Antitrust Law Daily Wrap Up, CONSUMER PROTECTION—5thCir: Louisiana Does Not Have Legitimate State Interest in Allowing Only Funeral Homes to Sell Caskets to Public, (Mar 25, 2013)

By Tobias J. Gillett, J.D., LLM.

A Louisiana law allowing only funeral homes to sell caskets to the public was not rationally related to any legitimate state interest, and was therefore unconstitutional, the U.S. Court of Appeals in New Orleans has ruled (St. Joseph Abbey v. Castille, March 20, 2013, Higginbotham, P.). The state did not have a legitimate interest in pure economic protection of the state funeral industry, and the law bore no rational relationship to the state’s interests in consumer protection, public health, or public safety, the court held.

St. Joseph Abbey, an Abbey of the Benedictine Order of the Catholic Church, recently began manufacturing and selling caskets at prices significantly lower than those offered by funeral homes. In December 2007, the Louisiana State Board of Embalmers and Funeral Directors ordered the abbey to stop selling caskets. The chair of the Board initiated a complaint against it, asserting that, under state law, intrastate sales of caskets to the public may be made only by a state-licensed funeral director and only at a state-licensed funeral home.

The abbey and its deacon brought suit against the Board under 42 U.S.C. § 1983, arguing that the restriction denied them equal protection and due process under the Fourteenth Amendment because it bore no rational relationship to any legitimate government interest. The district court agreed, concluding that economic protection of the funeral industry was not a legitimate state interest, and that the challenged law had no rational relationship to Louisiana’s interests in consumer protection, public health, and public safety. The Board appealed.

The Board initially argued that Louisiana had a valid government interest in pure economic protection of the funeral industry, pointing to the Tenth Circuit’s 2004 split decision in Powers v. Harris, 379 F.3d 1208, which had upheld a similar Oklahoma scheme on that ground. The Abbey responded by citing the Sixth Circuit’s 2002 decision in Craigmiles v. Giles, 312 F.3d 220, which had rejected “economic protectionism” as a rational basis for similar casket regulations.

The Fifth Circuit concluded that “neither precedent nor broader principles suggest that mere economic protection is a legitimate governmental purpose,” although economic protection may be supported by some other “post hoc perceived rationale,” even if the government had been motivated in part by economic protectionism. Therefore, the Louisiana law had to satisfy the “pivotal inquiry” of whether a legitimate government interest supported it.

The Board contended that even if economic protection was not a legitimate interest, the state still had a legitimate interest in protecting consumers by restricting predatory sales practices by third party casket sellers and by preventing them from inadvertently purchasing a casket that was not suitable for a given burial space.

Although the court found these might be legitimate state interests, the court concluded that the facts in the particular case demonstrated that the law did not serve those interests. The law would not help prevent consumers from purchasing unsuitable caskets, because customers would pay funeral directors a non-declinable service fee that would contractually bind the funeral director “to assist the customer with funeral and burial logistics, including, for example, casket selection, even if the customer does not purchase the casket from the funeral director.” Since only funeral homes could sell funeral services, and since all disposal of dead bodies had to be “through a funeral establishment,” the consumer “should receive the benefit of the funeral director’s experience in matters of casket selection,” regardless of the law. Moreover, Louisiana law did not require funeral directors to have training on caskets, or on counseling grieving customers.

The court also concluded that the law was not rationally related to a legitimate state interest in restricting predatory sales practices. The Federal Trade Commission, in declining to extend its Funeral Rule regulations of the funeral industry to third party sellers of funeral goods, had found “insufficient evidence that third-party sellers of funeral goods are engaged in widespread unfair or deceptive acts or practices.”

Even if third party sellers did pose a risk of deceptive sales practices, administrative regulations implementing the Louisiana Unfair Trade Practices and Consumer Protection Law permitted the state attorney general to regulate unfair trade practices in casket sales, but only in a manner consistent with the FTC Act and “any rule or regulation promulgated thereunder.”

Although the FTC’s Funeral Rule did not preempt Louisiana from regulating the sale of caskets, a rule issued by the attorney general that barred third party sellers from selling caskets would be “in tension” with FTC “rules that compel funeral homes both to accept caskets purchased from others and to not charge fees for doing so,” and with FTC findings “that third party sellers do not engage in consumer abuse.” Although this analysis was “not dispositive” of the court’s inquiry, it demonstrated the problem with the “post hoc hypothesis of consumer protection.” The court concluded that the “exclusive right of sale adds nothing to protect consumers and puts them at a greater risk of abuse including exploitative prices.”

The court also rejected the contention that a rational relationship existed between the law and the state’s interests in public health and safety. Louisiana law did not require a casket for burial, did not impose requirements for casket construction or design, did not require a casket to be sealed before burial, and did not require funeral directors to have any particular expertise in caskets. This lack of regulation led the court to conclude “that no rational relationship exists between public health and safety and limiting intrastate sales of caskets to funeral establishments.”

The court therefore concluded that no rational basis supported the Board’s rule, and affirmed the district court’s decision striking it down as unconstitutional.

The case is No. 11-30756.

Attorneys: Scott G. Bullock (Institute for Justice) for St. Joseph Abbey. Walter Rimmer Woodruff, Jr. (Bopp Law Corporation) for Paul Wes Castille.

Companies: St. Joseph Abbey

Cases: ConsumerProtection StateUnfairTradePractices LouisianaNews MississippiNews TexasNews