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Dalton v. Educational Testing Serv., 87 N.Y.2d 384 (December 7, 1995).

CONTRACT-IMPLIED IN LAW COVENANT OF GOOD FAITH-EDUCATION-EDUCATIONAL TESTING

[SUMMARY] | [ISSUE & DISPOSITION] | [AUTHORITIES CITED] | [COMMENTARY]

SUMMARY

In May 1991, Brian Dalton took the Scholastic Aptitude Test (SAT), administered by Educational Testing Service (ETS). When Dalton took the exam for a second time in November 1991, his scored increased by 410 points. Because the increase fell within the ETS category of "discrepant scores," Dalton's May and November answer sheets were reviewed by the ETS Test Security Office. Due to a document examiner's finding of disparate handwriting the answer sheets were forwarded to the Board of Review. As specified in the Registration Bulletin, signed by Dalton in registering for the November exam, ETS notified Dalton of its preliminary decision to cancel the November score. Dalton exercised his contractually guaranteed right to submit additional information to the Board. ETS continued to question the validity of Dalton's November score based on the opinion of a second document examiner. Peter Dalton, father of Brian Dalton, filed an Article 78 proceeding, later converted to an action at law, to prohibit ETS from canceling the November scores.

The trial court found that ETS breached the contract contained in the Registration Bulletin by failing to make "even a rudimentary effort to evaluate or investigate the information" supplied by Dalton. As a remedy for the contractual breach, the trial court ordered ETS to release the November score. The Appellate Division affirmed.

ANALYSIS

ISSUE

Whether ETS exercised a good faith effort to comply with the procedures specified in its contract with Brian Dalton.

DISPOSITION

The Court of Appeals affirmed the order of the Appellate Division, holding that ETS breached its contract with Brian Dalton. The remedy is the specific performance of a good faith compliance with ETS's stated procedures, not the release of the questioned scores ordered by the lower courts.

CASES CITED

Key
  • AEB & Assoc. Design Group v. Tonka Corp., 853 F. Supp. 724 (S.D.N.Y. 1994).
  • Yaeger v. Educational Testing Serv., 551 N.Y.S.2d 574 (N.Y. App. Div. 1990).
  • Humphrey v. State, 60 N.Y.2d 742 (N.Y. 1983).
  • Murphy v. American Home Prod. Corp., 58 N.Y.2d 293 (N.Y. 1983).
  • Olsson v. Board of Higher Educ., 49 N.Y.2d 408 (N.Y. 1980).
  • Tedeschi v. Wagner College, 49 N.Y.2d 652 (N.Y. 1980).
  • Rowe v. Great A&P Tea Co., 46 N.Y.2d 62 (N.Y. 1978).
  • Matter of KD v. Educational Testing Serv., 386 N.Y.S.2d 747 (N.Y. Sup. Ct. 1976).
  • VanValkenburgh v. Hayden Pub. Co., 30 N.Y.2d 34 (N.Y. 1971), cert. denied, 409 U.S. 875 (1972).
  • Kirke La Shelle Co. v. Armstrong Co., 263 N.Y. 79 (N.Y. 1933).

OTHER SOURCES CITED

  • Farnsworth, Contracts § 12.5

COMMENTARY

1. State of the Law Before Dalton

There have been few court cases in New York involving cancellation of standardized test scores by ETS. In one of the earliest of these cases, In re K.D., the relationship between the test-taker and ETS was described as contractual in nature, the court referring to the agreement as "a contract of adhesion." 386 N.Y.S.2d 747, 751 (N.Y. Sup. Ct. 1976).  K.D. involved cancellation of an LSAT score. The court noted that since a majority of accredited law schools in the United States required applicants to take the LSAT, ETS essentially offered the test on "a take it or leave it basis." id. The classification of the agreement as one of adhesion allowed the court to enforce the contract with an eye toward "protect[ing] the weaker party from the agreement's harsher terms by a variety of pretexts." id., at 752. In spite of this policy goal, the K.D. court held that ETS' cancellation of the LSAT score was justified. id.

In a subsequent ETS score cancellation case, the court used an analysis of implied duty of good faith to protect the weaker party. See, Yaeger v. ETS, 551 N.Y.S.2d 574, 576 (N.Y. Sup. Ct. 1990). In Yaeger, the court noted the obligation of ETS to follow, in good faith, the terms laid out in its registration bulletins. id.  See, Burton, Breach of Contract and Common Law Duty to Perform in Good Faith, 94 Harv. L. Rev. 369 (1980).

2. Effect of Dalton on Current Law

With respect to ETS' implied duty of good faith, Dalton clarifies the origin and, to a lesser degree, the extent of that duty. Noting a line of cases holding that the duty of good faith is "[i]mplicit in all contracts," the court indicates the analysis to be applied in future cases involving claims that ETS failed to follow its own guidelines.  Although Dalton addresses a single provision of ETS' standardized form agreement, the court ruled that ETS has a good faith obligation with respect to each of the terms in that agreement.

The court ruled that the duty of good faith requires ETS to "consider any relevant material" submitted by the test-taker. The terms "consider" and "relevant" are emphasized in the Dalton court's analysis.   The court  notes that the material submitted by Dalton was relevant to the question of his score's validity, despite ETS' decision to the contrary. The court indicates a willingness to intervene in cases where test-takers present significant evidence. A lower court case, involving an internal ETS decision, supports this reading of the Dalton court's decision regarding relevancy of submitted materials. See, Mindel v. Educational Testing Serv., 559 N.Y.S.2d 95 (N.Y. Sup. Ct. 1990) (holding that despite ETS conclusions that alleged disruptions were not "beyond the normal range of events occurring at test sites whenever the tests are given," the plaintiff submitted sufficient evidence to convince the court to order ETS to provide a makeup test).

According to the Dalton court, it "will not interfere with [ETS'] discretionary determination unless it is performed arbitrarily or irrationally."  The court does not offer guidance as to what constitutes sufficient consideration by ETS. Rather, the court notes that in this case the lower courts had determined that ETS had not considered the material at all. ETS' failure resulted in a breach of contract. The court's holding that the factual findings of the lower courts could not be reviewed is based upon well-established law. See, Humphrey v. State, 60 N.Y.2d 742 (N.Y. 1983); In re Francis, 1995 N.Y. Lexis 4760 (N.Y. 1995); Robert O. v. Russell K., 80 N.Y.2d 254 (N.Y. 1992). Dalton illustrates that significant debate remains regarding which facts are beyond review. See, e.g., In re Westchester County Medical Ctr., 72 N.Y.2d 517, 546 (N.Y. 1988) (dissenting opinion).

In spite of its decision, the court refused to order the release of the score by ETS, as the lower courts had done. The court notes that the goal of specific performance is to "produce as nearly as practicable, the same effect as if the contract had been performed." (internal quotes and citation omitted). Since ETS never promised, and is not bound "to release a score that it believed to be invalid," the court's ruling compels ETS only to consider the material submitted by Dalton.  As further justification for the limited scope of its order of performance, the court discusses a line of analogous cases involving academic institutions. The hesitancy of courts to force such institutions to award degrees is a result of the public's significant reliance on these types of credentials.  See, Olsson v. Board of Higher Educ., 49 N.Y.2d 408, 426 (N.Y. 1980) (holding that reliance by a student on the misstatement of a professor did not entitle a student to a diploma). The reference to Olsson signals that the court does not view itself as the final arbiter of every ETS internal decision.

3. Questions Unanswered

While the court explicitly noted ETS' duty to "consider" relevant material submitted by test-takers suspected of cheating, the court does not define the nature of that consideration. Thus, it remains to be seen whether ETS can succeed by claiming that the submitted material fails to overcome the presumption. Although the court notes that ETS decisions would only be reviewed if "arbitrary or irrational," there is the possibility that such a review might have substantial bite.

This is evident in the Dalton court's decision to deem all submitted material relevant, even though ETS had not. The previously discussed Mindel decision may foreshadow the level of review to which future cases might be subject. 559 N.Y.S.2d at 98 (overriding ETS' determination that interruptions were not abnormal). The cases likely to receive elevated review would be those where the plaintiff presents a significant amount of evidence. The amount and nature of evidence submitted by Dalton distinguishes it from prior score cancellation cases. See, In re Yaeger, 551 N.Y.S.2d at 576 (plaintiff failed to exercise any of the options offered by ETS upon notification that doubt existed as to the validity of his score); In re K.D., 386 N.Y.S.2d at 750 (plaintiff merely submitted a sworn statement that he had not cheated).

4. Other Jurisdictions

Dalton is distinguished from the following decisions in other jurisdictions as Dalton did not challenge the testing company's right to cancel, or their established procedure, instead challenging ETS' good faith execution of procedure. Plaintiff's typically attempt to prevent ETS from canceling a score by challenging ETS' right to do so under general contract principles or under a constitutional due process claim. The due process approach requires that a claimant show ETS acted under color of state law. Contract claims challenge either the clause granting ETS the right to cancel the scores or those stipulating options available to a test-taker whose scores are found "unreliable."

The leading First Circuit case involves both types of challenges.  Johnson v ETS, 754 F.2d 20 (1st Cir. 1985) (finding ETS is not a state actor in administering the LSAT and its contractual obligations were fulfilled in regard to canceling the score). Both parties agreed that Massachusetts law applied to the contract claim, and the court thought it "sufficient to note that ETS sought the services of three separate handwriting experts after the University of Pennsylvania questioned the 300 point discrepancy in Johnson's scores; that ETS provided Johnson with an opportunity to be heard and to be represented by counsel; and that ETS offered Johnson, without charge, the option of a retest in which she would take the same April 1971 examination that resulted in the 623 score. These and other factors indicate that ETS went beyond the letter of its contractual promise." Johnson, 754 F.2d at 26. This case is cited in Annotation, Liability for Procuring Breach of Contract, 26 A.L.R.2d 1227 (1995).

An eleventh circuit case cited Johnson when it considered both civil rights and contract challenges regarding a canceled ACT score. Langston v. ACT, 890 F.2d 380 (11th Cir. 1989) (holding that the testing company administering the ACT is not a state actor in context of a civil rights claim and under Alabama contract law, met its good faith obligation in dealing with test-taker before canceling score).

The due process approach failed in South Carolina when a test applicant for the NTE failed to exercise any ETS options, instead filing a due process claim. Tolleson v ETS, 832 F. Supp. 158 (D.S.C. 1992) (granting ETS's motion for summary judgement as claim did not fall within protection of due process clause).

In New Jersey, a NTE test-taker challenged score cancellation on due process grounds. Scott v ETS, 600 A.2d 500 (N.J. Super. Ct. 1991) ( ETS permitted to cancel NTE scores upon finding substantial evidence of invalidity; no proof of misconduct at an evidentiary hearing is warranted). Citing several New York state cases (Yaeger v ETS, 551 N.Y.S.2d 574 (N.Y. Sup. Ct. 1990), Matter of K.D. v. ETS, 386 N.Y.S.2d 747 (N.Y. Sup. Ct. 1976) and DePina v ETS, 297 N.Y.S.2d 472 (N.Y. App. Div. 1969) the court held that ETS did not have the burden of proving a test-taker cheated. "The fact that ETS had no proof of actual wrongdoing did not in any way undermine that showing of unreliability." Scott, 600 A.2d at 504. Another New Jersey court noted that there were limits to the contractual restraints ETS could enforce upon test-takers. Martin v ETS, 431 A.2d 868 (N.J. Super. Ct. 1981) (finding a contractual provision unreasonable in its attempt to deny test-taker right to verify score on real estate examination).

A Louisiana court heard a NTE test-taker's demand for release of a questioned score. Crow v ETS, Civ. No. 80-1865 (W.D. La. April 28, 1982) (holding ETS may cancel score without proving test-taker in fact cheated if they comport with contractual provisions allowing cancellation).

5. Dissent

The Dalton dissent would reverse the lower court, dismissing Dalton's suit for two reasons. First, the lower courts' factual findings were based upon an "erroneous legal standard,"in assuming that ETS had an implied duty to investigate Dalton's evidence. The majority of the Court rejected that standard as well. As a result, the dissent concluded that the lower court's decision must be reversed and remanded for new findings based on the proper legal standard. Dalton at 6.

However, remand would be unnecessary given the dissent's second argument, that the evidence indicates, as a matter of law, ETS fulfilled its contractual obligations. Citing largely the same case law, both the majority and dissent agree a covenant of good faith exists. Their differences appear to be a result of the facts, not the law. The specific factual dispute is whether ETS adequately considered Dalton's evidence regarding his presence at the test site. The dissent concluded that since each member of the ETS board gave a reason for disregarding this evidence, the covenant was breached only if these reasons were "arbitrary, capricious or irrational." Dalton at 8. The dissent concludes that ETS' doubts as to whether the handwriting on Dalton's test was actually his own were neither arbitrary, capricious, nor irrational, and that the majority is simply substituting its own judgement for that of ETS.

Prepared By:

  • Kathryn W. Becker, '97
  • Quentin C. Faust, '97
  • James D. McCann, '97
  • Stephen A. Mutkoski, Jr., '97

If you have views about the Court's decision or this LII commentary on it that you would like to share, the LII editors would be pleased to hear from you via an e-mail message to: editors@lii.law.cornell.edu