Court Cases Ask: Is America Still the Land of Opportunity?

Federal Courts Protect Cartels, Uphold Arbitrary Licensing Requirements, Stifle Entrepreneurial Opportunity

PRESS RELEASE: March 15, 2005
CONTACT: (703) 682-9320

John Kramer or Lisa Knepper
[Economic Liberty]

Washington, D.C.—Two federal court cases—one up for U.S. Supreme Court consideration later this week—will help answer the question whether America is still the “Land of Opportunity”—a place where aspiring entrepreneurs can earn an honest living in the occupation of their choice without the government standing in their way.  Across the nation, state and local governments impose arbitrary and irrational licensing requirements that do nothing more than protect existing businesses from the competition of newcomers.  And time and again, the federal courts are giving these “good-old-boy networks” their blessing.

How ridiculous have these government-imposed cartels become?

• In a case the U.S. Supreme Court will consider for review this Friday [March 18, 2005], Oklahoma requires anyone who sells a casket to become a state-licensed funeral director, a license that requires at least two years of full-time college coursework, a one-year apprenticeship that includes the embalming of 25 bodies, and two exams—most of which is utterly irrelevant to selling a casket.  In upholding Oklahoma’s casket cartel, the 10^th U.S. Circuit Court of Appeals stated, “[W]hile baseball may be the national pastime of the citizenry, dishing out special economic benefits to certain in-state industries remains the favored pastime of state and local governments.”  The true purpose of the law is to protect the biggest source of profit for politically powerful funeral directors:  the markup on caskets, which can reach 600 percent.
• In a case recently dismissed from federal court but submitted for reconsideration last week by the Institute for Justice, Louisiana is the only state in the union requiring would-be florists to secure a government-issued license.  To get that license, individuals must pass a highly subjective exam that is graded by the very State-licensed florists against whom they hope to compete.  Small wonder the pass rate for the floral exam has been well below 50 percent.  Incredibly, just days before the court dismissed the case, the State of Louisiana’s lawyers were forced to disclose communications showing that their own expert witness concluded Louisiana’s florist licensing exam was fundamentally unfair to applicants and that the overall licensing scheme reflected a “mismatch” between the asserted goal of the license and the means chosen by the State to achieve that goal.

“Because the courts refuse to question legislative decisions, it amounts to a blank check the courts are writing to legislators and politically connected lobbyists,” said Chip Mellor, Institute for Justice president.  “The courts no longer provide even a minimal check on even the most blatantly protectionist government regulation.  When it comes to economic regulation, the judicial standard now seems to be that so long as some democratic body—such as a state legislature—passes a law, that’s good enough for the courts.  The Framers of the Constitution envisioned a judiciary that would check legislative and executive overreach—not rubberstamp them.”

Nearly 10 percent of occupations across the country require government licensure.  Thousands of laws—enacted on the pretext of protecting the public’s health, safety or welfare—are in fact created for special interests to keep out potential competitors.  Invisible to most consumers, these roadblocks to free enterprise are everywhere and limit consumer choice as well as entrepreneurial ambitions in occupations ranging from floristry to taxicab service and even such cultural art forms as African hairbraiding.

Caskets in Court

In separate cases filed by the Institute for Justice, two federal appeals courts examined nearly identical laws and reached opposite conclusions about the constitutionality of state-sanctioned casket cartels.  The 6^th U.S. Circuit Court of Appeals in a case out of Tennessee found no rational basis for a state law requiring “someone who sells what is essentially a box” to be a licensed funeral director.  But the 10^th U.S. Circuit Court of Appeals reached the opposite conclusion in the Oklahoma case, holding that raw economic protectionism for favored industries is a legitimate function of occupational licensing laws.  Stated plainly:  state and local governments may concoct any scheme they want to promote their friends’ private economic interests at the expense of consumers and would-be entrepreneurs—the courts will not interfere.

“If the 10^th Circuit decision is allowed to stand, then every American earns a living at the whim of the government rather than as a matter of right,” said Clark Neily, lead attorney in the Oklahoma casket case.  “Laws that are so obviously designed to promote the economic interests of politically connected fat cats at the expense of consumers and would-be entrepreneurs should not receive the imprimatur of the federal courts.”

Read more on IJ's Oklahoma casket case.

Flower Power

	IJ Client Shamille Peters

In December 2003, the Institute for Justice filed a federal lawsuit in Louisiana on behalf of three would-be florists challenging the State’s anti-competitive, anti-consumer florist licensing law.  On March 3, 2005, U.S. District Court Judge Frank Polozola upheld Louisiana’s florist licensing law, on the ground that it might conceivably reflect a genuine concern on the part of Louisiana politicians for public health and safety, even though no other state in the country licenses florists and no safety issues are even tested in any meaningful way on the licensing exam.  The judge also found that the florist licensing scheme might be designed to protect consumers from shoddy flower arrangements, even though unlicensed floral designers are permitted to arrange and sell flowers with no supervision from a licensed florist, as long as they work in the same shop.  As the Institute for Justice argued, no reasonable person could believe that Louisiana’s florist licensing scheme advances any interest other than that of the licensed florist lobby in keeping potential competitors out of the market.

On Friday, March 11, the Institute for Justice filed a motion asking Judge Polozola to reconsider his ruling in light of the State’s expert’s previously undisclosed statements showing his true opinion of Louisiana’s florist licensing system, which he considers unfair to applicants and “mismatched” with the State’s asserted goals of consumer protection and public health and safety.