In a recently unsealed opinion, the U.S. District Court for the District of Columbia granted summary judgment to the Certified Financial Planner Board of Standards (CFP Board), on a Lanham Act false advertising claim brought by plaintiffs alleging that the CFP Board unfairly enforced its disciplinary rules against them. Mem. Op., Camarda, et al., v. Certified Financial Planner Board of Standards, Inc., Case No. 13-00871 (RJL) (D.C. July 6, 2015).
The CFP Board is a non-profit organization that sets and enforces professional standards for personal financial planners. It administers a certification program for financial planners, and allows professionals who meet its standards to use the CFP® certification mark. CFP® professionals must agree to comply with the CFP Board’s standards of professional conduct, including its code of ethics and professional responsibility, rules of conduct, financial planning practice standards, and disciplinary rules and procedures.
Background
In 2011, the CFP Board took action against two CFP® professionals (the eventual plaintiffs) based on alleged violations of the CFP Board’s compensation disclosure rules. After an evidentiary hearing pursuant to its disciplinary procedures, the CFP Board’s Disciplinary and Ethics Commission approved a finding that both individuals had violated the CFP Board’s rules and that a public letter of admonition should be issued. This decision was affirmed by an appeals committee, also operating under the CFP Board’s rules and procedures.
Plaintiffs subsequently filed suit against the CFP Board alleging breach of contract, common law unfair competition and violation of the Lanham Act, 15 U.S.C. § 1125(a)(1)(A). Plaintiffs’ Lanham Act claim was premised on the allegation that the CFP Board’s public representations that it fairly enforced its professional conduct rules and adhered to its disciplinary rules were “false or at the very least, misleading.”
The Court’s decision
In dismissing plaintiffs’ claims in their entirety, the court first found that the CFP Board had not breached any contract with plaintiffs, because it had “followed its own rules throughout the disciplinary procedures against plaintiffs,” and “[i]n 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.” Responding to plaintiffs’ allegation that they had been unfairly singled out for enforcement, the court also noted that there was no evidence that the CFP Board’s actions were motivated by bad faith or ill will, and there is no “‘selective-enforcement’ rule that governs contractual rights.”
The court further noted that because the CFP Board, “as a standards-setting organization, is not a competitor of plaintiffs,” it “cannot be liable for unfair competition.”
Finally, citing the U.S. Supreme Court’s recent decision in Lexmark Int’l Inc. v. Static Control Components, 134 S.Ct. 1377 (2014), the court rejected plaintiffs’ false advertising claim. Noting that the Supreme Court had made clear that a plaintiff must “ordinarily show economic or reputational injury flowing directly from the deception wrought by the defendant’s advertising,” the court found that even if the statement that “defendant fairly enforces discipline” was presumed to be false, the statement did not actually cause plaintiffs any direct harm.
The court noted “that the only potential harm comes from the perception that, although defendant had every legal right to sanction plaintiffs, they did so unfairly and falsely advertised their procedures as fair while doing so.” Finding this injury to be too indirect to sustain liability under section 43(a), the court declined to “extend such a novel theory of Lanham Act liability on the facts here,” observing: “Put simply, section 43(a) of the Lanham Act was not meant to remedy plaintiffs, like those here, who are unhappy with the outcome of a disciplinary decision of a standards-setting organization.”
