Federal Court Justice Russel Zinn's ruling dismisses the federation's challenge of Kenney's decision not to continue funding for a language-instruction program for immigrants in 2009-10.
It also strengthens the federal government's hand in adhering to its position that it will not give taxpayer dollars to organizations that tolerate or espouse hateful views.
Citizenship and Immigration told the federation in March 2009 that statements made by its officials appeared to be anti-Semitic and supportive of terrorist groups.
The department's letter said this raised serious questions about the federation's integrity and had undermined the government's confidence in it as an appropriate partner for delivery of services to newcomers.
Zinn's ruling says Kenney's office took exception to six specific episodes involving the federation, including the fact its then-president forwarded a leaflet in 2006 attacking Liberal leadership candidate Bob Rae for supporting "Israeli Apartheid" and singling out his wife, active in the Canadian Jewish Congress.
The minister's office also objected to the federation's webpage having links to sites that featured videos with images of Hamas operatives undergoing training as well as depictions of flags of Hamas and Islamic Jihad.
In addition, a federation gala honoured Zafar Bangash, who had "referred to Canadians as 'infidels or non-believers' in the past and reported on the September 11 attacks in a way that was unsympathetic to the victims," Zinn's ruling says.
The federation argued to the court that the actions and statements in question were either by people who did not officially represent the organization, or that it did not authorize or approve of them.
It filed affidavits from academics, Jewish advocacy groups and people with whom it had worked closely, stating that they have never witnessed anti-Semitism, promotion of hatred, or support for terrorism from the federation, Zinn's ruling says.
The judge said, however, that this ignores the maxim "one is known by the company one keeps."
"Quite simply, CAF cannot completely disassociate itself from the content of web links it includes in its materials, or from comments, distribution of materials, or attendances at meetings and conferences by its executive."
The judge cites email correspondence in concluding Kenney had made up his mind as early as February 2009 to terminate the federal funding arrangement with the federation, and that his only interest was in finding a way to do so.
Still, Zinn says the federation's behaviour could reasonably lead one to come to the same conclusions as the minister about the organization.
"There is an abundance of evidence in the record to show that, although many do not consider CAF’s actions to be anti-Semitic, including people of Jewish ethnicity, there are many others that hold the opposite view, including a former CAF president," Zinn wrote.
"In this context, it is especially important to be deferential to the Minister’s decision."
Zinn rejected the argument that Kenney owed a duty of procedural fairness to the federation, saying the nature of the relationship was "strictly commercial."
Also on HuffPost