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Standards Development:
Are You at Risk?

/by Amy A. Marasco/

Standards that have market relevance can attract mischief. Though many participants in the voluntary consensus standards development process understand that the specified “game rules” for participation provide for fairness and due process, many are not fully aware of the legal issues that can arise when these rules are not properly followed. “Due process” in itself is not a defense to legal claims, but it is a safeguard that prevents mischief from taking hold and improperly influencing the resulting standard.
This article looks at ways in which the antitrust laws and negligence principles can be implicated in relation to
standards development activity.

Competitive Effects of Voluntary
Standards Development

The benefits and procompetitive effects of voluntary standards are not in dispute. Standards do everything from solving issues of product compatibility to addressing consumer safety and health concerns. Standards also allow for the systemic elimination of non-value-added product differences (thereby increasing a user’s ability to compare competing products), reduce costs, and often simplify product development. They also are a fundamental building block for international trade.

As the Court of Appeals for the First Circuit explained in Clamp-All Corp. v. Cast Iron Soil Pipe Institute:

The joint specification development, promulgation, and adoption efforts would seem less expensive than having each member of CISPI [a trade association] make duplicative efforts. On its face, the joint development and promulgation of the specification would seem to save money by providing information to makers and to buyers less expensively and more effectively than without the standard. It may also help to assure product quality. If such activity, in and of itself, were to hurt Clamp-All by making it more difficult for Clamp-All to compete, Clamp-All would suffer injury only as result of the defendants’ joint efforts having lowered information costs or created a better product.... And, that kind of harm is not “unreasonably anticompetitive.” It brings about the very benefits that the antitrust laws seek to promote.(1)

Therefore, the analysis of any possible anti-competitive effects a standard may have must, under the “rule of reason,” be weighed against its procompetitive and positive effects. This, however, is somewhat easier said than done.

Enforcement agencies such as the Department of Justice and the Federal Trade Commission and the courts may confront difficulties when applying the “rule of reason” to standardization activities. A cost-benefit analysis or consideration of possible alternative standards may require a technical expertise that these bodies often admittedly lack. The obvious alternative is to leave the resolution of technical issues to the experts who participated in the standards development process and focus instead on the process itself. Focusing on the standards development process has the benefit of (1) being easier for courts and enforcement agencies to analyze, (2) providing clear guidance to the business community, and (3) being designed (and, if necessary, modified) to reduce if not eliminate the possibility of anti-competitive activity.

This has been ANSI’s approach in promulgating and maintaining the ANSI Procedures for the Development and Coordination of American National Standards, and it has been effective. In its role as the accreditor of U.S. standards developing organizations (SDOs), ANSI seeks to further the integrity of the standards development process and to determine whether candidate standards meet the necessary criteria to be approved as American National Standards. ANSI’s approval of these standards is intended to verify that the principles of openness and due process have been followed and that a consensus of all interested parties has been reached. These requirements ensure that the playing field for standards development is a level one.

If a standard is developed according to ANSI requirements, there should be sufficient evidence that the standard has a substantive reasonable basis for its existence and that it meets the needs of producers, users and other interest groups. If a vote on a standard was or is somehow perceived as having been subtly manipulated, any person or entity who is materially affected by or otherwise interested in the standard — whether a voting member of the consensus body or a public commentator — can appeal the decision. The grounds for an appeal to ANSI include issues such as lack of balance on the consensus body, dominance by any person or entity, inadequate response to a negative comment (again whether from a voting member of the committee or a public commentator), and improper restraint of trade concerns. The appeals process, and the requirement that all consensus bodies seek to have representatives from a balanced group of interested parties, assures that no one interest can manipulate the process unfairly. The ANSI system is designed so that contrary evidence proffered by opponents of the standard must be properly addressed and responded to or else the standard will fail to achieve ultimate approval.

Is this system absolutely foolproof? The answer is “no.” But it offers several advantages to other methods of evaluating whether anti-competitive activity is present in the standards development process.

First, ANSI’s system only requires a procedural and process-based review and not a dissection of the technical merits of the standard. As noted earlier, due process in and of itself is not and can never be a complete defense to an antitrust claim. However, the value of an open system and due process-based procedures derives from the fact that they are designed in large measure to cause antitrust-related issues to surface as early in the process as possible. Many of the current procedural requirements were fashioned in response to court decisions that highlighted where the process previously lent itself to the possibility of improper manipulation.

In addition, proper procedures are of little value if they are not followed in practice. As a result, in addition to the review ANSI undertakes when a standard is submitted to it for approval as an American National Standard, the Institute also has implemented a mandatory standards developer audit program. The program is designed both to verify an accredited developer’s compliance with ANSI requirements and to provide guidance on more efficient or effective ways to address various aspects of the standards development process.

Negligence and Other Tort Liability Grounds

From time to time claims have been asserted against standards developers, particularly those that develop safety-related standards, on the ground that the developer promulgated an allegedly unsafe or otherwise insufficient standard. Historically and in most jurisdictions, the courts have dismissed these types of claims on the ground that standards developers do not owe a “duty” to a person injured by a product or set of circumstances to which the developer’s standard applies. Courts generally have held standards developers liable only upon a showing that (1) the developer acted in bad faith, (2) the standards were to some degree compulsory, or (3) the developer had the power to control the operations of the companies that manufactured the particular products involved.

For example, in Meyers v. Donnatacci(2) (hereafter “Meyers”), the plaintiff suffered severe injuries when he dove into an in-ground swimming pool. He alleged a variety of claims against the National Spa and Pool Institute (NSPI), including negligence. The court granted NSPI’s motion for summary judgment.

At issue in Meyers was NSPI’s “Suggested Minimum Standards for Residential Swimming Pools.” Before promulgating the standard, NSPI commissioned a number of different studies on pool safety and, in turn, distributed a number of pamphlets to the general public on safe pool use. The court posed the key issue as whether a trade association/standards developer that performs research, conducts surveys, promulgates standards, and holds “itself out as an expert in the area of safety standards in swimming pools” owes a duty to a consumer who is using a product manufactured and/or installed by one of its members.

The court in Meyers found that there is no such duty as a matter of law. The court explained that the relevant factors included:
--The absence of a special relationship between plaintiff and NSPI. The plaintiff never received any information from NSPI or had any direct contact with NSPI.
--NSPI’s services are principally directed to its membership and not the public at large.
--The process of promulgating standards was voluntary and the results reflected a consensus of those who participated. The views of non-NSPI members were sought, including public officials and consumers.
--None of NSPI’s activities increased the risk of harm to the plaintiff. “The hazard of shallow-water diving existed independently of any acts on the part of NSPI.”
--Compliance with the standard was voluntary. NSPI had no authority to mandate compliance nor did it attempt to force its members to comply. NSPI had no power to control the operations of its members.
--If NSPI ceased its operation or discontinued providing the consensus standards, there was no suggestion that its membership would cease production of the related products.

Finally, the Meyers court noted that not-for-profit trade associations “serve many laudable purposes in our society,” including developing voluntary consensus standards, and suggested that such public interest benefits should not be lightly discouraged.(3)

A Duty of Care

Since late 1996, there have been at least three decisions in which the court held that a standards developer does owe a duty of care to those impacted by the application of the developer’s standards. The first such decision was Snyder v. American Assoc. of Blood Banks(4) (hereafter “Snyder”). In Snyder, the plaintiff brought claims of strict liability, breach of warranty, negligence and consumer fraud against the American Association of Blood Banks (AABB) alleging that he had contracted AIDS from a transfusion of blood received during open-heart surgery. At the time of the plaintiff’s operation, the precise cause and mode of transmission of AIDS were still matters of contention among health professionals. The court noted that AABB was a private, tax-exempt trade association that was recognized as the leader in setting blood-banking standards. A jury found AABB negligent for not recommending that its member blood banks conduct surrogate testing of donated blood for HIV.

On appeal the New Jersey Supreme Court held that AABB owed a duty of care to persons receiving blood from its member blood banks and found that AABB had breached this duty to the plaintiff. The court relied in part on the fact that AABB was the governing body of a significantly self-regulated industry, and noted that, as a practical matter, a blood bank cannot operate unless it is accredited by AABB and maintains that accreditation by complying with AABB standards. AABB dictates how its members should obtain, screen and distribute blood, and it inspects its members to ensure compliance.

The Snyder court based its decision on common-law negligence principles, evaluating the foreseeability of injury, nature of the risk, relationship of the parties and impact on the public. The court’s finding of a duty was explained as follows:

Society has not thrust on the AABB its responsibility for the safety of blood and blood products. The AABB has sought and cultivated that responsibility.... By words and conduct, the AABB invited blood banks, hospitals, and patients to rely on the AABB’s recommended practices. The AABB set the standards for voluntary blood banks. At all relevant times, it exerted considerable influence over the practices and procedures of its member banks....

The Snyder decision in New Jersey was subsequently followed by a New York state court that also held that AABB owed a duty of care to those receiving blood or blood products from its member blood banks (see Weigand v. New York University(5)).

The third recent decision finding the existence of a duty of care surfaced in 1998. A jury in the Superior Court of the State of Washington for the County of Benton awarded the plaintiff in Meneely v. S.R. Smith, Inc. et al. (hereafter “Meneely”) $11 million in damages, 60% of which was to be paid by the National Spa and Pool Institute. NSPI is an ANSI-accredited standards developer but the standard at issue in Meneely had not been approved as an American National Standard so the judge did not permit the introduction at the trial of any evidence related to ANSI. NSPI appealed the jury verdict in Meneely and that appeal is still pending.

In Meneely the plaintiff became a paraplegic after diving into a backyard pool. He alleged that NSPI was negligent in setting its residential pool safety standards. During the trial there was a factual debate as to whether the pool and diving board in question were in compliance with any relevant NSPI standard. Prior to the trial NSPI sought to have the negligence and related product liability claims dismissed as a matter of law. In summary fashion, the trial court sided with the plaintiff who argued that NSPI did owe a duty of care in developing standards and disseminating information about them:

Initially, NSPI had no statutory duty or judicially-imposed duty to promulgate industry-wide diving depth or board labeling standards. However, when it voluntarily did so, the law imposed a duty of acting carefully because it was foreseeable that member manufacturers would follow them and divers would be injured if the standards were inadequate.(6)

These types of decisions may be of concern to ANSI-accredited standards developers in part because they could encourage would-be plaintiffs to include standards developers as defendants in personal injury lawsuits. Even if standards developers are able ultimately to extract themselves from such lawsuits and have the claims against them dismissed on legal grounds, they still have to incur the related legal expenses and expend significant resources to bring about that result.

No Duty of Care

Since the decisions in Snyder, Weigand, and Meneely described above, at least three decisions have been issued holding that standards developers do not owe a duty of care to ultimate consumers. The first such decision is Commerce and Industry Insurance Co. v. Grinnell Corp.(7) (hereafter “Grinnell”). In this case, the plaintiffs asserted that the National Fire Protection Association (NFPA) was liable for the damage resulting from a warehouse fire. The plaintiffs alleged that NFPA failed to provide sufficient warnings and was negligent in promulgating safety standards relating to the storage of warehouse merchandise.

The Grinnell court granted NFPA’s motion for summary judgment. With regard to the “failure to warn” claim, the court found that the relationship between NFPA and the occupant of the building in question was too remote to warrant the imposition of such a duty. The court also dismissed the plaintiffs’ claims that NFPA was negligent in developing the standards in question and distinguished the circumstances in Grinnell from those in Snyder:

[M]ost courts have focused on the amount, if any, of control a trade association wields over the behavior of its members concerning, for example, the proper implementation of its standards…. By contrast, the NFPA does not list, inspect, certify or approve any products or materials for compliance with its standards. It merely sets forth safety standards to be used as minimum guidelines that third parties may or may not choose to adopt, modify or reject. Thus, NFPA has no control over whether or which jurisdictions adopt its voluntary standards…. Finally, even if plaintiffs could establish a duty on the part of the NFPA, they point to no evidence that the NFPA failed to exercise reasonable care in promulgating its standard….

A second recent decision involved three carpenters who were injured installing a wood truss system. The Truss Plate Institute (TPI) had disseminated a pamphlet entitled “Bracing Wood Trusses: Commentary and Recommendations,” which the manufacturer of the truss system had provided to the carpenters. The manufacturer claimed that TPI failed to provide adequate instructions and adequate warnings for the safe erection of roof trusses. The court in Bailey v. Edward Hines Lumber Co.(8) (hereafter “Bailey”) distinguished the decisions in Snyder, Weigand, and King and held that TPI owed no duty to the carpenters in this case. The Bailey court emphasized that TPI had no ability to oversee or control access to their recommendations or their use. The court also reiterated that standards developers provide a significant benefit to society and that public policy considerations mitigated in favor of not finding a duty under the circumstances presented in Bailey.

The third recent decision again involved the American Association of Blood Banks (AABB), which had been sued in a California state court. In this case, the plaintiff was a child who contracted AIDS in 1984 from a blood transfusion administered to him during surgery shortly after his birth to correct a congenital heart defect. The arguments raised by the plaintiff against AABB were very similar to those raised in the Snyder case discussed above.

On October 28, 1999, the California Court of Appeal for the Fourth District, Division 1, upheld the lower court’s grant of summary judgment to AABB on the ground that AABB did not owe a duty of care to third parties such as the plaintiff when it voluntarily undertook to set blood-bank safety standards (see NNV v. American Association of Blood Banks(9)). Among other things, the court based its decision on the lack of scientific evidence presented by the plaintiff to show that there was “a close connection between the AABB’s recommendations and his injury; he presented only speculation that adoption of the particular standards might have prevented his infection.” The court further noted that the problem of how best to test blood for the AIDS virus was, at the time in question, still a matter of contested debate in the medical and scientific community. If under then-current medical thinking there were acceptable alternative approaches, it would be unfair in hindsight to require that the medical community always make the correct selection:

We conclude a professional medical association such as the AABB should not face liability for making a choice among competing scientific and medical opinions when the medical and scientific community has reached no consensus on the proper approach to a medical situation and there is no showing the association was involved in any fraud or bad faith.

The court further noted that as a matter of public policy, society benefits from the work done by private sector standards developers:

Leaving these matters solely in the hands of government agencies, which is a possible result of imposing liability here, would not further the public’s interests nor guarantee the safety of the nation’s blood supply. It would limit debate and would deprive medical practitioners, scientists and governmental agencies of a valuable resource.

In its decision, the NNV court directly addressed the conflicting decision in the Snyder case. The NNV court found the reasoning in Snyder to be flawed because there was insufficient evidence presented that in 1984 the injuries to these types of plaintiffs was foreseeable given the unresolved debate within the community of relevant experts. The NNV court accused the Snyder court of using a “hindsight approach.” The NNV court also noted that, contrary to the Snyder court’s view, imposing liability on AABB would not further the goals of preventing future harm. Instead, it would likely chill debate on public health issues and deter private sector associations from undertaking this valuable work.

Conclusion

Standards developing organizations—and the experts that populate these groups—serve an important public interest function in devising American National Standards. It can be argued that the public interest is both served and protected if the standards developer is accredited by ANSI and meets the Institute’s requirements for openness, balance, consensus, and other due-process safeguards. It also is arguable that courts should therefore not impose on ANSI-accredited standards developers a duty of care to end users without some control by the developer over the related manufacturers/producers’ implementation of the standards or else intentional misconduct on the part of the developer.

The entire voluntary consensus standards system will be severely hampered in its ability to continue its valuable work if standards developers are forced to incur substantial legal and other costs in defending themselves from antitrust and negligence claims. //

References

1 Clamp-All Corp. v. Cast Iron Soil Pipe Institute, 851 F.2d 478 (1st Cir. 1988) (Breyer, C.J.) (citation omitted; emphasis in original).

2 Meyers v. Donnatacci, 220 N.J. Super. 73, 531 A.2d 398 (Law Div. 1987).

3 See also Beasock v. Dioguardi Enterprises, Inc., 130 Misc. 2d. 25, 494 N.Y.S.2d 974 (Sup. Ct. Monroe Co. 1985) (the court held that a duty of care will not be imposed on a standards developer absent a relationship with the manufacturer “sufficient to exercise control over the culpable conduct”); and Howard v. Poseidon Pools, Inc., 133 Misc. 2d 50, 506 N.Y.S.2d 523 (Sup. Ct. Allegheny Co. 1986) (the court found that NSPI owed no duty to the plaintiff, holding that for the developer “to be responsible for the [alleged] negligence of the manufacturer, it must appear that such defendant controlled the tort-feasing manufacturer”).

4 Snyder v. American Assoc. of Blood Banks, 676 A.2d 1036 (N.J. 1996).

5 Weigand v. New York University, 172 Misc. 2d 716, 659 N.Y.S.2d 395 (Sup. Ct. N.Y. Co. 1997) (hereafter “Weigand”).

6 Plaintiffs’ Brief In Opposition to Defendant NSPI’s Motion to Dismiss Plaintiff’s Negligence and Product Liability Act Claims. See also King v. National Spa & Pool Institute, Inc., 570 So. 2d 612 (Ala. 1990) (court held that NSPI’s “voluntary undertaking to promulgate minimum safety design standards … made it foreseeable that harm might result to the consumer if it did not exercise that care”) (hereafter, “King”).

7 Commerce and Industry Insurance Co. v. Grinnell Corp., 1999 U.S. Dist. LEXIS 11269 (D. La. July 14, 1999).

8 Bailey v. Edward Hines Lumber Co., 308 Ill. App. 3d 58, 719 N.E.2d 178 (Ill. App. 1999)

9 N.N.V. v. American Association of Blood Banks, 89 Cal. Rptr. 2d 885 (Oct. 28, 1999) (hereafter “NNV”).

Copyright 2000 ASTM

Amy A. Marasco currently serves as vice president and general counsel at the American National Standards Institute (ANSI). Among other things, she is responsible for oversight of the Institute’s accreditation of standards developers, the standards developer audit program, and the approval of American National Standards.