process requirements nor subject to any express private right of action under the Higher Education Act, Congress has given accrediting agencies “life-and-death” power over these schools by delegating to them decision-making power that affects student access to federal funding.  The Fourth Circuit recognized that this power comes with a corresponding due-process-like duty to employ fair procedures in the exercise of this power to avoid “allowing such agencies free rein to pursue personal agendas or go off on some ideological toot.”  Id. at 14. However, the federal common-law rights granted to higher-education institutions are severely circumscribed by the court’s emphasis on the limited nature of judicial review of accreditation decisions.  Based on principles of administrative law and judicial deference, the Fourth Circuit restricted judicial review of decisions by private accrediting agencies to whether the accrediting decision is “arbitrary and capricious” and is supported by “substantial evidence.”  Id. at 15-16.   The Fourth Circuit adopted this deferential standard based on the “quasi-public nature of accrediting institutions and their wide-ranging expertise in what may be highly technical and specialized fields of education.”  Id. at 16-17.  Because the accreditation process “operates as an instrument of quality control on educational institutions,” which Congress and the U.S. Department of Education have delegated to private accrediting agencies certified by the Department, the Fourth Circuit reasoned that generalist federal courts owed deference to the accrediting agency’s “expertise and knowledge” in not only the accreditation process and higher education, but also in the specialized fields under review.  Id. at 17-18 (citing Chevron U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837(1984)).  The court emphasized the relative importance of judicial deference by spending the greater weight of its opinion detailing the manner in which the district court was “remedially aggressive” and “conducted an impermissible de novo review” of the accreditation decision.  Id. at 20-40. PMTC v. ACCSC is significant not only for its recognition of the federal common-law rights of higher-education institutions and the deference due to decisions by accrediting agencies, but also because it clarifies the nature of these rights and provides a detailed road map into what sorts of challenges, if any, might be successful.  First, the Court defined the contours of the federal common-law right by reference to cases involving constitutional due-process claims against state actors. Second, the procedural opportunities that an accrediting agency provides an educational institution to “make its case” for accreditation is critically (if not conclusively) important to finding that these due-process standards have been satisfied.  Although the existence of discernible substantive standards used to measure performance is also important, the PMTC opinion makes it unlikely that any attack on the substantive adequacy of such standards would succeed in the Fourth Circuit, at least where the agency has provided the school with sufficient procedural opportunities to adequately respond to the agency’s reasons for denying or withdrawing accreditation. Third, the Fourth Circuit sent a very clear signal that the “substantial evidence” standard is satisfied as soon as the federal court finds in the record “anything ‘more than a mere scintilla’ provided that a ‘reasonable mind might accept [the evidence] as adequate to support’” the agency’s decision.  Id. at 26 (internal citations omitted).  Indeed, the Fourth Circuit appears to leave no room for a court to consider record evidence that an agency’s accreditation decision was wrong, as long as this there is some evidence to support the agency’s decision. Fourth, the court set a high bar for establishing “agency bias” that might justify a less deferential inquiry into the agency’s decision making.  Like their state-actor counterparts, private administrative decision makers are entitled to a presumption of honesty and integrity, absent a showing that a decision maker has a personal bias that “‘stem[s] from a source other than knowledge … acquire[d] from participating in a case.’”  Id. at 34 (internal citations omitted).  Absent evidence that the agency decision makers had this kind of personal bias or conflict of interest, the Fourth Circuit made it very difficult, if not impossible, for claims of agency bias to succeed.  The Fourth Circuit rejected the notion that agency staff expressions of frustration, or even dislike, anger, or dissatisfaction, regarding the school or its representatives was sufficient to support a claim that personal bias improperly influenced the creation of the agency record.  Absent evidence that information was improperly included in or omitted from the administrative record, evidence of what agency staff members may have thought or said about the school or its representatives appears to be irrelevant. Finally, although the Fourth Circuit avoided deciding “a serious question of cognizability” regarding the preemption of state-law challenges to accreditation decisions, id. at 40 n.3, it left little room for state-law claims to expand judicial review of such decisions.  After clarifying that an accrediting agency’s standards of accreditation do not constitute a contract between the agency and the accredited educational institutions, and that negligence claims are foreclosed by the economic-loss doctrine, the court relied on its analysis of the federal common-law claims to reject the state tortious-interference claims on the ground that the accrediting agency’s accreditation decisions were legally justified.  Id. at 42-43.
Disclosure:  Redmon, Peyton & Braswell, LLP served as counsel of record for Defendant Accreditation Alliance of Career Schools and Colleges in the District Court.