Arlington, Va.—The State of Maryland arbitrarily restricts who can own a funeral home. As a result, consumers pay more than they otherwise would, and opportunities for would-be entrepreneurs are blocked. These are among the reasons why the Institute for Justice, a public interest law firm that litigates nationwide on behalf of entrepreneurs whose rights are violated by the government, today filed a federal lawsuit seeking to break up the government-imposed cartel.
“Maryland’s law is a racket designed to protect the state’s funeral cartel from competition, and that’s not a valid use of government authority,” said Clark Neily, a senior attorney with the Institute for Justice, which filed the lawsuit on behalf of four Maryland entrepreneurs and one from Florida who wishes to do business in the state as a funeral home owner.
In Maryland, only licensed funeral directors and a handful of politically favored corporations and individuals may own a funeral home. Becoming a licensed funeral director takes two years of study and thousands of dollars. Among the many requirements of a mortuary science degree is learning how to embalm corpses.
But owning does not mean operating. Under Maryland law, a person is not allowed to own a funeral home even if he or she hires a licensed funeral director to oversee the funeral home’s day-to-day operations.
“It’s like saying that someone must be a pilot to own an airline,” Neily said.
Jeff Rowes, an Institute for Justice attorney, said, “There are no genuine health or consumer-protection reasons to justify this law.” Underscoring Rowes’ point is the fact that 58 corporations are authorized to own funeral homes, as are the surviving spouses of deceased funeral directors, as are the executors of deceased funeral directors’ estates, even though the widow or an executor could be someone with no experience at all in this line of work. Rowes added, “It’s simply impossible to look at the range of exceptions to this law and conclude that the government has any true interest in keeping ordinary entrepreneurs from owning funeral homes.”
“The real interest the law serves is the funeral home industry’s bottom line,” said Chip Mellor, president and general counsel of the Institute for Justice.
As a result of the cartel, a Maryland funeral costs about $800 more than it would in a more open market. With tens of thousands of burials a year, the funeral home cartel is fleecing consumers for millions.
The lawsuit was filed in U.S. District Court for the District of Maryland on behalf of five entrepreneurs—Charles Brown, Joe Jenkins, Gail Manuel, John Armiger and Brian Chisholm. This case is the latest in the Institute for Justice’s nationwide effort to strike down protectionist state laws that stifle entrepreneurship and harm consumers. IJ’s goal is to restore constitutional protection for the right to earn an honest living in the occupation of one’s choice free from excessive government regulation—the right to economic liberty.
Because of the ownership restrictions, the total number of funeral homes in Maryland is far lower than one would predict. Despite having about two percent of the U.S. population, Maryland has only about one percent of the funeral homes. Furthermore, the nationwide ratio is one funeral home for about every 17,588 people, but in Maryland there is only one funeral home for every 24,520 people. This translates directly into a windfall for the funeral home cartel. The average American funeral home has revenue of $681,000, while the average Maryland funeral home has revenue of $887,000.
“All we want is the chance to offer consumers the best service at the best price, but the government is standing in our way,” said plaintiff Charles S. Brown, who owns Rest Haven Cemetery in Hagerstown, Md., and runs it with his wife Pat and their son Eric. Charles wants to own the funeral home he built in order to provide additional revenue to care for the gravesites in his cemetery when the cemetery itself is full. He has been at the forefront of a decade-long effort in the General Assembly to reform Maryland’s unfair funeral home ownership law.
Plaintiff Joseph B. Jenkins III is a third-generation licensed funeral director who served on the Washington, D.C., Board of Funeral Directors and the Maryland State Board of Morticians. He was the youngest-ever president of the International Conference of Funeral Service Examining Boards. For Jenkins, the greatest frustration with Maryland’s law comes from the fact that the State only allows 58 special corporate licensees to operate funeral homes. He said, “Owning a business as a corporation, rather than as an individual, provides structure and security. And that is something that should be available for all without having to pay an inflated rate produced by this government-created scarcity.” Among many other benefits corporations offer over other business forms, corporations can raise capital by selling shares, making it easier for entrepreneurs to raise money. By contrast, a funeral director who simply owns his or her funeral home in an individual capacity must rely on personal loans to expand or upgrade and can’t easily sell off portions of his interest to raise money.
The defendants in this case are the 12 members of the Maryland State Board of Morticians, each of whom is being sued in his or her official capacity. The Maryland State Board of Morticians, which is located in Baltimore, is responsible for regulating the funeral home industry. The Board is part of the Department of Health and Mental Hygiene.
In 2004, the Maryland Department of Health and Mental Hygiene, which oversees the State Board of Morticians, expressed its official opinion that the law harms consumers and the industry alike. It recommended that Maryland’s funeral home ownership law be repealed. Likewise, the Federal Trade Commission agrees that Maryland’s funeral home ownership law does nothing to help the public and is instead a blatant impediment to competition that injures the public by artificially raising funeral prices. Finally, in separate studies, Professors Lynn Stout of the UCLA Law School and David Levy of the University of Baltimore also concluded that Maryland’s funeral home ownership restrictions do nothing but harm consumers.
The plaintiffs are challenging Maryland’s funeral home ownership law under four separate provisions of the U.S. Constitution: the Due Process Clause of the Fourteenth Amendment, the Equal Protection Clause of the Fourteenth Amendment, the Privileges or Immunities Clause of the Fourteenth Amendment, and finally, the Commerce Clause of Article One, Section Eight of the Constitution.
Founded in 1991, the Institute for Justice has successfully represented entrepreneurs nationwide who fought arbitrary government regulation. Among other victories, IJ’s litigation led a federal court to strike down Tennessee’s casket sales licensing scheme as unconstitutional, a decision that was upheld unanimously by the 6th U.S. Circuit Court of Appeals and not appealed. This marked the first federal appeals court victory for economic liberty since the New Deal. IJ recently won a case before the U.S. Supreme Court on behalf of Virginia and California vintners and New York wine consumers looking to open New York state’s wine market to the interstate direct shipment of wine to New York consumers.