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Tsamota Certification Ltd. v. Ansi Asq National Accreditation Board LLC

United States District Court, E.D. Wisconsin

April 24, 2018

TSAMOTA CERTIFICATION LIMITED, Plaintiff,
v.
ANSI ASQ NATIONAL ACCREDITATION BOARD LLC, Defendant.

          ORDER

          J. P. Stadtmueller U.S. District Judge.

         1. INTRODUCTION

         This is an action for breach of contract and unjust enrichment. Plaintiff provides auditing and certification services to private security companies. Defendant accredits companies like Plaintiff. Plaintiff sought accreditation from Defendant but did not obtain it. Plaintiff believes that Defendant wrongfully terminated it from the accreditation program. Defendant, of course, disagrees. Defendant filed a motion for summary judgment on March 1, 2018, seeking dismissal of both claims. (Docket #16). The motion is now fully briefed. (Response, Docket #24; Reply, Docket #27). For the reasons explained below, the motion must be granted.

         2. STANDARD OF REVIEW

         Federal Rule of Civil Procedure 56 provides that the “court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a); see Boss v. Castro, 816 F.3d 910, 916 (7th Cir. 2016). A “genuine” dispute of material fact is created when “the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The Court construes all facts and reasonable inferences in a light most favorable to the non-movant. Bridge v. New Holland Logansport, Inc., 815 F.3d 356, 360 (7th Cir. 2016).

         3. RELEVANT FACTS

         The disposition of Defendant's motion turns on only a few key facts. However, the subject matter of this action is somewhat intricate. For clarity's sake, the Court will provide an expanded recitation of the facts than is strictly necessary to its decision.[1] Plaintiff is in the business of providing auditing and certification services to private security companies (“PSCs”). This service, known as Private Security Company Management Services (“PSCMS”), has grown over the past fifteen years with the increased use of PSCs by governments and because of various well-publicized incidents of human rights abuses perpetrated by PSC personnel.

         PSCMS certification is valuable to PCSs because it gives governments some assurance that they are ethical and rule-complaint. PSCMS companies like Plaintiff can in turn seek accreditation to help market their services. There are two bodies which provide PSCMS accreditation: Defendant and the United Kingdom Accreditation Service (“UKAS”).[2] Both are private, non-governmental entities. Plaintiff sought to enter the PSCMS market in 2012. Though Plaintiff is based in Europe, it decided to pursue accreditation through Defendant because Defendant is an American company, and Plaintiff wanted to target American PSCs.

         Defendant's Management Systems Accreditation Manual (the “Manual”) describes its accreditation process. Those seeking accreditation (like Plaintiff) are called certification bodies (“CB”). There are seven steps in the accreditation process:

1. The CB submits a fee and files an initial accreditation application together with documentation demonstrating that it conforms to certain baseline requirements. Defendant notifies the CB whether or not its initial application is complete and acceptable.
2. Once its initial application is accepted, the CB purchases and downloads another application related to the specific standard for which accreditation is sought. The CB then uploads the completed application with the supporting documentation. Defendant reviews the documentation to determine whether the specific application is complete and acceptable.
3. Following the acceptance of its specific application and prior to conducting an Initial Office Assessment (“IOA”), the CB performs a complete internal audit and at least one complete management review that includes review of the results of the complete internal audit.
4. Defendant then performs an IOA and prepares a report itemizing any nonconformities with applicable rules and professional standards. The CB must address each nonconformity by taking corrective action, in accordance with the process and deadline set out in the Manual.
5. Next, Defendant performs the first of two Witnessed Audit Assessments (“Stage 1 Witnessed Audit”) of the CB's actual clients. Defendant then issues a report which outlines nonconformities which the CB must remedy before moving forward in the accreditation process.
6. Once those nonconformities are addressed, Defendant performs the second Witnessed Audit Assessments (“Stage 2 Witnessed Audit”). Any identified nonconformities must once again be corrected by the CB, in accordance with the process set out in the Manual, before proceeding.
7. Finally, if the CB meets all of the foregoing requirements, Defendant formulates an accreditation package and recommendation on accreditation which it presents to its Management Systems Accreditation Council (the “Council”). The Council then votes on whether to accredit the prospective CB. If the vote is favorable, then the Defendant issues the CB a certificate of accreditation.

See (Docket #19-2 and #19-3). The Manual also provides a one-year time frame for completion of the accreditation process. (Docket #19-3 at 7). The Manual gives Defendant discretion in enforcing that time limit, though the parties dispute the extent of the latitude provided.

         Accreditation is not awarded based simply on Defendant's opinion of the CB. Rather, Defendant applies national and international standards to evaluate whether accreditation is appropriate. These standards are developed in cooperation with a number of international accreditation associations, of which Defendant is a member. When Plaintiff began the accreditation process, the standard for PSCMS accreditation was known as ISO/IEC 17021:2011 (“17021”). A new standard, ISO/IEC 17021-1:2015 (“17021-1”), was later published and set to take effect on June 15, 2017, though Defendant planned to transition its program to the new standard long before then. (Docket #21-6 at 2). According to Accreditation Rule 50 (“AR 50”) promulgated by Defendant, CBs were required to transition their application to the new standard over the course of 2016. Id. at 2-4.

         17021 and 17021-1 are, in turn, based on even higher standards. The first is “Management System for Quality of Private Security Company Operations--Requirements with Guidance, ” American National Standard, ANSI/ASIS PSC.1:2012 (“PSC.1”). The second is “Conformity Assessment and Auditing Management Systems for Quality of Private Security Company Operations, ” American National Standard, ANSI/ASIS PSC.2 (“PSC.2”). Both standards are issued by the American National Standards Institute and are based on various international documents and agreements. PSC.1 provides “requirements and guidance for a management system with auditable criteria[, ] . . . consistent with respect for human rights, legal obligations and good practices[.]” (Docket #21-7 at 3, 17-22). PSC.2 offers “requirements and guidance for conducting conformity assessment of the [PSC.1] Standard.” (Docket #21-8 at 3, 11). PSC.1 governs PSC conduct, while PSC.2 is aimed at PSCMS companies. Of course, Plaintiff needed to be intimately familiar with both of these standards. Compliance with PSC.1 and PSC.2 was the end goal of the PSCMS accreditation process.

         Defendant itself is also subject to standards for processing accreditation requests. ISO/IEC 17011 (“17011”) is the standard relevant to Plaintiff's desired form of accreditation. 17011 mandates that Defendant require a commitment from its CBs to fulfill the requirements for accreditation, including when those requirements change over time. It also requires that CBs cooperate with Defendant in the accreditation process. Plaintiff notes that 17011 further obliges Defendant to “give due notice of any changes to its requirements for accreditation, ” including a decision on the time for implementing such changes. (Docket #19-1 at 25). The Manual memorializes these and other requirements for accreditation.

         Generally, Defendant requires an accreditation-seeking PSCMS company to execute a Certification Applicant Agreement (“CAA”) at the outset of the application process. Defendant's form CAA provides that it remains in effect until the CB and Defendant execute an accreditation agreement. CBs are required by Defendant to sign an accreditation agreement upon successful completion of the accreditation program. The form CAA also includes an indemnity provision. The parties agree that, contrary to the usual procedure, Plaintiff did not sign a CAA.

         Nevertheless, the parties proceeded through the accreditation process. On September 22, 2014, Plaintiff paid the initial application fee to Defendant. Plaintiff submitted a completed initial application on October 28, 2014, thereby completing step one. Six months later, Plaintiff obtained the specific application for PSCMS companies. Soon afterward, on May 1, 2015, Plaintiff submitted a completed application with supporting documentation. Eventually, after a number of resubmissions of the application, Defendant approved Plaintiff's application on August 4, 2015.

         Defendant conducted the IOA on September 9 and 10, 2015. The IOA resulted in seventeen minor non-conformity reports (“NCRs”). Defendant issued a report of its IOA to Plaintiff on September 22, 2015. The Manual requires that all minor NCRs be resolved within ninety days-in this case, December 11, 2015. (Docket #19-2 at 16). The NCR resolution deadline was twice extended by Defendant, consistent with the terms of the Manual, at Plaintiff's request. Plaintiff closed sixteen of the NCRs by January 16, 2016, and the final NCR was closed on ...


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