Arlington, Va.—On Friday, August 21, 2009, the Institute for Justice appealed to the U.S. Supreme Court a case challenging Maryland’s government-imposed funeral cartel—a cartel that unconstitutionally blocks competition and raises costs to consumers. Alone among the states, Maryland forbids funeral homes from being owned as corporations and permits only state-licensed Maryland funeral directors to own funeral homes. As a result, Maryland residents pay approximately $800 more per funeral than citizens in other states. (A copy of IJ’s cert petition is available at: http://www.ij.org/FuneralHome.)
After working for more than a decade to try to convince Maryland’s General Assembly to eliminate Maryland’s funeral cartel by bringing its funeral home ownership regulations into line with those of other states, a group of four entrepreneurs, represented by the Institute for Justice, filed suit in federal district court in Baltimore in September 2006 challenging Maryland’s law. In 2007, Judge Richard D. Bennett found the law unconstitutional, describing it as “the most blatantly anti-competitive state funeral regulation in the nation.”
But the Fourth U.S. Circuit Court of Appeals reversed that decision and reinstated the law, holding that the interstate movement of investment capital and profits—as opposed to physical goods like caskets or gravestones—is not “commerce” within the meaning of the U.S. Constitution’s Commerce Clause, which forbids states from discriminating against or unduly burdening commercial dealings with people and businesses in other states. The court also held that even if the Commerce Clause does protect the ability to invest money across state lines, Maryland’s restrictions on funeral home ownership do not impose an undue burden on interstate commerce.
But both of those holdings contradict U.S. Supreme Court precedent, as well as prior case law from the Fourth Circuit and from other federal appellate courts as well. Equally important, the rationale of the Fourth Circuit’s decision, consistently applied, would bring trade to a halt and render each state a commercial “island” in the stream of national commerce.
As Institute for Justice Senior Attorney Clark Neily, lead attorney on the case, explained, “Imagine if there were a law that said no corporation could sell hamburgers in the state of Maryland; there would be no doubt why that law was enacted and what companies it was targeting. And the funeral industry is no different: Maryland is very clearly, very deliberately trying to shield local funeral directors from competition, and it is doing so at the expense of Maryland residents—and the Constitution.”
Among the most basic values embodied in the U.S. Constitution is that states may not favor their own residents at the expense of non-residents. And yet, that is precisely what Maryland’s restrictions on funeral home ownership are understood and intended to do. As the chief lobbyist for the Maryland funeral cartel, Jim Doyle, testified during the case, the ownership ban “places a check” on the ability of national funeral chains “to thrive or spread in Maryland.”
Institute for Justice Staff Attorney Jeff Rowes explained, “It is vitally important that the Supreme Court take up this case in order to make clear that states may not wall off local industries from fair competition the way Maryland has. The Constitution gives everyone the right to invest their money, talent and energy wherever they see an opportunity, without being excluded or discriminated against just because they’re from another state.”
The Supreme Court is expected to decide by October whether to take up the case.