Score Two For the Underdogs

Score Two For the Underdogs:

IJ Closes 2002 with Wine and Casket Victories

By Chip Mellor

Score two for the underdogs! Within one December week, the Institute for Justice won two resounding victories for small entrepreneurs and their customers, soundly defeating powerful cartels that used government power to protect themselves from competition. Outgunned financially and faced with difficult legal precedent, our clients and IJ persevered to vindicate the principles of economic liberty. These hard-won victories showcased just how effective the Institute’s unique brand of public interest law can be in overcoming long odds and an entrenched status quo.

While they shared a common principle—economic liberty—the two cases could not have arisen from more different circumstances. In one, an inner-city minister from Chattanooga sought to provide his impoverished congregation with affordable caskets; in the other, a spirited Virginia woman whose forebears fought in the American Revolution wanted to ship the wine she produces to consumers in New York. In both cases these aspiring entrepreneurs were treated as outlaws because they violated laws put on the books to limit competition in order to protect cartels, namely funeral directors and wine wholesalers.

Sunday services at Marble Top Missionary Baptist Church too often revealed the loss of loved ones from violence or drugs the preceding week, and Pastor Nathaniel Craigmiles would conduct funeral services. The grief families suffered was made worse when they were confronted with exorbitant funeral-related charges. Upon discovering that caskets were the most expensive part of any funeral, and that funeral directors regularly marked them up as much as 600 percent, Pastor Craigmiles decided to start a retail casket store to offer affordable caskets in his community.

Shortly after opening, Pastor Craigmiles was served with a cease and desist order demanding that he close his store immediately or face criminal charges. His crime was selling caskets without a funeral director’s license. To obtain such a license, individuals had to either attend school for two years, apprentice for two years, or a combination of both. During that time, they would have to help embalm 25 bodies and master vast amounts of utterly irrelevant information. All this and more just to sell what the district court called a “box.”

This licensing scheme was a classic example of laws that arbitrarily limit economic opportunity. It lacked any fit between the asserted goals behind the law—safety and consumer protection—and the licensing requirements supposedly established to achieve the goals. Courts call this the “rational basis test.” IJ’s economic liberty litigation is dedicated to establishing that this fit under the rational basis test must be a tight one. We argue that courts must not merely rubber stamp any economic legislation and defer to legislatures completely. Such abdication of judicial responsibility guarantees that protectionist legislation will proliferate.

Thankfully for Pastor Craigmiles, his parishioners and countless others like them, the U.S. Court of Appeals for the 6th Circuit agreed with us and in a unanimous opinion affirmed the trial court’s decision to strike down Tennessee’s law requiring casket retailers to be licensed funeral directors. Judge Danny Boggs, writing for the Court, noted, “Tennessee’s justifications for the [law] come close to striking us with ‘the force of a five-week-old, unrefrigerated dead fish.’” He then went on to find that Tennessee’s law was a “naked attempt to raise a fortress protecting the monopoly rents that funeral directors extract from consumers.” Economic protectionism was not, according to the court, “animated by a legitimate governmental purpose.”

The 6th Circuit opinion marked a milestone for IJ and for constitutional jurisprudence. It was the first time since the New Deal that a federal appellate court has struck down economic legislation under the rational basis test. But it won’t be the last. We will build on this precedent. Our ultimate goal remains a U.S. Supreme Court ruling that restores proper constitutional protection for economic liberty under the Privileges or Immunities Clause of the 14th Amendment by reversing the Slaughter-House Cases. In the meantime, we will make use of other constitutional provisions, like the Commerce Clause, whenever appropriate to vindicate this cherished American birthright.

Virginia vintner Juanita Swedenburg never expected to be the poster child for the cause of hundreds of small wineries nationwide who were shut out of lucrative markets by laws passed to protect wine wholesalers. But when she first met with IJ Vice President Clint Bolick and Senior Attorney Deb Simpson to discuss challenging these onerous laws, she was resolute in her commitment to freedom and passionate in her beliefs. Before long she was the lead plaintiff in an IJ lawsuit against a powerful coalition of wholesalers, unions and retailers. She has never wavered and in the process has become nationally known as a champion of liberty.

Swedenburg had to resort to court because of a New York law (similar to ones found in nearly 30 states) that prohibits out-of-state wineries from shipping wine directly to consumers. Instead, all out-of-state wine must be shipped through a wholesaler, or middleman, before going to the ultimate consumer. In-state wineries could ship directly to New York consumers. Not surprisingly, prices charged by wholesalers are about 18-25 percent higher and many small wineries’ products are not even available through wholesalers.

The Institute for Justice challenged New York’s law under the Commerce Clause. We argued that the power to regulate alcohol given to the states under the 21st Amendment (the amendment that repealed Prohibition) did not give states authority to engage in naked economic protectionism. That principle, while dealing with wine and the 21st Amendment in this case, is one of profound significance to free trade within the United States.

The stakes were high for Swedenburg, but to see the array of high-priced legal talent marshaled against her, you would have thought it was truly a matter of life and death for our opponents. The wholesalers are multi-billion-dollar concerns, and they spared no expense defending the law. (It was revealing throughout the litigation that the heavy lifting for the other side was done by the wholesalers, not the State, which was charged with defending the law.) Not only did they retain high-powered New York lawyers, they brought in C. Boyden Gray and Robert Bork from Washington to assist. It was a frequent and telling sight when we went to court to see as many as 16 lawyers representing the state and wholesaler interests arrayed against two IJ lawyers.

In all of our cases, we have an uphill fight on the law and face adversaries with far more money. Nowhere was this more true than in this case, and nowhere was the advantage IJ brings to every case more evident. We are always better prepared and more creative. We set the pace of the case from the outset. All this paid off when U.S. District Court Judge Richard Berman issued his 34-page opinion decisively rejecting all of the other side’s arguments.

New York is the nation’s second-largest wine consuming state, so the decision echoed throughout the land. The State has appealed, so the fight isn’t over yet. In fact, we expect this issue will ultimately have to be resolved by the U.S. Supreme Court. And, of course, the Institute for Justice will be there every step of the way.

So drink a toast to Pastor Craigmiles and Juanita Swedenburg. Because of them, Americans are more free today, and the law more closely reflects the intent of our Founding Fathers.

Chip Mellor is the Institute’s president and general counsel.


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