Marjorie Webster Junior College, Inc., a Corporation v. Middle States Association of Colleges and Secondardy Schools, Inc., a Corporation, Appellant, 432 F.2d 650 (D.C. Cir. 1970)

Middle States Association of Colleges and Secondary Schools, Inc., is a voluntary nonprofit educational corporation, the successor to an unincorporated association of the same name established in 1887. Its general purposes are to aid and encourage the development of quality in secondary schools and institutions of higher education located within its geographical domain (New York, New Jersey, Pennsylvania, Delaware, Maryland, and the District of Columbia) or outside of the continental United States. Chief among its activities is that of accrediting member institutions and applicants for membership.¹  Marjorie Webster Junior College, Inc., is a proprietary junior college for women located in the District of Columbia. In 1966, it applied to Middle States for accreditation. Relying upon a policy statement of the Federation of Regional Accrediting Commissions of Higher Education,²  and upon its own past practice,³  Middle States refused to consider Marjorie Webster for accreditation because the latter was not "a nonprofit organization with a governing board representing the public interest." Following this refusal, Marjorie Webster brought suit to compel its consideration for accreditation without regard to its proprietary character. The District Court found Middle States' refusal to consider proprietary institutions of higher education for accreditation a violation of § 3 of the Sherman Act⁴  and of the developing common law regarding exclusion from membership in private associations; in addition, it found that Middle States' activities in the field of accreditation were sufficiently under the aegis of the Federal Government as to make applicable the limitations of the Due Process Clause; and that to deny accreditation to all proprietary institutions solely by reason of their proprietary character was arbitrary and unreasonable, in violation of the Fifth Amendment. Concluding, finally, that continued denial of consideration for accreditation would result in irreparable injury to Marjorie Webster, the District Court enjoined Middle States from denying Marjorie Webster accreditation solely because of its proprietary character, and ordered it to accredit Marjorie Webster if it should otherwise qualify for accreditation under Middle States' standards.⁵  On the application of Middle States, we stayed the District Court's order pending our determination of this appeal. For the reasons hereafter set forth, we conclude that the Sherman Act is not applicable to Middle States' conduct as indicated by the present record; that the circumstances are not such as to warrant judicial interference with the accreditation and membership policies of Middle States; and that, assuming the Due Process Clause to be applicable, Marjorie Webster has not sustained its burden of showing the irrationality of the policy in question as applied to bar consideration of Marjorie Webster for accreditation. Accordingly, we reverse the judgment of the District Court.

Appellee strongly urges, and the court below concluded,⁶  that once it be determined that appellee is engaging in "trade," restraint of that "trade" by appellant's conduct is subject to the limitations of the Sherman Act.⁷  If this were the ordinary case of a trade association alleged to have transgressed the bounds of reasonable regulation designed to mitigate the evils afflicting a particular industry,⁸  this reasoning might be conclusive.⁹  But in our view, the character of the defendant association, and the nature of the activities that it regulates, require a finer analysis.

Despite the broad wording of the Sherman Act,¹⁰  it has long been settled that not every form of combination or conspiracy that restrains trade falls within its ambit.¹¹  For the language of the Act, although broad, is also vague; and in consequence of that vagueness, "perhaps not uncalculated, the courts have been left to give content to the statute, and in the performance of that function it is appropriate that courts should interpret its word in light of its legislative history and of the particular evils at which the legislation was aimed."¹²  The Act was a product of

the era of "trusts" and of "combinations" of businesses and of capital organized and directed to control of the market by suppression of competition in the marketing of goods and services, the monopolistic tendency of which had become a matter of public concern.

Apex Hosiery Co. v. Leader, 310 U.S. 469, 492-493, 60 S. Ct. 982, 84 L. Ed. 1311 (1940). "The Court in Apex recognized that the Act is aimed primarily at combinations having commercial objectives and is applied only to a very limited extent to organizations, like labor unions, which normally have other objectives."¹³ 

That appellant's objectives, both in its formation and in the development and application of the restriction here at issue, are not commercial is not in dispute.¹⁴  Of course, when a given activity falls within the scope of the Sherman Act, a lack of predatory intent is not conclusive on the question of its legality.¹⁵  But the proscriptions of the Sherman Act were "tailored * * * for the business world,"¹⁶  not for the noncommercial aspects of the liberal arts and the learned professions.¹⁷  In these contexts, an incidental restraint of trade, absent an intent or purpose to affect the commercial aspects of the profession,¹⁸  is not sufficient to warrant application of the antitrust laws.

We are fortified in this conclusion by the historic reluctance of Congress to exercise control in educational matters.¹⁹  We need not suggest that this reluctance is of such depth as to immunize any conceivable activity of appellant from regulation under the antitrust laws.²⁰  It is possible to conceive of restrictions on eligibility for accreditation that could have little other than a commercial motive; and as such, antitrust policy would presumably be applicable.²¹  Absent such motives, however, the process of accreditation is an activity distinct from the sphere of commerce; it goes rather to the heart of the concept of education itself.²²  We do not believe that Congress intended this concept to be molded by the policies underlying the Sherman Act.

The increasing importance of private associations in the affairs of individuals and organizations has led to substantial expansion of judicial control over "The Internal Affairs of Associations not for Profit."²³  Where membership in, or certification by, such an association is a virtual prerequisite to the practice of a given profession, courts have scrutinized the standards and procedures employed by the association notwithstanding their recognition of the fact that professional societies possess a specialized competence in evaluating the qualifications of an individual to engage in professional activities.²⁴  The standards set must be reasonable, applied with an even hand, and not in conflict with the public policy of the jurisdiction.²⁵  Even where less than complete exclusion from practice is involved, deprivation of substantial economic or professional advantages will often be sufficient to warrant judicial action.²⁶ 

The extent of judicial power to regulate the standards set by private professional associations, however, must be related to the necessity for intervention.²⁷  Particularly when, as here, judicial action is predicated not upon a legislative text but upon the developing doctrines of the common law, general propositions must not be allowed to obscure the specific relevant facts of each individual case. In particular, the extent to which deference is due to the professional judgment of the association will vary both with the subject matter at issue²⁸  and with the degree of harm resulting from the association's action.²⁹ 

With these factors in mind, we turn to consider the harm appellee will suffer by virtue of the challenged exclusion. We note in this regard that denial of accreditation by Middle States is not tantamount to exclusion of appellee from operating successfully as a junior college. It has been, and without regard to accreditation by appellant will remain, accredited by the District of Columbia Board of Education, and licensed to award the Associate in Arts degree.³⁰  The record indicates that appellee's listing in the major publications available for use by high school guidance counsellors (and often, by students and their families) does not depend upon its accreditation by appellant.³¹  Appellee's lack of accreditation does not appear to render it, or its students, ineligible to receive federal aid.³²  Appellee's students seeking to transfer to four-year colleges at the completion of their programs are not necessarily barred from obtaining credit for their studies because of the unaccredited status of the institution.³³  We recognize, as the trial court found,³⁴  that lack of accreditation may be a not insignificant handicap to appellee both in the effect that such lack may have on students considering application for admission, and in the loss of the substantial benefits that the accreditation process itself has upon the institution under study. But appellee has operated successfully as a junior college since 1947. Although it suffered a decline in applications for admission in the years immediately preceding the instant suit, this decline was shared by the other women's institutions in the District of Columbia. In the last year for which figures were introduced, it received over 100 more applications than Mount Vernon Junior College, the institution receiving the second highest number.³⁵  We do not believe, therefore, that the record supports the conclusion that appellee will be unable to operate successfully as a junior college unless it is considered for accreditation by appellant.

Accordingly, we believe that judicial review of appellant's standards should accord substantial deference to appellant's judgment regarding the ends that it serves and the means most appropriate to those ends. Accreditation, as carried out by appellant, is as involved with educational philosophy as with yardsticks to measure the "quality" of education provided. As found by the trial court,

[Appellant] seeks to determine in broad qualitative terms whether an institution has clearly defined appropriate objectives, whether it has established conditions under which it can reasonably be expected to obtain them, and whether it appears to be obtaining them. Under this criteria [sic], Middle States, in its publication, The Nature of a Middle States Evaluation, notes that "Organization, administration, facilities, and resources are not important in themselves." Accreditation means that the institution has achieved quality within the context of its own aims and program — not that such institution is more qualified than any other accredited or unaccredited institution.³⁶ 

Appellee does not challenge this view of the accreditation process as improper. And given this view, we cannot say that appellant's refusal to consider proprietary institutions is an unreasonable means of seeking to reach the ends sought. Of course no institution, no matter how well endowed, can afford to entirely ignore the balance sheet. But when the institution itself is responsible in large part for setting the measure by which it is to be judged, we do not think it has been shown to be unreasonable for appellant to conclude that the desire for personal profit might influence educational goals in subtle ways difficult to detect but destructive, in the long run, of that atmosphere of academic inquiry which, perhaps even more than any quantitative measure of educational quality, appellant's standards for accreditation seek to foster.³⁷  Likewise, we may recognize that, even in nonprofit institutions, the battle for academic freedom and control of educational policy is still sporadically waged; but this factor would seem to strengthen, rather than weaken, the reasonableness of appellant's judgment that motives of personal profit should not be allowed to influence the outcome.³⁸  Finally, we need not say that appellant's views of the proper measure for accreditation of an educational institution are the only, the best, or even particularly well chosen ones. The core of appellant's argument is not that proprietary institutions are unworthy of accreditation, but rather that they, like many trade and professional schools, should properly be measured by standards different from those used by appellant, and which appellant is possessed of no special competence or experience in using. In this regard appellee is unlike the individual denied membership in or certification by a professional society. Rarely, if ever, could it be said that such an individual could realistically be expected to combine with others excluded on the same grounds³⁹  to form his own association. Appellee, however, is free to join with other proprietary institutions in setting up an association for the accreditation of institutions of such character; and such an association, if recognized,⁴⁰  could obtain for its members all the benefits of accreditation by appellant save, perhaps, prestige. Appellee has made no attempt to show that any such course has ever been attempted. In these circumstances, we do not think that appellant's refusal to consider appellee for accreditation as a proprietary institution lacks sufficient basis in reason to warrant judicial intervention.

In reaching this conclusion, we need neither disregard nor disbelieve the extensive testimony introduced by appellee below regarding the values and benefits, both for the educational process and for the country as a whole, that flow from proprietary educational institutions. We do not conclude, nor does appellant even suggest, that competition from proprietary institutions is anything but wholesome for the nonprofit educational establishment. We merely find that, so far as can be discerned from the present record, appellant does not wield such monopoly power over the operation of educational institutions that its standards for accreditation may be subject to plenary judicial review; and that in light of the substantial latitude that must accordingly be allowed appellant in setting its criteria for accreditation, appellee's exclusion solely on the basis of its proprietary character is not beyond the bounds of appellant's allowable discretion.

What has been said above should also dispose of so much of appellee's argument as is based upon the Due Process Clause. We may assume, without deciding, that either the nature of appellant's activities⁴¹  or the federal recognition which they are awarded⁴²  renders them state action subject to the limitations of the Fifth Amendment.⁴³  If so, however, the burden remains with appellee to show the unreasonableness of the restriction,⁴⁴  not simply in the abstract but as applied specifically to it.⁴⁵  We need not decide here the precise limits of those circumstances under which governmental action may restrict or injure the activities of proprietary educational institutions. For the reasons already discussed,⁴⁶  we conclude that appellee has failed to show that the present restriction was without reasonable basis. Accordingly, it must be upheld.

Reversed.