A federal judge refused to second guess the CFP Board’s handling of the enforcement action against Jeff and Kim Camarda, saying in a recently unsealed opinion that the advisors had failed to show the organization was motivated by “bad faith or ill will” in its discipline procedures.
Thee weeks after Judge Richard J. Leon awarded the CFP Board summary judgment and dismissed the Camardas' lawsuit, the opinion explaining the reasoning for his decision was unsealed. Leon determined there was no breach of contract, adding that the CFP Board “followed its own rules throughout the disciplinary proceedings against the plaintiffs [the Camardas],” according to the opinion.
“In reviewing a disciplinary action by a private organization, courts do not ‘second-guess’ the organization’s interpretation of its own rules or its evaluation of the evidence,” the opinion said.
Leon dismissed the Camardas’ claim that they were unfairly singled out for enforcement, stating the advisors failed to show that the CFP Board was motivated by any “bad faith or ill will” toward the advisors.
Leon also threw out the Camaradas’ claims of unfair competition, noting that the advisors were not competitors of the CFP Board and that their claim under the antitrust law the Latham Act was “too indirect an injury” to sustain.
Richard P. Rojeck, chairman of the CFP's board of directors, called the opinion a "significant victory," adding it affirmed the integrity of the CFP certification and the "CFP Board’s role as the standard-setting body for personal financial planners."
The Camardas disagreed with the judge’s decision, adding they believe it is ominous sign for both the profession and the public.
"The court did not consider the facts and evidence, instead finding the CFP Board could enforce its rules – unfairly, arbitrarily, capriciously, or otherwise – any way it alone chooses," the Camardas said in a statement Tuesday. "From the very beginning in 2011, we felt the Board has not acted in accordance with its core principles, and that we needed to stand up for them, not only for ourselves, but for consumers, and for certificates everywhere."
The advisors called the process “grueling,” but said they felt it was a fight that needed to be fought. “We have done the best we could with it,” they added. A spokesman noted previously that they are still considering their options for next steps, including an appeal.
The Camardas, who run Camarda Advisors and Camarda Consultants, filed the lawsuit two years ago, claiming the organization failed to provide a fair and just hearing before sanctioning them for their use of the term “fee-only” to describe their compensation model to clients.
The advisors claimed the organization’s disciplinary action and subsequent procedures violated the Board’s disciplinary guidance and policies, and damaged the Camardas’ reputation and competitive ability to run their businesses. The advisors alleged this is in violation of antitrust laws such as the Sherman Act and the Latham Act.
According to the amended complaint filed in January 2014, the CFP Board started to investigate the Camardas after receiving an anonymous complaint that the firm falsely advertised themselves as “fee-only” in connection with investment advice when they also provided commission-based services.
The Board’s investigation found probable cause, and the matter was referred to a disciplinary hearing in March 2012. But the Camardas claim they were not given a fair hearing, alleging the Board failed to properly conduct due diligence or speak with the firm’s clients to see if they were misled regarding their fee arrangements. Further, the Board failed to show any proof of a revenue-sharing arrangement between Camarda Advisors and Camarda Consultants.
The Camardas’ suit sought at least $75,000 in damages and attorneys’ fees, as well as an order rescinding the Board’s decision and voiding the corresponding disciplinary sanction.
The CFP Board filed its motion for summary judgment under seal in December. Leon granted that request on July 7.
This article was updated at 7:00 p.m. ET to include comments from Jeff and Kim Camarda.