Arlington, Va.—Today, U.S. District Court Judge Richard Bennett in Baltimore struck down as unconstitutional a Maryland law that restricted corporate funeral home ownership to 58 privileged in-state corporations. The Court affirmed that the Commerce Clause of the U.S. Constitution does not allow states to erect anti-competitive barriers to protect in-state special interests.
Describing the Maryland ban on corporate ownership of funeral homes as “the most blatantly anti-competitive state funeral regulation in the nation,” the court struck down a provision in the Maryland Morticians Act that prohibited corporations from owning funeral homes within the state. In doing so, the court flatly rejected the state’s assertion that the law protects consumers, finding instead that “Maryland consumers have been negatively affected by the lack of competition resulting from the corporate prohibition. This negative impact is reflected by the inflated cost of funerals in Maryland which well exceeded the national average.”
When the corporate ownership ban was first imposed some 70 years ago, existing corporate funeral homes were “grandfathered in”; as a result, there are currently 58 corporate funeral homes in Maryland that are exempt from the general ban on corporate ownership. The advantages of operating a funeral home as a corporation are so significant that those 58 corporate funeral homes have been bought and sold for decades on an informal market for up to $250,000 apiece.
While recognizing the blatantly anti-competitive nature of Maryland’s ban on corporate ownership of funeral homes, the court left unclear whether the state could require that the owners of corporate funeral homes themselves be licensed funeral directors.
Institute for Justice attorneys expect to seek clarification from the court, in which they will argue that the same requirements that have always applied to the 58 “grandfathered” corporate funeral homes-namely, that the owner need not be a licensed funeral director or mortician-apply equally to new corporate funeral homes that will be created in response to the court’s decision to strike down the general ban on corporate ownership.
“We are gratified by the court’s recognition that Maryland’s funeral home law is the most blatantly anti-competitive in the entire country,” said Institute for Justice Senior Attorney Clark Neily, who served as lead counsel. “For years, this protectionist law has been funneling millions of dollars in monopoly profits directly into the pockets of Maryland funeral directors at the expense of Maryland consumers. That is going to stop.”
Unfortunately, exactly who may now own and operate a funeral home in Maryland remains unclear. Jeff Rowes, an attorney with the Institute for Justice, said, “We intend to ask the court to clarify whether this decision enables our clients Charles Brown and Gail Manuel to pursue their dream of opening funeral homes-which will be operated under the supervision of state-licensed morticians-at the cemeteries they own even though they are not licensed funeral directors.”
The Institute represents four entrepreneurs in the case: Charles Brown, owner of Rest Haven Cemetery in Hagerstown; Joe Jenkins, a third-generation licensed funeral director in Landover; Gail Manuel, owner and operator of Trinity Memorial Gardens Cemetery and Mausoleum in Waldorf; and Brian Chisholm, a resident of Florida and a Maryland-licensed funeral director.
Maryland’s restrictions on funeral home ownership are so outrageous that both the state health department and the Federal Trade Commission supported legislative efforts to eliminate them. In 2004, the secretary of the Maryland Department of Health and Mental Hygiene, which oversees the State Board of Morticians, expressed his belief that the law harmed consumers and the funeral industry alike and recommended that Maryland’s funeral home ownership law be repealed. Likewise, the Federal Trade Commission agreed that the Maryland law did nothing to help the public and was instead a clear impediment to competition that injured the public by artificially raising funeral prices.
Founded in 1991, the Virginia-based Institute for Justice has represented entrepreneurs nationwide who successfully fought discriminatory government regulation. These cases include the nation’s leading legal battle to reestablish the American ideal of economic liberty when, on May 16, 2005, the U.S. Supreme Court struck down discriminatory state shipping laws that hampered small wineries as well as their consumers. IJ also secured the first federal appeals court victory for economic liberty since the New Deal.
IJ President and General Counsel Chip Mellor concluded, “Across the nation, hundreds of occupations are negatively impacted by arbitrary licensing laws that harm entrepreneurs and consumers for the benefit of special interests. Our goal is to restore economic liberty nationwide and today’s decision is a step toward that end.”