Heffner v. Murphy

PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

________________

No. 12-3591

________________

ERNEST F. HEFFNER; HARRY C. NEEL; BART H.

CAVANAGH, SR.; JOHN KATORA; BRIAN LEFFLER;

REBECCA ANN WESSEL; MARK PATRICK

DOUGHERTY; CYNTHIA LEE FINNEY; NATHAN RAY;

TODD ECKERT; BEN BLASCOVICH; MATTHEW

MORRIS; WILLIAM SUCHARSKI; JOHN MCGEE;

AMBER M. SCOTT; ERIKA HAAS; NICOLAS

WACHTER; DAVID HALPATE; PATRICK CONNELL;

EUGENE CONNELL; MATTHEW CONNELL; JAMES J.

CONNELL, JR; JEFFERSON MEMORIAL PARK, INC;

JEFFERSON MEMORIAL FUNERAL HOME, INC.;

WELLMAN FUNERAL ASSOCIATES INC., doing business

as Forest Park Funeral Home; EAST HARRISBURG

CEMETERY COMPANY, doing business as East Harrisburg

Cemetery & Crematory; ROBERT LOMISON; CRAIG

SCHWALM; GREGORY J. HARVILLA; BETTY FREY

v.

DONALD J. MURPHY; JOSEPH A. FLUEHR, III;

MICHAEL J. YEOSOCK; BENNETT GOLDSTEIN;

JAMES O. PINKERTON; ANTHONY SCARANTINO;

BASIL MERENDA; MICHAEL GERDES; PETER

MARKS; C.A.L. SHIELDS,

Appellants

________________

Appeal from the United States District Court

for the Middle District of Pennsylvania

(D.C. Civil Action No. 4-08-cv-00990)

District Judge: Honorable John E. Jones III

________________

Argued: June 11, 2013

Before: MCKEE, Chief Judge

AMBRO and GREENBERG, Circuit Judges

(Opinion filed: February 19, 2014)

2

James K. Kutz (argued)

Jason G. Benion

Post & Schell, P.C.

17 North Second Street, 12th Floor

Harrisburg, PA 17101

Counsel for Appellees

Kathleen G. Kane, Attorney General

John G. Knorr, III, Chief Deputy Attorney General (argued)

Maryanne M. Lewis, Senior Deputy Attorney General

Office of Attorney General

15th Floor, Strawberry Square

Harrisburg, PA 17120

Counsel for Appellants

________________

OPINION OF THE COURT

________________

McKEE, Chief Judge

Contents

I. Facts and Procedural History ...................................................................................... 6

II. Discussion ................................................................................................................. 10

A. Jurisdiction and Standard of Review ....................................................................... 10

B. Facial versus As-Applied Challenge ....................................................................... 10

C. Fourth Amendment .................................................................................................. 11

D. Dormant Commerce Clause .................................................................................... 18

1. Restrictions on Ownership and Alienability of

Funeral Establishments ............................................................................................. 19

2. Preparation Room Requirement ........................................................................... 28

3. Place of Practice and Full-Time Supervisor

Requirement .............................................................................................................. 30

E. Substantive Due Process .......................................................................................... 31

1. “One-and-a-Branch” Limitation ........................................................................... 32

3

2. Licensing Restrictions .......................................................................................... 33

3. “Place-of-practice” and Full-Time Supervisor

Requirement .............................................................................................................. 35

4. The Preparation Room Requirement .................................................................... 36

5. Restriction on Serving Food ................................................................................. 37

6. Trusting Requirement ........................................................................................... 39

F. First Amendment ...................................................................................................... 42

1. Restriction on Use of Trade Names ..................................................................... 42

2. Payment on Commissions to Unlicensed Salespeople ......................................... 45

G. Contract Clause ....................................................................................................... 47

III. Conclusion............................................................................................................... 48

The Pennsylvania Board of Funeral Directors (the

“Board”) appeals the grant of summary judgment that the

District Court awarded based upon its conclusion that several

provisions of Pennsylvania’s Funeral Director Law (“FDL”),

63 Pa. Stat. Ann. § 479.1 et seq., violate various provisions of

the U.S. Constitution. The suit was brought by individuals

and entities who are either involved in, or wish to be involved

in, Pennsylvania’s “death care industry.” 1 In relevant part,

the Plaintiffs challenged statutory provisions that: (1) permit

warrantless inspections of funeral establishments by the

Board; (2) limit the number of establishments in which a

funeral director may possess an ownership interest; (3)

restrict the capacity of unlicensed individuals and certain

entities to hold ownership interests in a funeral establishment;

(4) restrict the number of funeral establishments in which a

funeral director may practice his or her profession; (5) require

every funeral establishment to have a licensed full-time

supervisor; (6) require funeral establishments to have a

“preparation room”; (7) prohibit the service of food in a

funeral establishment; (8) prohibit the use of trade names by

funeral homes; (9) govern the trusting of monies advanced

pursuant to pre-need contracts for merchandise; and (10)

prohibit the payment of commissions to agents or employees.

1

The Plaintiffs-Appellees are collectively referred to as the “Plaintiffs.”

4

As a threshold matter, we surmise that much of the

District Court’s conclusions regarding the constitutionality of

the FDL, enacted in 1952, stem from a view that certain

provisions of the FDL are antiquated in light of how funeral

homes now operate. That is not, however, a constitutional

flaw. Thus, for the reasons that follow, we reverse the

District Court’s judgment striking down the FDL’s

warrantless inspection scheme on Fourth Amendment

grounds. We also reverse the District Court’s judgments

concerning the Plaintiffs’ dormant Commerce Clause

challenges to certain provisions of the FDL. We reverse as

well the District Court’s conclusions that the disputed FDL

provisions violate the substantive component of the Due

Process Clause. We also reverse the District Court’s ruling

that the Board’s actions unconstitutionally impair the

Plaintiffs’ private contractual relations with third parties in

violation of the Constitution’s Contract Clause. We will

affirm the District Court’s ruling that Pennsylvania’s ban on

the use of trade names in the funeral industry runs afoul of

First Amendment protections, but reverse its ruling that the

ban on the payment of commissions to unlicensed salespeople

violates the Constitution. Finally, we remand to the District

Court to modify its order in accordance with this opinion.

5

I. Facts and Procedural History

The FDL was enacted in 1952 to “provide for the

better protection of life and health of the citizens of

[Pennsylvania] by requiring and regulating the examination,

licensure and registration of persons and registration of

corporations engaging in the care, preparation and disposition

of the bodies of deceased persons . . . .” 63 Pa. Stat. Ann. §

479.1. The FDL created the Board, it entrusts the Board with

enforcing the FDL, and “empower[s] [it] to formulate

necessary rules and regulations not inconsistent with [the

FDL] for the proper conduct of the business or profession of

funeral directing and as may be deemed necessary or proper

to safeguard the interests of the public and the standards of

the profession.” Id. § 479.16(a); see also id. § 479.19.

The FDL requires individuals to obtain a license to be

a funeral director or own funeral homes in Pennsylvania. 2 Id.

§ 479.13(a). Generally, only licensed funeral directors or

partnerships of two or more licensed funeral directors may

own funeral homes. Id. § 479.8(a). The statute also restricts

the types of individuals and entities that may obtain such

licenses. However, upon the death of a licensee, the FDL

authorizes the Board to issue a license to the licensee’s estate

2

The FDL defines “funeral director” as

includ[ing] any person engaged in the

profession of a funeral director or in the care

and disposition of the human dead, or in the

practice of disinfecting and preparing by

embalming the human dead for the funeral

service, burial or cremation, or the

supervising of the burial, transportation or

disposal of deceased human bodies, or in the

practice of funeral directing or embalming

as presently known, whether under these

titles or designation or otherwise. The term

“funeral director” shall also mean a person

who makes arrangements for funeral service

and who sells funeral merchandise to the

public incidental to such service or who

makes financial arrangements for the

rendering of such services and the sale of

such merchandise.

63 Pa. Stat. Ann. § 479.2(1).

6

for a period of three years or to the licensee’s surviving

spouse while s/he remains unmarried. Id. The statute

authorizes restricted corporations (“RBCs”) to obtain

licenses, provided that they are formed for the sole purpose of

conducting a funeral directing practice. Id. § 479.8(b). 3 The

FDL prohibits an RBC from having an ownership interest in

any other funeral establishment and requires that at least one

of its principal officers be a licensed funeral director. Id.

Upon the death of a shareholder funeral director, shares or

stock of an RBC may be transferred to members of the

decedent’s immediate family. Id.

The FDL also codifies Pennsylvania’s prohibition of

general business corporations owning funeral directing

licenses. See id. § 479.8(d). Prior to 1935, Pennsylvania

issued funeral directing licenses to individuals as well as

corporations. However, in 1935 the General Assembly

imposed restrictions. Consistent with a 1936 decision of the

Pennsylvania Supreme Court, see Rule v. Price, 185 A. 851

(Pa. 1936), the legislature eventually allowed a total of

seventy-seven “pre-1935” licenses to be “grandfathered” into

the new law. Currently, any person or entity—including

general business corporations—may own an interest in one of

these licenses and own and operate a funeral establishment

pursuant to the authority granted by that license.

Licensed funeral directors are limited to operating at

one principal place of business with no more than one branch

location. 63 Pa. Stat. Ann. § 479.8(e). These establishments

must be conducted under the name of a licensed principal or

that of a predecessor establishment. Id. §§ 479.8(a)-(c). In

addition, the FDL requires that each establishment retain a

licensed funeral director as a “full-time supervisor,” id., and

include a “preparation room . . . for the preparation and

embalming of human bodies,” id. § 479.7. Food service is

generally prohibited inside a funeral establishment. Only

“non-intoxicating” beverages may be served, and they may

3

As defined by § 479.8(b), “[a] restricted business corporation is . . . a

corporation formed by one or more licensed funeral directors specifically for the

purpose of conducting a funeral directing practice and whose shareholders are

licensed funeral directors or members of the immediate family of a licensed

funeral director.” H.P. Brandt Funeral Home, Inc. v. Commonwealth of

Pennsylvania, et al. 467 A.2d 106, 107 (Pa. Cmwlth 1983).

7

only be served in rooms “not used for the preparation and

conduct of [] funeral service[s].” Id.

As the administrative entity entrusted with enforcing

the FDL, the Board’s inspectors are authorized to conduct

warrantless and unannounced inspections of funeral

establishments. Specifically, Section 16(b) of the FDL

authorizes the Board to appoint inspectors who have:

[T]he right of entry into any

place, where the business of

funeral directing is carried on, or

advertised as being carried on, for

the purpose of the inspection and

for the investigation of complaints

coming before the board and for

such other matters as the board

might direct.

Id. § 479.16(b).

Finally, the FDL also contains two provisions relating

to the “pre-need” sale of funeral arrangements that are at

issue here. 4 First, Section 11(a)(8) of the FDL provides that a

funeral director or funeral home’s license may be suspended

or revoked if a licensed funeral director pays unlicensed

employees commissions on sales. See id. § 479.11(a)(8)

(“The board . . . may refuse to grant, refuse to renew, suspend

or revoke a license of any applicant or licensee . . . for . . . (8)

paying a commission . . . to any person . . . for . . . business

secured. . . .”). Second, the FDL requires that a funeral

director who enters into a pre-need contract to provide funeral

services deposit 100% of any advance payments into an

escrow or trust account. Id. § 479.13(c).

In May 2008, the Plaintiffs initiated this suit against

the Board, asserting claims under 42 U.S.C. § 1983 and 28

U.S.C. § 2201 for alleged violations of their rights under the

U.S. Constitution. Specifically, the Plaintiffs’ amended

complaint asserted that the above-referenced FDL provisions

4

“‘Preneed’ services are what their name implies: a customer makes his or her

funeral arrangements and pays for them, either in a lump sum or over time with

the idea that, at the time of death, the services are fully paid for.” In re Forest

Hill Funeral Home & Mem’l Park, 364 B.R. 808, 811 (Bankr. E.D. Okla. 2007).

8

violated several constitutional provisions, including the

Commerce Clause, the Contract Clause, the First

Amendment, the Fourth Amendment, and the substantive

component of the Fourteenth Amendment’s Due Process

Clause.

By way of stipulation, the parties dismissed one of the

counts in the amended complaint with prejudice. 5 Thereafter,

the Board and Plaintiffs both moved for summary judgment.

The District Court largely agreed with the Plaintiffs

that the challenged FDL provisions violated various

constitutional provisions. See Heffner v. Murphy, 866 F.

Supp. 2d 358 (M.D. Pa. 2012). The Court struck down FDL

provisions that: (1) permit warrantless inspections of funeral

establishments by the Board; (2) limit the number of

establishments in which a funeral director may possess an

ownership interest; (3) restrict the capacity of unlicensed

individuals and certain entities to hold ownership interests in

a funeral establishment; (4) restrict the number of funeral

establishments in which a funeral director may practice

his/her profession; (5) require every funeral establishment to

have a licensed full-time supervisor; (6) require funeral

establishments to have a “preparation room”; (7) prohibit the

service of food in a funeral establishment; (8) prohibit the use

of trade names by funeral homes; (9) govern the trusting of

monies advanced pursuant to pre-need contracts for

merchandise; and (10) prohibit the payment of commissions

to agents or employees. 6

This appeal followed.

5

The parties agreed to dismiss Count X, which claimed that the Board had

arbitrarily and unreasonably restricted licensed funeral directors from securing

continuing education credits online.

6

The District Court found in the Board’s favor on Count XI of the amended

complaint, which alleged that certain restrictions that the FDL places on

cremation violated the Plaintiffs’ rights under the Commerce Clause, the First

Amendment, and the Due Process Clause. See Heffner, 866 F. Supp. 2d at 408-

18. The Plaintiffs have not appealed the District Court’s ruling on this issue.

9

II. Discussion

A. Jurisdiction and Standard of Review

We have jurisdiction to review a district court’s order

granting an injunction under 28 U.S.C. § 1292(a). The

District Court had federal question jurisdiction over this case

pursuant to 28 U.S.C. §§ 1331 and 1343.

We exercise plenary review over a district court’s

grant or denial of summary judgment. Carter v. McGrady,

292 F.3d 152, 157 (3d Cir. 2002). “To prevail on a motion

for summary judgment, the moving party must demonstrate

that ‘there is no genuine dispute as to any material fact and

the movant is entitled to judgment as a matter of law.’”

Interstate Outdoor Adver., L.P. v. Zoning Bd. of Twp. of

Mount Laurel, 706 F.3d 527, 530 (3d Cir. 2013) (quoting Fed.

R. Civ. P. 56(a)). Moreover, “where, as was the case here,

the District Court considers cross-motions for summary

judgment ‘the court construes facts and draws inferences in

favor of the party against whom the motion under

consideration is made.’” J.S. ex rel. Snyder v. Blue Mountain

Sch. Dist., 650 F.3d 915, 925 (3d Cir. 2011) (quoting Pichler

v. UNITE, 542 F.3d 380, 386 (3d Cir. 2008) (internal

quotation marks omitted)).

B. Facial versus As-Applied Challenge

Before we proceed to the merits of the Plaintiffs’

constitutional claims, we need to address the threshold matter

of whether we are reviewing a facial or an as-applied

challenge to the disputed FDL provisions. The difference

between the two is significant. “A party asserting a facial

challenge ‘must establish that no set of circumstances exists

under which the Act would be valid.’” United States v.

Mitchell, 652 F.3d 387, 405 (3d Cir. 2011) (quoting United

States v. Salerno, 481 U.S. 739, 745 (1987)). This is a

particularly demanding standard and is the “most difficult

challenge to mount successfully.” Salerno, 481 U.S. at 745.

By contrast, “[a]n as-applied attack . . . does not contend that

a law is unconstitutional as written but that its application to a

particular person under particular circumstances deprived that

person of a constitutional right.” United States v. Marcavage,

609 F.3d 264, 273 (3d Cir. 2010).

10

In granting summary judgment to the Plaintiffs on all

but one of their asserted counts, the District Court only

engaged in a facial analysis. Confusingly, however, the

District Court’s subsequent order invalidated those same FDL

provisions both on their face and as-applied to the Plaintiffs.

When confronted with this kind of ambiguity in the

past, our inquiry has examined whether the challenged

statutes survive either type of challenge. See Mitchell, 652

F.3d at 405-06; Marcavage, 609 F.3d at 273. However, in

those cases, the parties themselves disputed the nature of the

challenges. Here, the amended complaint is generally

consistent with a facial challenge and Plaintiffs’ briefs

exclusively advance facial challenges. This is consistent with

the position Plaintiffs’ counsel took at oral argument. On

appeal, counsel relies on several grounds in continuing to

argue that the FDL is invalid on its face. Accordingly, we

will limit our inquiry to whether the challenged provisions of

the FDL are facially invalid. 7

C. Fourth Amendment

Section 16(b) of the FDL gives board inspectors “the

right of entry into any place, where the business or profession

of funeral directing is carried on or advertised as being

carried on, for the purpose of inspection and for the

investigation of complaints coming before the board and such

other matters as the board may direct.” 63 Pa. Stat. Ann.

§ 479.16(b). Count I of the Plaintiffs’ amended complaint

charged that this authority to conduct warrantless searches of

funeral establishments violates the Fourth Amendment.

The Supreme Court has recognized that “warrantless

searches are generally unreasonable, and [] this rule applies to

commercial premises as well as homes.” Marshall v.

Barlow’s, Inc., 436 U.S. 307, 312 (1978). Therefore, the

7

As noted above, a finding that the FDL’s provisions are facially invalid negates

any need to conduct an as-applied challenge. See Salerno, 481 U.S. at 745. If

the FDL is determined to be unconstitutional as written, it is irrelevant whether

the statute’s application to a particular person under particular circumstances

deprived that person of a constitutional right. See Marcavage, 609 F.3d at 273.

Moreover, given the arguments asserted by Plaintiffs and the record before us,

we conclude that an “as applied challenge” is not supported by this record.

11

government must secure a warrant before searching or

inspecting private premises absent certain narrow

circumstances that are not alleged here. Showers v. Spangler,

182 F.3d 165, 172 (3d Cir. 1999). The Board defends its

authority to conduct warrantless searches by relying on the

“well recognized exception” to the warrant requirement that

applies to highly regulated industries. See id.; see also Free

Speech Coal., Inc. v. Att’y Gen. of U.S., 677 F.3d 519, 544

(3d Cir. 2012) (“Certain industries have such a history of

government oversight that no reasonable expectation of

privacy could exist.”).

In New York v. Burger, 482 U.S. 691 (1987), the Supreme Court

rejected a Fourth Amendment challenge to a New York statute that authorized

warrantless inspections of vehicle- dismantling businesses. The Court reasoned

that the authority to inspect such businesses without a warrant came within the

narrow exception to the warrant requirement for administrative inspections of

closely regulated businesses. Id. at 703. The state had a substantial interest in

regulating industries associated with motor vehicle theft, and warrantless

administrative inspections advanced that interest. Id. at 708. The Court held

that the challenged statute provided a “constitutionally adequate substitute” for

warrants by informing operators of a vehicle-dismantling business that

inspections will be made on a regular basis and by limiting discretion of

inspection officers. Id. at 711.

Accordingly, we begin our Fourth Amendment inquiry

by determining whether the FDL is a “closely regulated

industry.” Free Speech Coal., Inc., 677 F.3d at 544. “Factors

to consider when determining whether a particular industry is

closely regulated include: duration of the regulation’s

existence, pervasiveness of the regulatory scheme, and

regularity of the regulation’s application.” Id.

The funeral “industry” in Pennsylvania is clearly

subjected to extensive regulations. 8 The FDL and its

supporting regulations prescribe a broad range of standards

that funeral directors in Pennsylvania have long been required

to comply with. These include licensing requirements, health

standards, and funeral services that funeral homes must

provide. See, e.g., 63 Pa. Stat. Ann. §§ 479.6 (issuance of

licenses), 479.7 (health restrictions); see also Guardian Plans

v. Teague, 870 F.2d 123, 126 (4th Cir. 1989) (describing

8

Indeed, one need look no further than the breadth of the regulations being

challenged by the Plaintiffs to understand the breadth of Pennsylvania’s

regulations of the funeral industry.

12

similar requirements governing funeral service professionals

in Virginia as “extensive”); Toms v. Bureau of Prof’l and

Occupational Affairs, 800 A.2d 342, 349 (Pa. Cmwlth. 2002)

(“The [FDL] . . . impose[s] rules and restrictions on funeral

directors not only to protect the bereaved . . . , but also to

provide a framework with which to help the bereaved address

each of the issues that arise when making final arrangements

for a deceased loved one.”). The funeral industry is also

subject to significant federal regulation. Not only does the

Federal Trade Commission require funeral homes to disclose

pricing information prior to all transactions, see 16 C.F.R.

453.2, funeral establishments must also comply with several

health and safety standards imposed by the Occupational

Safety and Health Administration, see, e.g., 29 C.F.R.

1910.1030 (Blood borne Pathogen Standard).

Since we have no difficulty concluding that

Pennsylvania’s funeral industry is a “closely regulated

industry,” our Burger inquiry proceeds to determining if the

searches authorized by the FDL are reasonable. Free Speech

Coal., Inc., 677 F.3d at 544 (“Once a business is determined

to be part of a closely regulated industry, then we must decide

whether the alleged warrantless search was reasonable.”).

That inquiry requires us to focus on three criteria:

First, there must be a substantial

government interest that informs

the regulatory scheme pursuant to

which the inspection is made. . . .

Second, the warrantless

inspections must be necessary to

further the regulatory scheme. . . .

Finally, the statute’s inspection

program . . . must provide a

constitutionally adequate

substitute for a warrant.

Burger, 482 U.S. at 702-03 (internal quotation marks and

citations omitted); Free Speech Coal., Inc., 677 F.3d at 544.

The Plaintiffs argue that the searches authorized by the

FDL are not supported by a sufficient governmental interest

to withstand Fourth Amendment scrutiny under Burger.

However, Pennsylvania obviously has a substantial interest in

13

public health, safety, and consumer protection. See, e.g.,

Grime v. Dep’t of Public Instruction, 188 A. 337, 381 (Pa.

1936) (noting that the General Assembly has a legitimate

interest in regulating the licensing of funeral directors in order

“to protect the public health from the dangers attendant upon

the inexpert conduct of undertaking by those not qualified by

the necessary knowledge of principles of sanitation and

disease prevention.”); Brown v. Hovatter, 561 F.3d 357, 368

(4th Cir. 2009) (“[A] State has ‘a legitimate interest in

protecting the health, safety and welfare of its citizens

through regulation of the funeral profession.’” (quoting

Guardian Plans, Inc., 870 F.2d at 126)); Toms, 800 A.2d at

346 (“‘[T]he General Assembly has a legitimate interest in

regulating the funeral industry to safeguard the interests of the

public and the standards of the profession.’” (quoting

Ferguson v. Pa. State Bd. of Funeral Dirs., 768 A.2d 393,

397-98 (Pa. Cmwlth. 2001))).

The Plaintiffs claim that Section 16(b) of the FDL does

not satisfy Burger because a warrantless search is not

necessary to further the regulatory objectives. The Plaintiffs

support that argument by highlighting differences between

funeral homes on the one hand, and searches of premises

involved in the rapid exchange of fungible items—e.g., the

“chop shops” at issue in Burger—on the other. According to

the Plaintiffs, inspectors’ searches of funeral establishments

are likely to focus on compliance with such regulations as

building standards, and the need for surprise inspections is

therefore attenuated to such an extent that it cannot justify a

warrantless intrusion under Burger.

Although that may be true, it is neither outcome

determinative nor does it advance our inquiry. Although the

need for unannounced inspections of funeral parlors may not

be as great as for other kinds of businesses, that does not

negate the need for surprise inspections of funeral parlors.

The Board need not show that warrantless searches are the

most necessary way to advance its regulatory interest. See

Contreras v. City of Chicago, 119 F.3d 1286, 1290 (7th Cir.

1997) (“The pertinent inquiry is whether the [government’s]

objectives would be frustrated by requiring a warrant or

notice.”) (internal quotation marks and alterations omitted).

14

The Board persuasively explains that if inspectors are

barred from entering funeral homes without a search warrant

or advance notice, unscrupulous funeral practitioners could

bring their establishments into regulatory compliance prior to

an inspection, only to let them fall below prescribed standards

when the threat of detection passes. We agree. Thus,

Pennsylvania’s warrantless search regime is not qualitatively

different from various other administrative inspection

schemes that depend on the element of surprise to both detect

and deter violations. See, e.g., Lesser v. Espy, 34 F.3d 1301,

1308 (7th Cir. 1994) (upholding statutory regime authorizing

warrantless searches of businesses that supplied rabbits to

research laboratories).

Plaintiffs also argue that Section 16(b) cannot survive

the third prong of the Burger inquiry because it does not

sufficiently limit inspectors’ discretion and therefore cannot

be a constitutionally adequate substitute for a warrant. The

Plaintiffs base that claim on the statutory text which allows

inspection for any complaints or “other matters as the board

may direct[.]” 63 Pa. Stat. Ann. § 479.16(b). According to

the Plaintiffs, this gives inspectors nearly absolute discretion

and infringes upon the privacy interests of funeral directors.

Plaintiffs stress, for example, that “no regulation or policy

specifies what will be inspected or when,” and they claim that

the “frequency, nature, and extent of an inspection” appear to

be left to an inspector’s discretion. Plaintiffs’ Br. at 11.

The third prong of the Burger test requires that a

regulatory statute authorizing warrantless searches both (1)

advise the owner of the premises that a search is pursuant to

the law, and (2) limit the discretion of the officers conducting

the search. See Burger, 482 U.S. at 703. “Inspectors, in other

words, cannot barge into an establishment any time they want

and inspect the place however they please.” Contreras, 119

F.3d at 1291.

We agree that a delegation of authority as broad as that

which Plaintiffs describe could not satisfy Burger. However,

Plaintiffs mischaracterize Section 16(b). Their argument

ignores other aspects of the statutory regime that place

restrictions on warrantless searches under the FDL as

required by Burger. The statute plainly states that any

15

business that engages (or represents itself as engaging) in the

practice of funeral directing is subject to search by Board

inspectors. Notice that inspections of private premises may

take place “pursuant to the law” is sufficient under Burger, so

long as limits are placed on the discretion of the inspecting

officer. See id. at 703, 711; see also LeSueur-Richmond Slate

Corp. v. Fehrer, 666 F.3d 261, 265 (4th Cir. 2012) (“[T]he

Burger Court meant that a statute permitting warrantless

administrative searches must clearly indicate that the

[relevant] property is subject to search, whether or not any

government official actually conducts one.”).

Section 16(b) provides that only Board-appointed

inspectors may search private premises used in the funeral

business. Accordingly, the FDL more closely circumscribes

who may conduct searches than the statutory regimes that the

Supreme Court upheld in Burger. See Burger, 482 U.S. at

704, 711 (discussing scheme authorizing inspections “by the

police or any agent of the Department of Motor Vehicles”);

see also Tart v. Commonwealth of Mass., 949 F.2d 490, 497

(1st Cir. 1991) (upholding scheme authorizing “any

authorized person” to inspect fishing permits).

Moreover, while the FDL permits officers to inspect

for “such . . . matters as the Board may direct,” it exclusively

restricts the Board’s enforcement duties to matters pertaining

to the FDL. See 63 Pa. Stat. Ann. § 479.16(a). As the Board

correctly notes, under Burger we have upheld significantly

broader grants of authority. See Watson v. Abington Twp.,

478 F.3d 144, 152 (3d Cir. 2007) (recognizing that

Pennsylvania’s liquor board is authorized to inspect for “‘any

violation of the Liquor Code or any law of the

Commonwealth’” (quoting In re Catering Club Liquor

License No. CC-4837 Issued to Fulton Post, Inc., 438 A.2d

662, 663 (1981))); see also LeSueur-Richmond Slate Corp.,

666 F.3d at 266.

Plaintiffs’ Burger challenge also relies on the absence

of appropriate temporal limitation on searches of funeral

establishments. The point is well taken, but we believe the

absence of such restrictions is not fatal to the FDL. Time

limitations, along with those related to the scope and location

of a search, are key to restricting inspectors’ discretion. See

Burger, 482 U.S. at 703. Accordingly, courts reviewing

16

regulatory search schemes under Burger generally look to

whether the statutes and regulations at issue place adequate

temporal limits on government officers’ ability to conduct

searches of private property. Here, neither Section 16(b) of

the FDL nor relevant Board regulations establish any such

limitations—e.g., by requiring that officers conduct

inspections during normal business hours.

However, context matters and courts have consistently

upheld statutes permitting administrative searches in the

absence of time restrictions where such limitations would

frustrate the underlying governmental interest. See United

States v. Vazquez-Castillo, 258 F.3d 1207, 1212 (10th Cir.

2001) (upholding regulatory inspection scheme on

commercial carriers and noting that “trucks operate twenty-

four hours a day”) (internal quotation marks omitted); Crosby

v. Paulk, 187 F.3d 1339, 1347 (11th Cir. 1999) (upholding

statute authorizing inspections of properties where alcohol

was sold and permitting Georgia officers to “enter upon the

licensed premises . . . at any time” (emphasis omitted)

(quoting O.C.G.A. § 3-2-32)); United States v. Dominguez-

Prieto, 923 F.2d 464, 470 (6th Cir. 1991) (noting “limitation

[on searches of commercial carriers] would . . . render the

entire inspection scheme unworkable and meaningless”).

Obviously, the concerns that lead to the regulation of

funeral facilities do not disappear at the close of business, nor

is the need for regulatory compliance restricted to business

hours. In fact, just the opposite may be true. It is quite

reasonable for the state to assume that owners of funeral

businesses will be particularly careful to avoid disturbing or

offending visitors and family members who are already

grieving the loss of a loved one. However, the health

concerns that underlie much of the FDL’s regulatory scheme

do not dissipate when those visitors and family members

leave the funeral home. Death is obviously not restricted to

normal business hours and a funeral facility must continually

maintain the corpse until it is finally removed. Therefore the

state has a strong interest in ensuring that the funeral business

complies with applicable regulations 24 hours a day, 7 days a

week. Limiting regulatory inspections to business hours

would not advance that interest.

17

In mounting a facial challenge to the FDL, Plaintiffs

must persuade us that “there is no set of circumstances” under

which the FDL’s inspection scheme may be applied

constitutionally. See Mitchell, 652 F.3d at 415-16. Plaintiffs

have failed to do so. As we have just explained, the very fact

that death is not restricted to normal business hours or

workdays belies any suggestion that administrative searches

of funeral parlors should be so restricted. Given the totality

of the FDL’s warrantless administrative inspection scheme,

we hold that the statute adequately limits the discretion of

government officers. 9

D. Dormant Commerce Clause

The Commerce Clause of the U.S. Constitution grants

Congress the power to “regulate Commerce . . . among

the several States.” U.S. Const. Art. I, § 8, cl.3. “This

clause has an implied requirement—the Dormant

Commerce Clause—that the states not ‘mandate

differential treatment of in-state and out-of-state

economic interests that benefit the former and burdens

the latter.’” Keystone Redev. Partners, LLC v. Decker,

631 F.3d 89, 107 (3d Cir. 2011) (quoting Granholm v.

Heald, 544 U.S. 460, 472 (2005)). Accordingly, it is

“[a]xiomatic . . . that a state cannot impede free market

forces to shield in-state businesses from out of state

competition.” Cloverland-Green Spring Dairies, Inc.

v. Pa. Milk Mktg. Bd., 298 F.3d 201, 210 (3d Cir.

2002) (“Cloverland I”).

Our dormant Commerce Clause inquiry begins with

determining whether the FDL discriminates against interstate

commerce in either purpose or effect. See Am. Trucking

Ass’n, Inc. v. Whitman, 437 F.3d 313, 319 (3d Cir. 2006). If

so, the discriminatory restrictions must then survive

heightened scrutiny to survive the Plaintiffs’ Commerce

Clause challenge. Am. Exp. Travel Related Servs., Inc. v.

Sidamon-Eristoff, 669 F.3d 359, 372 (3d Cir. 2012).

9

In addition, we note that nothing in the record suggests that Board officers

have conducted inspections of funeral homes outside of normal business hours.

Indeed, the Board asserts—and the Plaintiffs concede—that because government

inspectors are only paid for work performed between 8:30 a.m. and 5:00 p.m.,

administrative inspections have exclusively taken place during those hours.

18

Heightened scrutiny requires the State to “‘demonstrate (1)

that the statute serves a legitimate local interest, and (2) that

this purpose could not be served as well by available

nondiscriminatory means.’” Freeman v. Corzine, 629 F.3d

146, 158 (3d Cir. 2010) (quoting Am. Trucking Ass’n, Inc.,

437 F.3d at 319).

If we determine that heightened scrutiny is

inappropriate because the FDL’s provisions do not

discriminate in favor of in-state interests, we then must

balance interests pursuant to Pike v. Bruce Church, Inc., 397

U.S. 137 (1970). Pike balancing is necessary because

“[s]tates may not impose regulations that place an undue

burden on interstate commerce, even where those regulations

do not discriminate between in-state and out-of-state

businesses.” United States v. Lopez, 514 U.S. 549, 579-80

(1995). The Pike balancing inquiry requires that we

determine “whether the [law’s] burdens on interstate

commerce substantially outweigh the putative local

benefits.’” Freeman, 629 F.3d at 158 (quoting Cloverland-

Green Spring Dairies, Inc. v. Pa. Milk Mktg. Bd., 462 F.3d

249, 258 (3d Cir. 2006) (alterations omitted) (“Cloverland

II”)). Here, the District Court concluded that several of the

FDL’s provisions unconstitutionally shielded Pennsylvania

funeral establishments from out-of-state competition in

violation of the Commerce Clause. In explaining why we

disagree with that conclusion we will separately discuss each

of the allegedly discriminatory provisions.

1. Restrictions on Ownership and Alienability of Funeral

Establishments

The Plaintiffs first argue that FDL’s limits on the

ownership of funeral establishments in Pennsylvania

violate the dormant Commerce Clause. The first

challenged restriction that we will discuss is referred to

as the “one-and-a-branch” limitation. It restricts

licensees to possessing an ownership interest in one

funeral establishment with only a single “branch”

location. 63 Pa. Stat. Ann. §§ 479.8(a)-(e).

The second limitation that is challenged under the

dormant Commerce Clause arises from a set of provisions

governing funeral licensing requirements in Pennsylvania.

19

These provisions generally restrict ownership of an interest in

funeral establishments to individuals and entities that had a

license before 1935. See id. §§ 479.8(a)-(c). However, as we

explained earlier, notwithstanding this limitation, these

ownership provisions allow the estate of a deceased licensee

or surviving spouse to receive a license to continue the

business of the deceased licensee. Similarly, immediate

family members may hold a deceased funeral director’s stock

in a restricted corporation upon death of the licensee.

The District Court did not independently analyze the

one-and-a-branch limitation in concluding that these

“ownership restrictions” violated the dormant Commerce

Clause. We will nevertheless examine the constitutionality of

each of the ownership restrictions.

a. One-and-a-Branch Provision

The one-and-a-branch provision states that “[l]icensees

authorized to conduct a funeral practice . . . may practice at

one principal place and no more than one branch place of

business.” Id. § 479.8(e). Other provisions, in Section 8 of

the FDL, similarly restrict business entities’ ownership

interests. See id. §§ 479.8(a), (b), (d). The Plaintiffs allege

that these provisions unconstitutionally prohibit out-of-state

interests from operating a funeral business at more than two

locations. Plaintiffs claim that the unconstitutionality results

from the resulting inability to “cluster” 10 facilities so that they

can more effectively compete with in-state funeral directors.

We begin our analysis by asking “whether [the State

law] discriminates on its face against interstate commerce.”

United Haulers Ass’n, Inc. v. Oneida-Herkimer Solid Waste

Mgmt. Auth., 550 U.S. 330, 338 (2007). The answer to that

question is as obvious as it is straightforward. Despite

Plaintiffs’ attempt to conjure up a discriminatory impact on

out-of-state funeral owners, it is clear from the text of the

10

Plaintiffs define “clustering” as the sharing of employees and equipment

between multiple locations. Plaintiffs’ Br. at 26. Plaintiffs contend that the

prohibition on clustering -- i.e., limiting the extent to which the services of a

funeral director can be shared across a cluster of funeral homes -- means that a

firm attempting to cluster in Pennsylvania is required to hire more personnel at

greater expense. See Heffner, 866 F. Supp. 2d at 396.

20

statute that the challenged provisions impose the same

limitation on out-of-state funeral directors and those in

Pennsylvania. There is simply no distinction under the FDL

between in-state and out-of-state interests or impact. The

restriction burdens both to the same extent. Any burden that

results from these limitations affects all licensed individuals

who possess an ownership interest in a funeral business

operated in Pennsylvania regardless of the state of residency

of any of its owners.

Our dormant Commerce Clause inquiry only considers

whether the impact of the limitation falls equally upon in-

state and out-of-state funeral directors; if so, there is clearly

no discrimination in favor of Pennsylvania operators. See

Sixth Angel Shepherd Rescue, Inc. v. West, 477 F. App’x 903,

907 (3d Cir. 2012) (noting that, under the dormant Commerce

Clause analysis, “we ask whether a challenged law

discriminates against interstate commerce . . . [but a]bsent

discrimination for the forbidden purpose . . . the law will be

upheld unless the burden imposed on interstate commerce is

clearly excessive in relation to the putative local benefits.”)

(quoting Dep’t of Revenue of Ky. v. Davis, 553 U.S. 328, 338-

39 (2008) (internal quotations and citations omitted).

By way of example, a Pennsylvania resident who is a

licensed funeral director in Pennsylvania and a Maryland

resident who is a licensed funeral director in Pennsylvania are

similarly barred from owning an interest in more than two

funeral establishments in Pennsylvania. In-state funeral

parlor owners who want to achieve an economy of scale

through “clustering” face the same obstacles as out-of-state

owners who want to cluster. 11

We realize, of course, that the vast majority of individuals who apply

for and obtain a Pennsylvania funeral directing license will probably reside in-

state in order to practice their trade. Indeed, like the one-and-a-branch

provision, many of the FDL’s requirements may render that choice all but

inevitable. However, that does not elevate the resulting choice to the level of

unconstitutional coercion under the dormant Commerce Clause. The funeral

11

The Plaintiffs describe clustering as “the primary competitive advantage of []

out-of-state competitors.” Plaintiffs’ Br. at 25. Although the record contains

evidence that supports the alleged consumer benefits flowing from an economy

of scale business model, the record does not support the contention that the

FDL’s interposition of an obstacle to clustering unilaterally advances the interest

of Pennsylvania funeral establishments.

21

service “industry,” involving the internment and cremation of consumers’ loved

ones, is by nature a highly localized enterprise. So long as a State’s regulation

operates evenhandedly as to both in-state and out-of-state actors seeking to enter

such an industry, we do not subject it to heightened scrutiny under dormant

Commerce Clause analysis. See Am. Trucking Assocs., Inc., 545 U.S. at 437 (in

upholding Michigan’s annual fee assessed on trucks engaged in intrastate

commercial freight, the court noted the disputed provision “taxe[d] purely local

activity; it does not tax an interstate truck’s entry into the State nor does it tax

transactions spanning multiple States”); CTS Corp. v. Dynamics Corp. of Am.,

481 U.S. 69, 87 (1987) (holding Indiana statute regulating acquisition of

corporation stock did not merit heightened scrutiny because it had “same effects

on tender offers whether or not the offeror is a domiciliary or resident of

Indiana”).

Accordingly, we hold that the one-and-a-branch

restriction does not discriminate against out-of-state interests,

and we thus reject the Plaintiffs’ contention that we should

subject the applicable provisions of the FDL to heightened

scrutiny. See McBurney v. Young, 133 S. Ct. 1709, 1719

(2013) (noting dormant Commerce Clause jurisprudence “is

driven by a concern about ‘economic protectionism—that is,

regulatory measures designed to benefit in-state economic

interests by burdening out-of-state competitors’” (quoting

New Energy Co. of Ind. v. Limbach, 486 U.S. 268, 273-74

(1988)).

Having determined that the one-and-a-branch

limitation does not discriminate against out of state interests,

we need only determine whether it can withstand scrutiny

under the Pike balancing test. See Dep’t of Revenue of Ky. v.

Davis, 553 U.S. 328, 353 (2008). We believe that it does.

The “incidental burdens” that we must assess under Pike

consist of “the degree to which the state action incidentally

discriminates against interstate commerce relative to

intrastate commerce.” Norfolk S. Corp. v. Oberly, 822 F.2d

388, 406 (3d Cir. 1987). As we have just explained, the

FDL’s one-and-a-branch restriction imposes the very same

burdens on Pennsylvania funeral directors as it imposes on

out-of-state interests. Thus, the regulation here is a burden on

commerce without discriminating against interstate

commerce. See Instructional Sys., Inc. v. Computer

Curriculum Corp., 35 F.3d 813, 826-27 (3d Cir. 1994)

(“[W]here the burden on out-of-state interests rises no higher

than that placed on competing in-state interests, it is a burden

on commerce rather than a burden on interstate commerce.”)

(emphasis in original).

22

b. Licensing Restrictions

The Plaintiffs contend that the FDL’s restrictions on

who may obtain a funeral director license violate the dormant

Commerce Clause. Usually, a funeral establishment in

Pennsylvania may be owned by a licensed funeral director

who, in turn, may operate the business as a sole

proprietorship, a partnership (with one or more licensed

funeral directors), or a restricted business corporation

established for the sole purpose of providing funeral services.

General business corporations are barred from owning a

funeral home in Pennsylvania unless they are able to obtain

one of 76 existing “pre-1935” licenses issued before the ban

on corporations went into effect. The law carves out limited

exceptions and allows certain unlicensed individuals and

entities—namely, the spouses, children, grandchildren,

surviving spouse, or estate of a deceased licensed funeral

director—to own and operate funeral homes in Pennsylvania.

However, they may only do so if they employ a full-time

licensed funeral director as supervisor. 63 Pa. Stat. Ann. §

479.8(a).

The District Court agreed with the Plaintiffs’ contention that this

scheme effectively bans out-of-state entities from owning funeral homes within

Pennsylvania and subjected the ownership restrictions to heightened scrutiny.

The Court then ruled that the restrictions could not survive the resulting inquiry.

Alternatively, the Court found that even if heightened scrutiny was not

appropriate, the FDL’s licensing restrictions could not survive Pike balancing.

See Heffner, 866 F. Supp. 2d at 387. We disagree with both conclusions.

Any individual or entity can obtain the required license

to operate a funeral home in Pennsylvania as long as certain

requirements are satisfied. None of those requirements

mandate state residency or citizenship. See id. at 388 (noting

“an out-of-state individual may obtain a Pennsylvania funeral

license by complying with the requirements for applicants”).

Similarly, the statutory exceptions to the rule that only

licensed individuals may own funeral homes in Pennsylvania

provide that surviving family members of a deceased funeral

director may own interests in a restricted business corporation

regardless of their state of residency.

Concomitantly, a general business corporation that

does not own a “pre-1935” license is ineligible for a license

23

regardless of where it is domiciled. Therefore, we cannot

agree that the FDL’s ownership provisions “erect a barrier”

protecting in-state interests from out-of-state competition that

would trigger heightened scrutiny. See Dean Milk Co. v. City

of Madison, 340 U.S. 349, 354 (1951); see also Keystone

Redev. Partners, LLC, 631 F.3d at 108.

The limitation on licensing also survives the Pike

balancing test. As noted above, when we engage in Pike

balancing, we consider whether any incidental burdens that

the FDL’s ownership and license restrictions place on the

flow of interstate commerce outweigh the statute’s putative

local benefits. See Norfolk S. Corp., 822 F.2d at 405-06.

Here, Plaintiffs again posit that the FDL’s ownership

restrictions burden interstate commerce by requiring out-of-

state interests to be licensed in order to own or operate funeral

homes in Pennsylvania while excepting deceased licensed

funeral directors’ families from that obligation. The Board

articulates three countervailing benefits of these restrictions:

(1) disfavoring ownership of funeral homes by unlicensed

individuals or corporations; (2) advancing the public interest

in the continued operation of a funeral home after the

licensee’s death; and (3) alleviating the financial loss to

survivors who, on the death of a licensed director, might find

themselves with a funeral home which they could neither

operate nor sell at a fair price.

The situation here is analogous to that which

confronted the Court of Appeals for the Fourth Circuit in

Brown v. Hovatter, 561 F.3d 357 (4th Cir. 2009). There, the

court rejected a dormant Commerce Clause challenge to

Maryland’s Morticians and Funeral Directors Act. That

statute, like the FDL, required all individuals who desired to

practice mortuary science in Maryland be licensed by the

State’s Board of Morticians. Md. Health Occ. Code § 7-

301(a). Only the surviving spouses or executors of the estates

of deceased licensed individuals could own a funeral

establishment without a license. Id. §§ 7-310(c)(2), 7-308, 7-

308.1. Maryland’s law also prohibited licensing corporations

but carved out an exception for corporations grandfathered

under an earlier version of the statute. Id. § 7-310. The

plaintiffs in Brown also argued that they should be able to

own and operate funeral establishments without being

24

individually licensed or going through general purpose

corporations. Brown, 561 F.3d at 360.

In rejecting that argument, the Court explained:

Any person—out-of-state or in-

state—may obtain a license to

practice mortuary science and

own and operate a funeral

establishment in Maryland, and

there is no limit on the number of

licenses that the State may issue.

Likewise, with respect to the []

grandfathered corporations

owning licenses, any person or

corporation, out-of-state or in-

state, may own the stock.

Id. at 364. After surveying the alleged restrictions that

Maryland placed on licenses, the Brown Court concluded that

“entry into the Maryland funeral services market is limited

only by the choices of the individual as to how best to

allocate his or her time and resources.” Id.

Were we to substitute “Pennsylvania” for “Maryland”

in the above-quoted text, we could easily adopt the Fourth

Circuit’s description of the operation of Maryland’s

Morticians Act as our analysis of the corresponding

provisions of the FDL. Contrary to the Plaintiffs’

characterization of the effect, the FDL’s licensing and

ownership restrictions affect in-state and out-of-state players

equally.

The Plaintiffs highlight four alleged “significant differences” between

the Maryland Morticians Act and the Pennsylvania FDL in an attempt to

distinguish Brown. They argue: (1) Maryland does not allow ownership by

unlicensed spouses, children, and grandchildren of funeral directors and their

trusts; (2) unlike Maryland, Pennsylvania allows corporate ownership of funeral

homes through RBCs; (3) Maryland does not limit the number of funeral homes

that may be owned, whereas Pennsylvania’s one-and-a-branch restriction limits

ownership to two locations; and (4) Maryland does not allow the “Pinkerton

rule,” a well-recognized (and Board-acknowledged) way to circumvent the

FDL’s limitations that allows a licensee to “own” more than two locations by

ceding his or her stock in other homes to third parties while retaining ownership

over the establishments’ assets.

25

These purported differences are neither significant nor persuasive. The

first claim is only partially correct—Maryland allows the executors and

surviving spouses of deceased licensed funeral directors to own and operate a

funeral establishment. See Md. Health Occ. Code §§ 7-310(c)(2), 7-308, 7-

308.1. The fact that Maryland does not extend similar benefits to the children

and grandchildren of licensed funeral directors is of little import. The second

distinction is no less relevant to our analysis. We do not agree with the level of

importance that the Plaintiffs ascribe to Pennsylvania’s choice to allow restricted

business corporations to own funeral homes within the State because that

provision of the FDL applies equally to in-state and out-of-state interests.

Indeed, the provision appears to expand access to the relevant market rather than

contracting it as the Plaintiffs claim. Moreover, we have already explained why

the third purported distinction (Pennsylvania’s one-and-a-branch limitation)

does not excessively burden interstate commerce. Finally, that licensees—

whether they reside in-state or out-of-state—may avail themselves of the

“Pinkerton rule” or other existing “end-runs” to circumvent the FDL’s express

requirements says nothing about the constitutional validity of those provisions

for purposes of a dormant Commerce Clause analysis. The fact that some

potential owners of funeral homes can circumvent the goals of the FDL through

the Pinkerton mechanism also fails to establish a scheme that favors

Pennsylvania businesses and residents. The Pinkerton end-run operates the

same way for in-state and out-of-state businesses and residents.

Under the FDL, any individual—out-of-state or in-

state—may apply for and obtain the applicable license as long

as they satisfy general requirements relating to citizenship,

professional education, and experience. See 63 Pa. Stat. Ann.

§§ 479.3(a)-(f). Once an applicant satisfies these

requirements, that individual—whether he or she resides in

Pennsylvania or elsewhere—may be licensed as a

“Pennsylvania funeral director” and is entitled to the same

benefits that the FDL grants all other licensees regardless of

state of residence. The unlicensed surviving spouse of a

deceased funeral director who resides in Ohio but routinely

commutes to Pennsylvania to operate a funeral establishment

that s/he owned, for example, is statutorily entitled to the

same license under Section 479.8(a) as the surviving spouse

of a funeral director residing in-state.

To be sure, this scenario likely represents the

exception and not the norm; as this record attests, the vast

majority of funeral directors who obtain a license to practice

in Pennsylvania will no doubt choose to reside in the

Commonwealth because of convenience or economic

necessity. However, this does not evidence any burden on

interstate commerce nor discrimination against out-of-state

operators. Rather, there is nothing on this record to suggest

that this is a reflection of anything other than the nature of the

26

funeral business. “The practice of mortuary science is,” after

all, “inherently a local profession.” Brown, 561 F.3d at 363.

Moreover, as we have explained, “virtually all state

regulation involves increased costs for those doing business

within the state, including out-of-state interests doing

business in the state . . . . In this absolute sense, virtually all

state regulation ‘burdens’ interstate commerce.” Norfolk S.

Corp., 822 F.2d at 406. Thus, our examination of a statute’s

burden on interstate commerce must focus on whether

regulatory scheme results in an excessive burden on interstate

commerce. That inquiry is informed by whether a State has

“unjustifiably [] discriminate[d] against or burden[ed] the

interstate flow of articles of commerce.” Or. Waste Sys., Inc.

v. Dep’t of Envi. Quality of State of Or., 511 U.S. 93, 98

(1994).

We do not believe that the licensing requirements of

the FDL run afoul of that limitation. The State has made a

rational decision that consumers in need of funeral services

are better served by licensed individuals who, in the usual

case, are not shielded by the cloak of corporate ownership.

Cf. N.D. State Bd. of Pharma. v. Snyder’s Drug Stores, Inc.,

414 U.S. 156, 166-67 (1973) (“‘A standing criticism of the

use of corporations in business is that it causes such business

to be owned by people who do not know anything about it.’”

(quoting Louis K. Liggett Co. v. Baldridge, 278 U.S. 105,

114-15 (1928))); see also Brown, 561 F.3d at 367. We cannot

“accept [the] notion that the Commerce Clause protects the

particular structure or methods of operation in a retail market

. . . . [T]he Clause protects the interstate market, not

particular interstate firms, from prohibitive or burdensome

regulations.” Exxon Corp. v. Governor of Md., 437 U.S. 117,

127-28 (1978); see also McBurney v. Young, 667 F.3d 454,

469 (4th Cir. 2012) (rejecting dormant Commerce Clause

challenge where state law “prevent[ed] [plaintiff] from using

his ‘chosen way of doing business,’ but [did] not prevent him

from engaging in business in the [State]”).

Similarly, although Pennsylvania has carved out

limited exceptions to its own rule by allowing unlicensed

family members to participate in the ownership of a funeral

home, those exceptions—enacted with the twin purposes of

27

ensuring that a funeral establishment continues to serve the

community after the death of a licensed funeral director and

protecting the deceased’s director’s family—do not impose

burdens (excessive or otherwise) on the flow of interstate

commerce. We therefore conclude that the District Court

erred in ruling that that the FDL’s licensing and ownership

restrictions violate the dormant Commerce Clause.

2. Preparation Room Requirement

Section 7 of the FDL provides that “every

establishment in which the profession of funeral directing is

carried on shall include a preparation room, containing

instruments and supplies for the preparation and embalming

of human bodies.” 63 Pa. Stat. Ann. § 479.7. The Plaintiffs

claim that this provision violates the dormant Commerce

Clause by protecting established in-state funeral homes at the

expense of out-of-state interests seeking to enter the market.

According to Plaintiffs, the preparation room requirement

deprives out-of-state competitors of any competitive

advantage that they could otherwise gain from consolidating

embalming operations in one centralized facility from which

they could service other locations. 12

Here again, the Plaintiffs’ challenge ignores the fact

that any impediments arising from the preparation room

requirement burden all funeral directors operating in

Pennsylvania. Out-of-state entities are not specifically

targeted, deprived of a competitive advantage, nor afforded a

competitive advantage compared to Pennsylvania businesses.

See Cloverland II, 462 F.3d at 263; see also Town of Southold

v. Town of E. Hampton, 477 F.3d 38, 49 (2d Cir. 2007).

Indeed, to the extent that the preparation room requirement

has an effect on interstate commerce, it is incidental at most.

Consequently, the provision will only violate the dormant

Commerce Clause if it does not survive Pike balancing—i.e.,

if its burdens on interstate commerce “clearly outweigh” its

putative local benefits. See Dep’t of Revenue of Ky., 553 U.S.

at 353.

12

The Plaintiffs do not allege that the FDL’s preparation room requirement is

discriminatory on its face, but in its operation.

28

The “burden” that the preparation room requirement

imposes on interstate commerce consists of the cost of

equipping each funeral establishment with a preparation room

and the resulting impediment that arises from requiring

“centralized” embalming facilities. We do not doubt that

these burdens can be significant. 13 However, they are not so

significant as to “clearly outweigh” the State’s asserted

interests in minimizing the time between death and

embalming, reassuring customers that the remains of their

loved ones will be in the funeral home’s custody at all times,

minimizing the possibility of accidents in-transit between

embalming facilities, and ensuring accountability.

Moreover, although the Plaintiffs make much of the

State’s apparent admission that the preparation room

requirement is either unnecessary or unduly burdensome,

Plaintiffs fail to realize that the concession is without

constitutional significance. Specifically, the Plaintiffs point

to a 2008 legislative initiative in which the Board advocated

for the repeal of the preparation room requirement because of

the economic benefits of dispensing with the policy. The

Plaintiffs also highlight a 1994 Audit Report, which said that

requiring each funeral home to have its own preparation room

was “burdensome and unnecessary” and noted the resulting

additional costs to funeral directors and consumers. J.A. 846.

There are two reasons why this concession lacks the

constitutional significance that Plaintiffs attach to it. First,

the recommendation that the preparation room requirement be

repealed appears to have resulted from the requirement’s

intrastate economic impact. The Report is therefore not

particularly helpful to our focus on the burdens on interstate

commerce as required under Pike. See C&A Carbone, Inc. v.

Town of Clarkstown, N.Y., 511 U.S. 383, 430 (1994)

(“[L]ocal burdens are not the focus of the dormant Commerce

Clause . . . .”). Second—and more importantly—neither the

Board’s views in the above-referenced 2008 legislative

initiative nor the Audit Report’s recommendation to repeal

the preparation room requirement were enacted into law.

Thus, notwithstanding any reservations that some

13

The Plaintiffs estimate the costs of establishing a preparation room to be

approximately $220,000 to a funeral home during its first year.

29

Pennsylvania officials might have expressed in the past, the

preparation room requirement remains the law of

Pennsylvania. 14

3. Place of Practice and Full-Time Supervisor

Requirement

Section 7 of the FDL provides that a “license shall

authorize the conduct of the [funeral directing] profession at

the particular place of practice thereon and no other.” 63 Pa.

Stat. Ann. § 479.7. Somewhat confusingly, this section also

provides that a funeral director is free to “assist another duly

licensed person, partnership or corporation[.]” Presumably,

this applies to assisting at another branch location. Id. In

addition, Section 8(e) mandates that each branch location

must retain a licensed funeral director as a “full-time

supervisor.” Id. 479.8(e). However, a funeral director may

not supervise more than one location. Id. § 479.2(11). In

Counts V and VI of the amended complaint, the Plaintiffs

alleged that both the FDL’s “place-of-practice” restrictions

and full-time supervisor requirement violate the dormant

Commerce Clause. Once again, the District Court agreed.

See Heffner, 866 F. Supp. 2d at 397-99.

The Plaintiffs claim that these provisions facially

discriminate against out-of-state interests and must therefore

be subjected to heightened scrutiny. They allege that, under

the place-of-practice provision, a funeral director who

practices at one location in another state would be precluded

from practicing in Pennsylvania because that would constitute

practicing at a second location. According to the Plaintiffs, a

14

In addition, the opinions that the Board may have expressed in the past in its

capacity as an administrative arm of the Commonwealth may inform judicial

inquiry into whether the full-time supervisor requirement excessively burdens

interstate commerce, but it does not end it. The 2008 legislative initiative

simply does not have the force of Commonwealth law. Unlike a statute or

Board-issued regulation, it does not embody official Commonwealth policy, but

only the views that the Board saw fit to communicate to the Pennsylvania

legislature at a particular time. See Shannon v. United States, 512 U.S. 573, 584

(1994) (“‘[C]ourts have no authority to enforce a principle gleaned solely from

legislative history that has no statutory reference point.’” (quoting Int’l Bhd. of

Elec. Workers, Local Union 474 v. NLRB, 814 F.2d 697, 712 (1987) (alterations

omitted))); see also Abrego v. Dow Chem. Co., 443 F.3d 676, 686 (9th Cir.

2006) (per curiam) (discounting importance of legislative silence “coupled with

a sentence in a legislative committee report untethered to any statutory

language”).

30

funeral director who manages a location in another state

would be similarly barred from obtaining a funeral supervisor

license in Pennsylvania. Plaintiffs’ argument is supported by

a letter from the Board denying a New Jersey applicant’s

request for a funeral supervisor license on these grounds. J.A.

1455.

We decline to adopt Plaintiffs’ reasoning as to these

provisions. We recognize that the FDL’s place-of-practice

restriction and full-time supervisor requirement compel a

funeral director to relinquish one operating license in favor of

another, should he or she wish to supervise another location.

§ 479.2(11). However, we disagree that this provision

facially discriminates against out-of-state interests. Having to

surrender an out- of-state license to practice in Pennsylvania

is simply the result of the operation of the one-and-a-branch

rule, and the limits it places on being an owner and/or

supervisor of a funeral home. Moreover, Pennsylvania

residents also have to surrender an existing license in order to

operate more than the two establishments allowed under the

restriction. Thus, it makes no difference where the funeral

homes or owners are located.

E. Substantive Due Process

The Fourteenth Amendment Due Process Clause prohibits the states

from “depriv[ing] any person of life, liberty, or property, without due process of

law.” U.S. Const. Amend. XIV, § 1. The prohibition has both a procedural and

substantive component. See Planned Parenthood of S.E. Pa. v. Casey, 505 U.S.

833, 846 (1992); Troxel v. Granville, 530 U.S. 57, 65 (2000). The Plaintiffs

have continually alleged that several of the FDL’s provisions violate their right

to substantive due process.

Unless a legislative enactment abridges “certain fundamental rights and

liberty interests,” Washington v. Glucksberg, 521 U.S. 702, 720 (1997), we

apply a more lenient “rational basis” inquiry, Roe v. Wade, 410 U.S. 113, 173

(1973), in determining the statute’s constitutionality. Here, Plaintiffs concede

that we should apply rational basis review to their substantive due process

challenge.

Under rational basis review, “‘a statute withstands a substantive due

process challenge if the state identifies a legitimate state interest that the

legislature could rationally conclude was served by the statute.’” Alexander v.

Whitman, 114 F.3d 1392, 1403 (3d Cir. 1997) (quoting Sammon v. N.J. Bd. of

Med. Exam’rs, 66 F.3d 639, 645 (3d Cir. 1995)). We have repeatedly warned

that rational basis review is by no means “toothless”—“[a] necessary corollary

to and implication of rationality as a test is that there will be situations where

proffered reasons are not rational.” Doe v. Pa. Bd. of Prob. & Parole, 513 F.3d

95, 112 n.9 (3d Cir. 2009); see also Murillo v. Bambrick, 681 F.2d 898, 905 n.15

31

(3d Cir. 1982). Nevertheless, rational basis review allows legislative choices

considerable latitude. See FCC v. Beach Commc’ns, Inc., 508 U.S. 307, 315

(1993). A governmental interest that is asserted to defend against a substantive

due process challenge need only be plausible to pass constitutional muster; we

do not second-guess legislative choices or inquire into whether the stated motive

actually motivated the legislation. See United States R.R. Ret. Bd. v. Fritz, 449

U.S. 166, 179 (1980) (“Where . . . there are plausible reasons for Congress’

action, our inquiry is at an end. It is . . . ‘constitutionally irrelevant whether this

reasoning in fact underlay the legislative decision’ . . . .” (quoting Flemming v.

Nestor, 363 U.S. 603, 612 (1960))).

Thus, as we recently explained, “‘the rationality requirement [is]

largely equivalent to a strong presumption of constitutionality.’” Connelly v.

Steel Valley Sch. Dist., 706 F.3d 209, 213 (3d Cir. 2013) (quoting Laurence H.

Tribe, American Constitutional Law § 16-2, at 1442-43 (2d ed. 1988)).

1. “One-and-a-Branch” Limitation

In addition to the dormant Commerce Clause challenge discussed

above, the Plaintiffs also attack the one-and-a-branch limitation on substantive

due process grounds. The Board argues that the limitation advances five

legitimate state interests. Those interests are: (1) diversifying the ownership of

funeral establishments; (2) preventing a single firm from dominating a local

market through “clustering”; (3) limiting the damage to consumers and a

community from the possible failure of a single firm; (4) promoting familiarity

and accountability between funeral directors and their consumers; and (5)

preventing licensees from being “spread too thin.” We perceive no substantive

difference in the first three goals and will treat them as the same legislative

objective for purposes of our analysis. 15

These goals are clearly legitimate. “[A] state has a ‘legitimate interest

in protecting the health, safety and welfare of its citizens through regulation of

the funeral profession[;]’” Brown, 561 F.3d at 368 (quoting Guardian Plans,

870 F.2d at 126), and the Pennsylvania legislature could have reasonably

concluded that these objectives advance those interests. Accordingly, the one-

and-a-branch limitation will survive rational basis review unless the State

legislature could not rationally conclude that the provision furthered these ends.

The Plaintiffs make several arguments to support their contention that

the one-and-a-branch restriction does not reasonably advance the State’s stated

objectives. For example, they claim that restricting the number of locations that

a licensee may own (to two) does not rationally prevent a funeral director from

being “spread too thin,” since s/he may still have to perform thousands of

funerals a year at the locations that are licensed. The Plaintiffs also note that a

funeral director could effectively own a potentially unlimited number of homes

by employing loopholes like the so-called “Pinkerton rule,” thereby allowing a

single firm to de facto dominate a local market and thus undermine the goal of

limiting the damage to consumers when a firm that is “too big to fail” does, in

fact, fail. 16

15

Diversification is merely one of the ways that the Commonwealth is trying to

advance the second and third objectives.

16

As we explained above, the “Pinkerton rule” refers to the practice of allowing

a licensee to circumvent the one-and-a-branch restriction by transferring his or

her stock in a funeral establishment to another entity or individual while

32

However, the one-and-a-branch limitation is not constitutionally infirm

merely because its response to legitimate governmental concerns is imprecise

and imperfect. “[U]nder the deferential standard of review applied in

substantive due process challenges to economic legislation there is no need for

mathematical precision in the fit between justification and means.” Concrete

Pipe & Prods. of Cal., Inc. v. Constr. Laborers Pension Trust for S. Cal., 508

U.S. 602, 639 (1993). Therefore, the one-and-a-branch limitation can survive

our substantive due process inquiry even though it neither targets all applicable

threats nor succeeds in preventing all of them. Despite the limitation’s

imperfection, the State could have rationally concluded that limiting licensees to

owning funeral businesses at no more than two locations would limit the number

of consumers that a director could service and avoid the problems that could

arise when a funeral director is “spread too thin.” All that is necessary is that

the selected means is rationally linked to the stated ends. See Stretton v.

Disciplinary Bd. of Supreme Court of Pa., 944 F.2d 137, 146 (3d Cir. 1991) (“A

state is permitted to take steps . . . that only partially solve a problem without

totally eradicating it.”).

Similarly, the fact that Pennsylvania’s current statutory and regulatory

scheme does not prevent licensees from sidestepping the limitation by seizing

upon loopholes such as the “Pinkerton rule” is not constitutionally fatal. “‘A

legislature need not . . . risk [] losing an entire remedial scheme simply because

it failed, through inadvertence or otherwise, to cover every evil that might

conceivably have been attacked.’” Parker v. Conway, 581 F.3d 198, 202 (3d

Cir. 2009) (quoting McDonald v. Bd. of Election Comm’rs, 394 U.S. 802, 809

(1969)). We therefore conclude that the FDL’s one-and-a-branch limitation

easily weathers scrutiny under rational basis review.

2. Licensing Restrictions

The Plaintiffs also raise a substantive due process challenge to the other

restrictions in the FDL that we have discussed above as part of our dormant

Commerce Clause discussion. Specifically, the Plaintiffs argue that the State

acted irrationally in limiting ownership of funeral homes to licensed funeral

directors while barring general business corporations from obtaining the

required license. 63 Pa. Stat. Ann. § 479.8(a). Here, as before, the Plaintiffs

highlight the FDL’s “exceptions,” which allow the administrators of a deceased

licensee’s estate and his or her surviving spouse and family members to possess

an ownership interest in a funeral establishment under specific circumstances,

whether or not they possess a funeral directors’ license. 17 Plaintiffs contend that

these exceptions belie the Board’s asserted interest in promoting consumer

protection, accountability, competency, trust, and accessibility. Rather,

retaining ownership over the establishment’s assets. Since the Board has

recognized that the FDL does not restrict who may own or lease the assets

necessary to operate a funeral home, this “loophole” would presumably allow a

licensee to de facto “own” an unlimited number of funeral homes within the

Commonwealth.

17

As explained, administrators of a licensee’s estate may possess an ownership

interest for a maximum of three years. Widows and widowers may own an

interest in a funeral home for an indefinite period so long as they remain

unmarried. Section 8(b)(4) of the FDL allows immediate family members of a

deceased licensed funeral director or shareholder to own shares of an RBC.

33

according to Plaintiffs, these exceptions demonstrate that the licensing

requirement is not rationally related to those objectives.

The argument incorrectly presupposes that Pennsylvania’s response to

its stated objectives had to be limited to addressing a single objective at a time.

An otherwise rational legislative response to a given concern cannot be

invalidated under the Due Process Clause merely because the chosen solution

creates other problems while addressing the original concern. Rather,

legislatures are generally free to consider and balance several interests in

carrying out their legislative responsibilities. See, e.g., Salazar v. Buono, 130 S.

Ct. 1803, 1817 (2010) (noting “Congress’s prerogative to balance opposing

interests”); Dennis v. United States, 341 U.S. 494, 539-40 (1951) (“How best to

reconcile competing interests is the business of legislatures . . . .”); see also Pace

Res., Inc. v. Shrewsbury Twp., 808 F.2d 1023, 1035 (3d Cir. 1987) (noting

“process of democratic political decision-making often entails [] accommodation

of competing interests”). Accordingly, where, as here, a State does not infringe

upon fundamental rights or interests, it may address multiple or even competing

objectives as long as its actions are rationally related to legitimate legislative

objectives.

Throughout this litigation, the Board has consistently reasoned that the

exceptions to the FDL’s licensing requirement address Pennsylvania’s distinct

interest in protecting the livelihood of a licensed director’s surviving family

members and the interests of the community in a funeral home’s continued

operation following the death of the owner. It is not at all difficult to see how

the licensing exceptions that the Plaintiffs have chosen to attack address that

legitimate governmental interest – albeit imperfectly. In upholding Maryland’s

Mortician’s Act against a similar Due Process challenge in Brown v. Hovatter,

the Court explained “exemptions” to Maryland’s licensing requirement that

allowed unlicensed surviving spouses and executors of deceased licensed

morticians to possess an ownership in funeral establishments as follows:

[C]orporations that historically held

licenses in the funeral business were allowed

to continue to hold licenses because the

General Assembly wanted to protect

reliance interests of family members. For a

similar reason, spouses of deceased

licensees are exempted from being licensed

to allow the spouse, who presumably was

already involved in the affairs of the

business, to continue the business. The Act

also provides an exemption for executors of

licensees, allowing the temporary operation

of the funeral establishment to wind down

the affairs of the business. The fact that the

General Assembly created these rational

exemptions does not undermine the overall

rationality of the Morticians Act based on its

relationship to a legitimate government

purpose.

561 F.3d at 369.

We agree. As in Brown, the Pennsylvania legislature was free to

consider the reliance interests of communities throughout the state as well as

34

those of the deceased funeral directors’ family in crafting the limitations

contained in the FDL. The means chosen is a rational (though perhaps

imperfect) means of achieving those ends, and Section 8(a) of the FDL does not

violate substantive due process. 18

3. “Place-of-practice” and Full-Time Supervisor

Requirement

As explained above, a license issued pursuant to the FDL only

authorizes a licensee to practice at one primary location and one branch location;

each location must have its own full-time and licensed supervisor. 63 Pa. Stat.

Ann. §§ 479.7, 479.8(e). The District Court concluded that both provisions

denied Plaintiffs’ right to substantive due process because the Board’s asserted

interests in ensuring “competency, public health, accountability, and

competition [were] not rationally related to the [FDL’s] restrictions . . . .”

Heffner, 866 F. Supp. 2d at 400.

On appeal, the Plaintiffs concede the State has a legitimate concern in

safeguarding these interests, but they argue that the legislature could not have

rationally believed that the place-of-practice restriction and full-time supervisor

requirement would serve that purpose. 19 Once again, we disagree.

We haven repeatedly stressed the obvious; Pennsylvania clearly has a

legitimate interest in protecting consumers who must venture into the potentially

exploitative market for funeral services. See Brown, 561 F.3d at 368. As the

Court explained in Kleese v. Pa. State Bd. Of Funeral Dirs , 738 A.2d 523, 526

(Pa. Cmwlth. 1999), “[g]enerally, the time in which the consumer seeks the

services of a funeral establishment is a very emotional and vulnerable time as a

loved one has most likely just passed away leaving the consumer vulnerable and

more susceptible to being deceived or cheated.” Limiting licensees to one

primary location and one branch, each with its own licensed supervisor, clearly

helps to protect against funeral directors being “spread too thin” to provide

personal, caring, and sensitive services to those who are mourning the loss of a

loved one. Funeral businesses clearly must operate with a sensitivity and

personalized service unlike few other business we can think of, and

Pennsylvania’s legislature can hardly be faulted for imposing restrictions that

are intended to address the unique concerns in that industry.

18

For the same reasons, we also reject the Plaintiffs’ claim that Section 8(e) of

the FDL is unconstitutional. That provision provides that a licensed shareholder

of an RBC may bequeath his or her shares or stock in the restricted corporation

to immediate family members.

19

The Plaintiffs correctly note that the Board has not articulated benefits or

legitimate purposes that specifically underlie the place-of-practice restriction in

its briefing to us. Plaintiffs’ Br. at 35. However, the Board’s brief does assert

that the FDL’s “operational provisions”—which it defines to include the FDL’s

place-of-practice restriction, full-time supervisor requirement, preparation room

requirement, and restrictions on food service—are all in place to further “a

variety of legitimate interests such as quality assurance, accountability, and

health and safety.” Appellant’s Br. at 16. In any case, we note that, as the party

challenging the Commonwealth’s statute, the Plaintiffs bear the burden of

refuting “‘every conceivable basis which might support it,’” Beach Commc’ns,

Inc., 508 U.S. at 315 (emphasis added), not just those that the Commonwealth

may assert, see Connelly, 706 F.3d at 216.

35

Likewise, the place-of-practice requirement is a rational means of

advancing accountability by ensuring that a funeral director is more readily

accessible to answer questions from grieving and particularly vulnerable

consumers. The requirement of a full-time supervisor is so obviously reasonable

as to negate the need for in-depth discussion or inquiry. We merely note that the

Pennsylvania General Assembly could have rationally believed that requiring a

licensed funeral director to oversee each funeral home advances the goal of

maintaining professional standards at funeral establishments, and, by extension,

safeguards public health, safety, and welfare. It also increases the likelihood

that vulnerable consumers will be able to readily communicate with someone

who is responsible for providing services for a deceased loved one. It is

reasonable to assume that the individuals who have met the State’s licensing

requirements are much better equipped to supervise funeral home operations

than an unlicensed entrepreneur would be. Cf. Guardian Plans Inc., 870 F.2d at

126 (noting legislature “could have rationally determined that keeping the

arrangement of funerals in the hands of licensed funeral professionals would

benefit the public by ensuring competence in funeral arrangement”).

We are similarly unpersuaded by the Plaintiffs’ suggestion that a

funeral home that routinely performs 1,000 funerals each year and another that

performs only twenty-five would each comply with the requirement so long as

they hired a single supervisor. That reality does not alter the result of our

rational basis review. The State could have adopted a different scheme that

would have required funeral homes that routinely perform a high volume of

funerals each year to retain multiple supervisors. However, as we explained

above, “[a] legislative policy decision about where [] line[s] should be

drawn . . . ‘[is] not legally relevant under substantive due process

jurisprudence.’” Alexander, 114 F.3d at 1406 (quoting Sammon, 66 F.3d at

647)).

4. The Preparation Room Requirement

The Plaintiffs also argue that requiring each funeral home to include a

preparation room for on-site embalming is irrational because neither the FDL

nor the Board’s regulations require that a funeral establishment actually use this

room. 20 According to Plaintiffs, the preparation room requirement is not

practical and it hinders funeral directors’ ability to prepare bodies in a more

cost-effective centralized location. Plaintiffs explain that centralizing this

service would achieve economies of scale that would benefit consumers and

allow funeral directors to service other locations as part of a “cluster.” Plaintiffs

contend that requiring each funeral home to have its own preparation room

(which may not even be used) thus imposes significant expense on consumers

with little (if any) corresponding benefit. The District Court agreed that “there

is no rational relationship between providing access to preparation rooms and

requiring that funeral homes expend unnecessary funds on the same when the

Board [has] recognize[d] that many existing preparation rooms remain []

20

Pennsylvania law does not require that all deceased remains be embalmed.

Instead, families can choose whether or not to embalm a deceased person. See,

e.g., 49 Pa. Code § 13.201(6)(i) (“Human remains held 24 hours beyond death

shall be embalmed or sealed in a container that will not allow fumes or odors to

escape or be kept under refrigeration, if this does not conflict with a religious

belief or medical examination.”).

36

unused, and . . . costs are merely passed on to consumers.” See Heffner, 866 F.

Supp. 2d at 402.

The Board once again asserts several purportedly legitimate interests

that support this requirement. The Board claims that this requirement: (1)

minimizes the time between death and embalming, leading to better results; (2)

reassures families regarding the safeguarding of their loved ones; (3) minimizes

the possibilities for accidents in transit and mix-ups at separate embalming

facilities; and (4) ensures that the funeral director with whom the family

communicates is directly accountable for the results of his/her work.

The record contains an uncontested expert report which shows that

Pennsylvania’s requirement of an on-site embalming preparation room at each

funeral establishment is consistent with the regulatory scheme of at least

eighteen other states – each of which had a similar requirement as of the latter-

half of 2010. 21 See J.A. 635; see also Powers v. Harris, 379 F.3d 1208, 1212-13

(10th Cir. 2004) (noting Oklahoma had similar preparation room requirement as

of date case decided). Although a majority of states have chosen not to adopt

this approach and either allow funeral directors to “cluster” embalming

operations under an economy of scale model or exempt certain funeral

establishments from having a preparation room, the costs or benefits of these

approaches are beyond the parameters of our due process inquiry. A chosen

legislative scheme need not be the most efficient or even the most practical to be

reasonable under the Due Process Clause. See Williamson v. Lee Optical of

Okla., 348 U.S. 483, 487-88 (1955) (“[A] law need not be in every respect

logically consistent with its aims to be constitutional. It is enough that there is

an evil at hand for correction, and that it might be thought that the particular

legislative measure was a rational way to correct it.”). Moreover, the

rationale advanced by the Board to support the preparation room requirement

seems so patently reasonable as to eliminate the need for much discussion. See

Ferguson v. Skrupa, 372 U.S. 726, 729 (1963). As long as the State has chosen

a rational method of addressing its concerns, our inquiry is at an end. See id.

(“[I]t is up to legislatures, not courts, to decide on the wisdom and utility of

legislation.”).

Indeed, even if we credit the Plaintiffs’ assertion—and the Board’s

concession in the 2008 legislative materials that many preparation rooms built to

comply with the FDL are never actually used for embalming—the result of our

rational basis review would be the same. The Constitution does not protect

against inefficient, wasteful, or meaningless legislation. “[A] law may exact a

needless, wasteful requirement in many cases. But it is for the legislature, not

the courts, to balance the advantages and disadvantages of the [] requirement.”

Id. at 487. Consequently, we hold that the District Court erred in concluding

that the separate embalming room requirement violates the Plaintiffs’ right to

substantive due process.

5. Restriction on Serving Food

21

According to the Board’s submissions, the following states, in addition to

Pennsylvania, all required funeral homes to each contain a preparation room as

of late 2010: Alabama, Arizona, Connecticut, Delaware, Georgia, Idaho,

Massachusetts, Mississippi, Minnesota, Nevada, New Hampshire, New Jersey,

New Mexico, New York, North Carolina, South Dakota, Tennessee, and

Wyoming. J.A. 635.

37

In addition to the preparation room requirement, Section 7 of the FDL

also prohibits funeral establishments from serving “food or intoxicating

beverages.” 63 Pa. Stat. Ann. § 479.7. The provision does allow funeral

establishments to serve customers non-alcoholic beverages, but only in “a

separate room not used for the preparation of funeral service.” Id.

The District Court concluded that this restriction also violated

substantive due process. See Heffner, 866 F. Supp. 2d at 403-04. The Court

based its ruling, in part, on a proposed 2009 regulation in which the Board

recommended repeal of these restrictions. The District Court explained its

rejection of the Board’s argument that the food prohibition furthered the

government’s legitimate interest in promoting public health as follows: “[the

Board] fail[ed] to explain how the use of [] chemicals in one part [of the facility]

. . . would necessarily contaminate other areas of the establishment providing

food service . . .” Id. at 404. The Court relied on the fact that bodies are

prepared in one area of a funeral establishment and food is served elsewhere.

Ultimately, the District Court concluded that the restriction did not survive

rational basis review because: (1) the fact that non-alcoholic beverages could be

served but food could not presented a “distinction without a difference,” id., and

(2) it was irrational for the FDL to allow food to be served in certain areas

within the same structure so long as those areas were not designated as parts of a

“funeral establishment,” id.

On appeal, the Board reiterates its position that “public health” is a

legitimate government interest justifying the FDL’s ban on food service at

funeral establishments. The Board argues that the legislature could have

reasonably concluded that food should not be served where the embalming of

human bodies is occurring. The Board also argues that the ban on serving food

furthers the government’s interest in upholding the unique nature and solemnity

of funeral services.

Whether one agrees with the Board’s position, and assuming arguendo

that the Board’s reasoning is erroneous, it is exceedingly difficult to understand

how it could be viewed as unreasonable. The first prong of the rational basis

test is easily satisfied by the Board’s asserted interest in public health. 22 See

Watson v. Maryland, 218 U.S. 173, 176 (1910) (“It is too well settled to require

discussion . . . that the police power of the states extends to the regulation of

certain trades and callings, particularly those which closely concern the public

health.”). We fail to see anything irrational in the legislative decision to prohibit

the service of food and alcoholic beverages in areas designated as “funeral

establishments” under the FDL. 23 It may well be that the legislature’s concern

22

Because we believe that the Commonwealth’s asserted interest in protecting

public health is legitimate, we do not pass judgment on whether the Board’s

second asserted interest—i.e., “preserving the unique nature and solemnity of

the funeral service”—also qualifies as a legitimate government interest under

substantive due process review. See N.J. Retail Merchs. Ass’n, 669 F.3d at 398

(noting statute “will pass rational basis examination” where one of several stated

purposes was not legitimate “as long as it was not the only legitimate purpose

underlying the legislation”).

23

Indeed, the authority of states to regulate and tightly restrict the availability of

alcohol is far too evident to require either citation or discussion, and

Pennsylvania’s restrictions on the availability of alcohol are particularly strict.

See generally 47 Pa. Stat. §§ 4-491– 494. However, such tight controls (of

38

had more force in an earlier time when refrigeration and sanitation were not as

developed as they are today, outdoor temperatures could more readily affect

sanitation as well as food storage and preservation, and attitudes about serving

and consuming alcohol were nowhere near as liberal. Thus, the passage of time,

and the advanced technology used in modern air conditioning and ventilation

systems suggest that the Pennsylvania General Assembly may want to revisit the

need for some of these restrictions as the Board has suggested.

However, there is a fundamental difference between legislative

enactments that may be archaic and those that are irrational for purposes of our

substantive due process inquiry. These restrictions may now be overly cautious,

but excess caution does not rise to the level of a due process deprivation if it is

reasonably intended to advance a legitimate governmental interest. It is not up

to a court to determine if the State has struck the perfect balance of advantage

and disadvantage in addressing its interest, nor should we compel legislatures to

reexamine restrictions that may seem better suited for an earlier time. See

Heller v. Doe, 509 U.S. 312, 321 (1993) (“[C]ourts are compelled under

rational-basis review to accept a legislature’s generalizations even when there is

an imperfect fit between means and ends.”). The Constitution is not a lever that

we can use to overcome legislative inertia. This restriction, though perhaps

antiquated, is nevertheless sufficiently reasonable to survive rational basis

review.

6. Trust Requirement

Funeral directors in Pennsylvania routinely sell and provide “pre-need”

funeral services – i.e., services selected in advance of a person’s death. See

generally Walker v. Flitton, 364 F. Supp. 2d 503 (M.D. Pa. 2005). Because

these contracts require advance payment for goods and services associated with

funeral homes, Pennsylvania (like many other states) imposes trust requirements

on pre-need sellers. 24 Specifically, the FDL requires that a funeral director who

enters into a pre-need contract deposit 100% of the proceeds accepted for

“funeral services,” such as embalming, into an escrow account or trust. 63 Pa.

Stat. Ann. § 479.13(c). 25

which the FDL is but one example) do not rise to the level of a due process

violation.

24

See generally Judith A. Frank, Preneed Funeral Plans: The Case for

Uniformity, 4 Elder L.J.1, 7-8 (1996) (discussing trust arrangement as “most

common form of funding” in preneed funeral contract context and collecting

States’ statutes establishing trust requirement).

25

In relevant part, the FDL states:

No person other than a licensed funeral

director shall, directly or indirectly, or

through an agent, offer to or enter into a

contract with a living person to render

funeral services to such person when

needed. If any such licensed funeral director

shall accept any money for such contracts,

he shall . . . either deposit the same in an

escrow account in, or transfer the same in

trust to, a banking institution in

[Pennsylvania], conditioned upon its

withdrawal or disbursement only for the

39

This trust arrangement is confusing because another statute, the

Pennsylvania Future Interment Act (“FIA”), only requires that 70% of the sales

price of funeral-related property—e.g., caskets, vaults, or urns— be held in trust.

Id. § 480.1. This creates an obvious problem for funeral directors who provide

pre-need services. In an attempt to reconcile the tension in these statutes, the

Board took the position that funeral directors were only required to hold in trust

70% of the sales price customers paid for pre-need funeral merchandise, but that

they had to hold 100% of pre-need monies for other “funeral services” in trust.

In Pennsylvania Funeral Directors Ass’n v. Bd. of

Funeral Directors, 494 A.2d 67 (Pa. Cmwlth. 1985), aff’d

mem., 511 A.2d 763 (Pa. 1986) (“PFDA”), the

Commonwealth Court of Pennsylvania disagreed with the

Board’s position and held that the FIA “did not abrogate the

one hundred per cent trust requirement in . . . the [FDL].” Id.

at 72. The Board thereafter adopted the view that a

merchandising company that is not itself a licensee but is

nevertheless owned in part by a licensed funeral director may

trust at the FIA-prescribed rate of 70%, so long as the

company is not used to evade the FDL’s requirements.

In challenging the trusting provisions, Plaintiffs argue

that requiring licensed funeral directors to hold in trust 100%

of pre-need monies received does not further the State’s

asserted interest in consumer protection, and the District

Court agreed. See Heffner, 866 F. Supp. 2d at 423. However,

the fact that Pennsylvania’s statutory scheme restricts

individuals whom the State has certified as experts, while

exempting unlicensed merchants, does not necessarily result

in an irrational (and therefore unconstitutional) scheme. As

the Commonwealth Court explained in PFDA, Pennsylvania’s

legislature could have reasonably “believed that the public’s

perception of funeral directors as licensed professionals

necessitated stricter standards to protect consumers.” 494

A.2d at 71.

In addition, the Board correctly notes that the trust

requirements also pass constitutional muster under the

separate interpretation that it has adopted and endorsed. See

Skilling v. United States, 130. S. Ct. 2896, 2929 (2010)

(“‘[E]very reasonable construction must be resorted to, in

purposes for which such money was

accepted.

63 Pa. Stat. Ann. § 479.13(c).

40

order to save a statute from unconstitutionality.’” (quoting

Hooper v. California, 155 U.S. 648, 657 (1895))). As we

have just explained, after PFDA was decided, the Board

adopted the view that funeral directors with an ownership

interest in a merchandising company may sell pre-need

funeral property if their company is owned and operated

“separate and apart” from a funeral home or establishment.

Plaintiffs concede that the Board explained its position in a

1991 memorandum, which outlined a series of factors that

could be used to determine whether a merchandising

company’s operations are sufficiently separate from those of

a funeral establishment. J.A. 1144-45. 26

Moreover, the potential for consumer abuse and fraud

in any scheme that allows merchants to accept payment for

goods and services that will not be tendered until some future

date is painfully obvious. This is especially true where, as

here, the date for the vendor’s performance may well be

decades after accepting payment. Requiring proceeds

accepted under such an arrangement to be placed in trust is

not only logical, but imperative if vulnerable consumers are

to be protected from the unscrupulous (or financially

“strapped”) vendor. Cf. Nat’l Funeral Servs., Inc. v.

Rockefeller, 870 F.2d 136, 143 n.11 (4th Cir. 1989) (relying

upon attorney solicitation Supreme Court cases to uphold

West Virginia’s ban on door-to-door and telephone

solicitation for funeral pre-need contracts and noting that,

“[i]n both [contexts], an advocate trained in the art of

persuasion is trying to convince an emotionally vulnerable

layperson that he needs professional services”). The

requirements of the FDL and FIA are reasonable standing

alone. The Board’s attempt to resolve the tension between

26

Among the factors outlined in a memo authored by then-Board prosecutor

Kathleen Grossman are:

[A]re the pre-need sales merchandising

corporations . . . operated separate and apart

from the funeral business . . . .? Are there

two sets of bookkeeping records kept?

Separate advertising signs? Do the

corporations display signs for public view at

all? Which businesses display signs? Are

there separate entrances? How is the

building set up, i.e., a common vestibule

leading to separate suites?

J.A. 1145.

41

those two statutes may be awkward or even strained, but it is

not unreasonable and it is consistent with Pennsylvania’s

legitimate public interest. 27 Accordingly, we part with the

District Court’s conclusion that the trust requirement results

in a constitutional deprivation.

F. First Amendment

The Plaintiffs claim that the FDL’s restrictions on commercial speech

violate the First Amendment. It is long-settled that the First Amendment

protects commercial speech. See Va. Bd. of Pharma. v. Va. Citizens Consumer

Council, Inc., 425 U.S. 748, 765 (1976). Several arguments are subsumed in the

Plaintiffs’ First Amendment challenge, and we will discuss the merits of each of

these claims in turn.

1. Restriction on Use of Trade Names

Subject to limited exceptions, 28 Section 8 of the FDL requires that

funeral homes operate under the name of the current funeral director or that of a

predecessor. See 63 Pa. Stat. Ann. §§ 479.8(a), (b), (d), 479.9(a). 29 For

example, if a hypothetical funeral director named “Jane Smith” purchased the

“Johnson Funeral Home,” she would only be able to continue to operate the

establishment under its current name or as the “Smith Funeral Home.” The

Plaintiffs claim that this restriction on the use of trade names violates the First

Amendment.

a. Applicability of Central Hudson & Gas Electric Corp.’s

Test

At the outset, the parties dispute whether we should assess the merits of

the First Amendment claim under Central Hudson Gas & Electric Corp. v.

Public Service Commission, 447 U.S. 557 (1980), or whether Friedman v.

Rogers, 440 U.S. 1 (1979), controls.

In Friedman, the earlier of these two cases, the Supreme Court upheld a

Texas law that proscribed the practice of optometry under a trade name. See

Friedman, 440 U.S. at 3-4. The Court distinguished the use of trade names from

other types of “commercial speech” such as product or service advertisements

27

Indeed, although we do not hold that resolution of the tension between the

100% requirement in the FDL and the 70% requirement in the FIA necessitates

it, the Commonwealth could rationally have argued that the dangers inherent in

the deferral of performance that is endemic in pre-need contracts requires that

100% of the contract price be placed in trust to ensure performance under the

contract.

28

Section 9 of the FDL excepts funeral homes owned by “grandfathered” pre-

1935 corporations from this requirement. 63 Pa. Stat. Ann. § 479.9(a).

29

Even in that circumstance, funeral homes owned by a sole proprietor or

partnership that operate under the name of a predecessor funeral director must

disclose the name of the current owner in advertising. Id. § 479.8(a). Funeral

homes owned by an RBC or professional (pre-1935) corporation that operate

under a predecessor’s name must similarly disclose the name of the home’s

licensed supervisor. Id. §§ 479.8(b), (d).

42

by explaining that while the latter are “self-contained and explanatory,” a trade

name will generally have “no intrinsic meaning.” Id. at 12. The Court then

stated that because “ill-defined associations of trade names with price and

quality information can be manipulated by the users of trade names, there is a

significant possibility that trade names will be used to mislead the public.” Id. at

12-13. Given the State’s “substantial” interest in “protecting the public from the

deceptive and misleading use of [] trade names” and the Court’s conclusion that

the restriction only had “incidental effect on the content of the commercial

speech involved,” the Supreme Court rejected the plaintiffs’ challenge. Id. at

15-16. Not surprisingly, Pennsylvania urges us to apply Friedman because it is

more favorable to the State’s position than Central Hudson.

However, Friedman’s applicability and continued viability is not as

clear as the Commonwealth would have us believe because the Court

subsequently adopted a more detailed test for limitations on commercial speech

in Central Hudson. There, the Court explained that a court considering the

validity of a restriction on commercial speech must first ask whether the

commercial speech concerns unlawful activity or is misleading. 447 U.S. at

566. If the speech is neither, the reviewing court must then determine “whether

the asserted governmental interest is substantial.” Id. If it is, the third and

fourth prongs of the Central Hudson inquiry require a court to respectively

inquire “whether the regulation directly advances the governmental interest

asserted” and whether the regulation is “more extensive than is necessary to

serve that interest.” Id.

In subsequent cases, the Supreme Court has provided additional

guidance by explaining that—in the professional services context—commercial

speech that is actually misleading “may be prohibited entirely,” In re R.M.J.,

455 U.S. 191, 203 (1982), while potentially misleading speech may be regulated

but not entirely curtailed, id.

Although Pennsylvania does not urge us to wholly disregard the

Central Hudson test, it does suggest that Friedman is sufficiently on point to

resolve our inquiry in the Commonwealth’s favor and that we should avoid

parsing through the four prongs of Central Hudson. The State’s argument goes

too far.

As noted, Friedman predated the four-part Central Hudson test and the

latter distinction between commercial speech that is “actually misleading” and

that which is “potentially misleading.” See Wine & Spirits Retailers v. Rhode

Island, 481 F.3d 1, 8 (1st Cir. 2007) (“Since its decision in Friedman, the Court

has made a doctrinal refinement, distinguishing in the professional services

context between commercial speech that is inherently or actually misleading and

commercial speech that is only potentially misleading.”). Accordingly, even

where Friedman applies, federal courts commonly conduct an analysis within

the framework of the more “refined” and nuanced test set forth in Central

Hudson. See Alexander v. Cahill, 598 F.3d 79, 95-96 (2d Cir. 2010)

(considering Friedman’s applicability to challenge against certain New York

restrictions on attorney advertising as part of Central Hudson test); Wine &

Spirits Retailers, 481 F.3d at 8-9 (same). 30 Our inquiry will be thus be guided

by the more recent decision in Central Hudson.

30

Thus, the Central Hudson test would not apply if the Commonwealth could

show that the use of trade names in the funeral industry is either unlawful or

inherently misleading. See Wine & Spirits Retailers, 481 F.3d at 8 (“It is not

always necessary . . . to deal with each of the test’s four parts. In framing the

43

b. The Central Hudson Test

As noted, Central Hudson’s threshold requirement is that the regulated

speech concern lawful activity and not be misleading. Here, there is neither

evidence nor allegation that the use of trade names in the funeral industry would

either mask or facilitate illegal activity. Instead, Pennsylvania heavily relies on

Friedman to suggest that the use of trade names presents “numerous”

opportunities for deception of the public—e.g., by keeping a trade name despite

staff changes and freeing proprietors from relying on their personal reputation to

attract business.

We agree that Friedman underscored “the significant possibility that

trade names will be used to mislead the public” in the context of invalidating

Texas’s ban on trade names in the field of optometry. Friedman, 440 U.S. at 12.

However, the Board’s argument ignores the record that the Court’s analysis was

based on in Friedman. See Friedman, 440 U.S. at 13 (“The concerns of the

Texas Legislature about the deceptive and misleading uses of optometrical trade

names were not speculative or hypothetical, but were based on experience in

Texas with which the legislature was familiar . . . .”). Indeed, as other courts

have noted when considering challenges to an across-the-board ban on the use of

trade names, in Friedman Texas “marshaled substantially strong[] and []

specific evidence supporting its prohibition on trade names” in the field of

optometry. Alexander, 598 F.3d at 96. There has been no such showing here.

Moreover, while Friedman provides some support for the

Commonwealth’s position, the lack of record support for its parade of

hypothetical horribles suggests caution before concluding that trade names in the

funeral industry are sufficiently misleading to rest our analysis upon Friedman.

Instead, we conclude that the assignment of trade names to funeral homes is, at

best, potentially misleading, and we must therefore consider the remaining

prongs of the Central Hudson test.

Obviously the Board’s asserted government interest in providing

accurate information to the public is “substantial.” See Friedman, 440 U.S. at

15-16 (noting State’s interest in protecting public from deceptive and misleading

use of trade names in optometry industry is “substantial and well

demonstrated”). However, the FDL’s ban on the use of trade names in the

funeral industry cannot survive the limitations imposed under Central Hudson.

Under its requirements, “the government must demonstrate that the challenged

law ‘alleviates’ the cited harms ‘to a material degree.’” Pitt News v. Pappert,

379 F.3d 96, 107 (3d Cir. 2004) (quoting Fla. Bar v. Went For It, Inc., 515 U.S.

618, 624 (1995) (alterations omitted)).

That requirement is inconsistent with a statutory scheme that is fatally

“underinclusive.” See City of Ladue v. Gilleo, 512 U.S. 43, 52 (1994)

(“Exemptions from an otherwise legitimate regulation . . . . [m]ay diminish the

credibility of the government’s rationale for restricting speech in the first

place.”); see also Metro Lights, L.L.C. v. City of Los Angeles, 551 F.3d 898, 905

(9th Cir. 2009) (“To put it in the context of the Central Hudson test, a regulation

inquiry, the threshold question is whether ‘the commercial speech concerns

unlawful activity or is misleading.’ If so, the inquiry ends there: ‘the speech is

not protected by the First Amendment.’” (quoting Thompson v. W. States Med.

Ctr., 535 U.S. 357, 367 (2002))). The Board has not made such a showing.

44

may have exceptions that ‘undermine and counteract’ the interest the

government claims it adopted the law to further; such a regulation cannot

‘directly and materially advance its aim.’” (quoting Rubin v. Coors Brewing Co.,

514 U.S. 476, 489 (1995))).

The restrictions on commercial speech here are so flawed that they

cannot withstand First Amendment scrutiny. Indeed, the District Court correctly

identified the pivotal problem concerning the FDL’s proscription at Central

Hudson’s third step: by allowing funeral homes to operate under predecessors’

names, the State remains exposed to many of the same threats that it purports to

remedy through its ban on the use of trade names. See Heffner, 866 F. Supp. 2d

at 408. A funeral director operating a home that has been established in the

community, and known under his or her predecessor’s name, does not rely on

his or her own personal reputation to attract business; rather, the predecessor’s

name and reputation is determinative. Nor does a funeral home operating under

a former owner’s name provide transparency or insight into changes in staffing

that the Board insists is the legitimate interest that the State’s regulation seeks to

further.

Moreover, unlike in Friedman, there is nothing in the record here to

even suggest that the use of trade names in the funeral industry has either

mislead or deceived the public to a greater degree than using a predecessor’s

name, and the Board does not suggest otherwise. Thus, we agree with the

District Court that the FDL’s trade name ban is irrevocably “pierced” by the

type of “exemptions and inconsistencies” that the Supreme Court has in found

fatal to First Amendment scrutiny. 31 Greater New Orleans Broad. Ass’n, Inc. v.

United States, 527 U.S. 173, 190 (1999); see also Rubin v. Coors Brewing Co.,

514 U.S. 476, 488 (1995); Cincinnati v. Discovery Network, Inc., 507 U.S. 410,

424-26 (1993); Fla. Star v. B.J.F., 491 U.S. 524, 540 (1989).

2. Payment on Commissions to Unlicensed Salespeople

The second issue that the Plaintiffs attack on First Amendment grounds

concerns the constitutionality of Section 11(a)(8) of the FDL. In relevant part,

that section provides that a funeral director or funeral home’s license may be

suspended if a licensee pays unlicensed employees commissions on sales for

pre-need funeral arrangements. See 63 Pa. Stat. Ann. § 479.11(a)(8). The

Board has implemented this restriction by promulgating regulations prohibiting

payment of “any gratuity” or “valuable consideration” to unlicensed employees.

In Count XIII of the Plaintiffs’ amended complaint, they argue that this

restriction is unconstitutional because it prohibits anyone but a licensed funeral

director from communicating with customers about services or merchandise.

See Walker v. Flitton, 364 F. Supp. 2d 503, 503, 507 (M.D. Pa. 2005) (holding

that the First Amendment precludes a prohibition on unlicensed employees and

31

Because we conclude that the FDL’s proscription on the use of trade names

does not pass Central Hudson’s third step, we need not discuss the fourth

“narrow-tailoring” prong. We note, however, that the Supreme Court has

recognized that the third and fourth prongs of the test complement each other

and has observed that the four factors of the analysis are “not entirely discrete.”

See Lorillard Tobacco Co. v. Reilly, 533 U.S. 525, 556 (2001); Greater New

Orleans Broad. Ass’n, Inc., 527 U.S. at 183, 188; see also Metro Lights, L.L.C.,

551 F.3d at 904 (noting “[i]t has not always been clear how [inquiry into a

regulation’s ‘fit’] differs with respect to the last two steps of the Central Hudson

analysis”).

45

agents from interacting with customers). The Plaintiffs allege that this

restriction on commissions similarly violates the First Amendment under the

reasoning in Central Hudson. We disagree.

Here again, the Commonwealth’s articulated interest in consumer

protection is undoubtedly substantial. “The whole premise behind earning a

commission is that the amount of sales [] increase[s] the rate of pay.” Parker v.

NutriSys., Inc., 620 F.3d 274, 284 (3d Cir. 2010) (internal quotation marks and

citation omitted). It is therefore eminently reasonable for a legislature to want to

protect consumers from dealing directly with salespeople who have a financial

interest in “upselling” more expensive or unnecessary merchandise and services

than are appropriate for a given consumer’s situation or resources. See Walker,

364 F. Supp. 2d at 520 (recognizing “substantial governmental interest in

protecting the general public as it relates to the dissemination of information

regarding, and the purchasing of, preneed funerals.”).

The potential for this evil to manifest itself in the context of sales

personnel being rewarded for exploiting the need to afford a loved one a

“proper” or “respectful” burial or memorial is too obvious to require elaboration.

Customers looking to purchase funeral arrangements and services are clearly

among the most vulnerable consumers to be found in any marketplace.

We therefore have little difficulty in concluding that this restriction

easily satisfies the third Central Hudson prong. Section 11(a)(8) “directly and

materially” advances the State’s asserted interest by removing the financial

incentive that salespersons would have to oversell pre-need funeral services.

We realize that the consumer protection afforded by this statutory

scheme is imperfect. For example, it still allows salaries or bonuses to be

influenced by the volume or amount of sales, and this may still incentivize the

unscrupulous sales person to prey upon the unwary and vulnerable consumer.

However, this flaw does not suggest that the protection is so under-inclusive that

it imposes an unconstitutional restriction on commercial speech. Salespersons

in the funeral industry are obviously as entitled to compensation as any other

sales persons, and any compensatory scheme may favor those who sell more

goods and/or services than their colleagues. Perhaps because such realistic

considerations limit the potential effectiveness of any such scheme, the Supreme

Court has explained that “[its] commercial speech cases establish that localities

may stop short of fully accomplishing their objectives without running afoul of

the First Amendment.”). Discovery Network, Inc., 507 U.S. at 442; see also

Metromedia, Inc. v. San Diego, 453 U.S. 490, 511 (1981) (upholding San

Diego’s proscription on offsite billboard advertising and rejecting plaintiffs’

argument that ban was underinclusive because it did not also cover onsite

advertising). We therefore believe that the FDL’s ban on payment of

commissions to unlicensed sales people is a constitutional remedy that is

sufficiently tailored to satisfy Central Hudson. 32

32

The only alternative that would eliminate any room for upselling would be

mandating a flat compensation for all employees. Assuming such a scheme

would be legal, it would prevent businesses from rewarding those employees

who show extraordinary dedication to their jobs by doing the “little things” that

employers rarely require but nevertheless expect from employees.

46

G. Contract Clause

Finally, the Plaintiffs contend that the Board’s interpretation of the

FDL’s trust provisions violates the Constitution’s Contract Clause by impairing

pre-need contracts between the Plaintiffs and their customers.

The Contract Clause provides that “[n]o State shall . . . pass any . . .

Law impairing the Obligation of Contracts.” U.S. Const. art I, § 10, cl. 1. To

show a Contract Clause violation, a plaintiff must demonstrate that a change in

state law effectively altered a contractual obligation. Gen. Motors Corp. v.

Romein, 503 U.S. 181, 186 (1992). Our Contract Clause inquiry must consider

“[(1)] whether there is a contractual relationship, [(2)] whether a change in law

impairs that contractual relationship, and [(3)] whether the impairment is

substantial.” Id. If all three questions are answered affirmatively, we must then

“inquire whether the law at issue has a legitimate and important public purpose

and whether the adjustment of the rights to the contractual relationship was

reasonable and appropriate in light of that purpose.” Transp. Workers Union

Local 290 v. SEPTA, 145 F.3d 619, 621 (3d Cir. 1998).

The premise for the Plaintiffs’ Contract Clause

argument is that the post-PFDA regime, whereby funeral

directors who receive money in the sale of pre-need

merchandise may trust funds at the FIA rate of 70% if their

operations are separate from those of a funeral establishment,

is not the actual state of the law. According to the Plaintiffs,

the Board has recently reversed its stated position and

currently requires 100% of all pre-need sales of merchandise

to be held in trust if the corporation selling the goods is

owned in whole or in part by a licensed funeral director. The

Plaintiffs largely base their claim on a regulation that the

Board proposed in August 2007 but later withdrew and never

enacted. See 37 Pa. Bull. 4643, 4646 (Aug. 25, 2007) (“A

preneed funeral contract may not incorporate a contract for

funeral merchandise entered into by a person or entity other

than a funeral director.”).

The Plaintiffs argue that the Board’s proposed interpretation requiring

100% trust of all funds paid as compensation for pre-need funeral services be

put in trust impaired the Plaintiffs’ contractual obligations with existing

consumers. The Board initially allowed licensed funeral directors to own

corporations that sold pre-need merchandise as long as those corporations were

wholly separate from funeral homes. The Plaintiffs claim that they relied on that

interpretation only to have their expectations frustrated when the Board

proposed a regulation banning this practice in August 2007.

The Plaintiffs’ Contract Clause arguments fail as a matter of law for

two obvious reasons. First, the Plaintiffs have not even shown that there was a

change in state law. Just as we discussed earlier, the Plaintiffs’ articulation of

the current state of the law in Pennsylvania is based on a proposed regulation

47

that the Board never formally prescribed. See 37 Pa. Bull. 4643, 4646 (Aug. 25,

2007). Indeed, the record shows—and the Plaintiffs concede—that the Board

withdrew this proposal in December 2009, and it never took effect. Thus, the

Plaintiffs have not shown even a threshold action that could be characterized as

a burden on their contractual obligations with consumers.

Second, even if the Plaintiffs could show that the Board’s proposed

regulation had the force of law, the Board’s reinterpretation of the FDL would

not implicate the Contract Clause. “The Supreme Court has made clear that the

language of the Contract Clause (i.e., “pass any . . . law”) means that the clause

applies only to exercises of legislative power.” Mabey Bridge & Shore, Inc. v.

Schoch, 666 F.3d 862, 874 (3d Cir. 2012). While the Clause’s application is by

no means limited to the formal enactments of a State’s legislature, 33 “[t]he

Supreme Court has rejected the argument that the Contract Clause is violated

when there is a new interpretation of an antecedent state statute.” Id. at 875.

Here, the Plaintiffs accuse the Board of reversing its own interpretation

and application of longstanding FDL provisions. Such a reversal is simply not

the kind of “exercise of legislative authority” that the Contract Clause

proscribes. See id. (holding Pennsylvania Department of Transportation’s

interpretation and application of law that had been in force for over 30 years

“did not exercise legislative authority subject to scrutiny under the Contract

Clause”).

III. Conclusion

For the foregoing reasons, we reverse the District Court’s judgment

striking down the FDL’s warrantless inspection scheme on Fourth Amendment

grounds. We also reverse the District Court’s judgments concerning the

Plaintiffs’ dormant Commerce Clause challenges to certain provisions of the

FDL. We reverse as well the District Court’s conclusions that the disputed FDL

provisions violate the substantive component of the Due Process Clause. We

also reverse the District Court’s ruling that the Board’s actions

unconstitutionally impair the Plaintiffs’ private contractual relations with third

parties in violation of the Constitution’s Contract Clause. We will affirm the

District Court’s ruling that Pennsylvania’s ban on the use of trade names in the

funeral industry runs afoul of First Amendment protections, but reverse its

ruling that the ban on the payment of commissions to unlicensed salespeople

violates the Constitution. Finally, we remand to the District Court to modify its

order in accordance with this opinion.

33

We recently explained that “[t]here is no simple formula for determining

whether a government act is an exercise of legislative authority.” Mabey Bridge

& Shore, Inc., 666 F.3d at 874. However, Supreme Court cases offer some

guidance. A government act will “bear[] the hallmarks of legislative authority

when it ‘changes existing conditions by making a new rule to be applied

thereafter to all or some part of those subject to its power.’” Id. (quoting Ross v.

State of Oregon, 227 U.S. 150, 163 (1913)). Conversely, “an act is likely not

legislative when ‘its purpose was not to prescribe a new law for the future, but

only to apply to a completed transaction laws which were in force at the time.’”

Id. (quoting Ross, 227 U.S. at 163).

48