Opposition Brief — Brown v. Hovatter (No. 09-231)

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Supreme Court, U.S.

FILED

\\5 qd) OCT 26 2009

7 No. 09-231 OFFICE OF THE CLERK

IN THE

Supreme Court of the United States

CHARLES BROWN, et a/,

Petitioner,

Vv.

DAVID HOVATTER, ef a/,

Respondents.

On Petition For A Writ Of Certiorari

To the United States Court Of Appeals

For the Fourth Circuit

BRIEF IN OPPOSITION TO

PETITION FOR WRIT OF CERTIORARI

DOUGLAS F’. GANSLER

Attorney General of Maryland

STEVEN M. SULLIVAN*

KATHLEEN A. ELLIS

GRANT D. GERBER

Assistant Attorneys General

200 St. Paul Place

Baltimore, Maryland 21202

(410) 576-6324

Attorneys for Respondents

* Counsel of Record

QUESTION PRESENTED

Did the court of appeals correctly conclude that

a long-standing State enactment limiting funeral

business licenses to individual applicants, rather than

corporations, does not violate the dormant Commerce

Clause, where there was no showing that the

requirement either discriminated against or

unjustifiably burdened interstate commerce?

TARLE OF CONTENTS

Page

QUESTION PRESENTED .................. i

memes OP AUTHORITIES ................. lil

STATEMENT OF THE CASE ............. ou

pememememers Below .................08- 1

Regulation of the Funeral Profession

Ne ely as ke bo eee 2

The Petitioners’ Efforts to Secure

Passage of Legislation

to Expand Corporate Licensing

in the Funeral Profession ......... 6

Recent Maryland Legislation Addressing

the Funeral Profession ........... /

The Current Makeup of

the Funeral Profession in Maryland

REASONS FOR DENYING THE WRIT ........ 8

THE PETITION DOES NOT PRESENT

A SUBSTANTIAL FEDERAL QUESTION. 5

A. The Court of Appeals’ Decision Does Not

Conflict With Any Decision of Another

Federal Court of Appeals or State Court

et ee ee eee ee 8

B. The Court of Appeals’ Decision Does Not

Conflict With Any Relevant Decision of

es sw ee ee ee 8 we 10

ill

c. The Court of Appeals Properly Applied

Established Principles Governing

Commerce Clause Challenges. ......... 11

CONCLUSION 1;

owt

TABLE OF AUTHORITIES

Page

Cases

Ass'n of Int] Auto. Manufrs, Inc.

v. Abrams, 84 F.3d 602 (2d Cir. 1996) ... 9n

CTS Corp. v. Dynamics Corp. of America,

481 U.S. CPUGST) 2. ccc cca 10, 12

Dennis v. Higgins, 498 U.S. 439 (1991) ........ 11

Dept of Revenue of Ky. v. Davis,

126 BS. Ct. 1601 COGR) cc ces 10, 13

Exxon Corp. v. Governor of Maryland,

ye Se Reh ye ts) | ne 10, 11, 12

Ford Motor Co. v. Muir,

874 F.2d 926 (3d Cir. 1989) ............ 9n

Ford Motor Co. v. Texas Dep't of Transportation,

264 F.5d 403 (5" Cir. 2001) ............ Qn

Gov't Suppliers Consol. Servs., Inc.

v. Bavh, 975 F.2d 1267 (7'" Cir. 1992) . 9, 9n

Healy v. Beer Inst., 491 U.S. 324 (1989) ....... 11

H.P. Hood & Sons, Inc. v. Du Mond.

$36 U.S. 825 (1949) .........2c.ecc0eee il

Kleinsmith v. Shurtleff,

571 F.3d 1033 (10 Cir. 2009) ......... On

Lewis v. BT Inv. Managers, Inc..,

OOF eer CO ee oo ee LE OS 11

North Dakota State Bd. of Pharmacy

v. Snyder's Drug Stores, Inc.,

MOM EP, PEERS oo ee ke ee kes 12

Oregon Waste Sys., Inc. v. Dep’t of Envrt7

Quality of Oregon, 511 U.S. 93 (1994) ... 13

Prke v. Bruce Church, Inc.,

397 U.S. 137 (1970) 2,11

’ 6 « «2 8 BOS £16 & OA. % ee mys,

Tenn. Scrap Recyclers Ass'n v. Bredesen,

656 F.3d 442 (6™ Cir. 2009) ............ 9n

United Haulers Ass'n, Inc. v. Oneida-Herkimer

Solid Waste Management Auth,

550 U.S. 330 (2007) ........ ae eet

Constitutional Provisions

i. oes. wrt. 1, 3G, Cl. SB . . c k e ce es passim

Statutes

Maryland Code Annotated

Health Occupations Article, title 7 ....... 4

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a, I ye 2 4

ED et mes tee tr tote Jee 5

By, ia ag exe eee eae ee 5

EN is a ee 5

Se ee Unrate eee eee 5

a ee 5

§ 7-306 ee ERR ee ae as

Dee os pee

IN onc) So) Pe tel Oy ected ees ee | ae

Se ee en atc 1

1902 Md.

1904 Md.

1908 Md.

1910 Md.

1924 Md.

1937 Md.

1945 Md.

1962 Md.

1971 Md.

1980 Md.

1981 Md.

1996 Md.

2007 Md.

2008 Md.

Laws of Maryland

Laws, ch.

Laws,

ch.

ch. !

on. <

ch.

ch. ;

ch.

Laws, ch. 5

Sa ie a A to ae Ok ot ee ee en Se ey eet Te

“nee 6 6. 6.56 6 6°@° 8 12 8.8 6

Regulations

Code of Maryland Regulations 10.29.03.04 ...... 5

STATEMENT OF THE CASE

Proceedings Below

After repeatedly and unsuccessfully lobbying

the Maryland General Assembly for legislative action,

four individuals, each of whom operates a funeral or

cemetery business in Maryland, brought this lawsuit

challenging the constitutionality of a seventy-year-old

provision of a State statute, which generally requires

that a mortician or funeral director license be held by

an individual rather than a corporation. The

complaint asserted equal protection, due process, and

dormant Commerce Clause challenges to the limits on

corporate licenses set forth in the Maryland

Morticians and Funeral Directors Act (the “Act”),

codified at Md. Code Ann., Health Occupations §§ 7-

101 to 7-602 (2005 Repl. Vol. and 2008 Supp.); see §§

7-309(a), 7-309(b). App. 100-01. Separate counts of

the complaint also asserted equal protection and due

process claims with respect to § 7-310 of the Act,

which requires that each licensed funeral

establishment must be owned and operated by at

least one licensed mortician or funeral director. App.

102-03.

On cross-motions for summary judgment, the

district court rejected all of the equal protection and

due process claims. App. 46°57. As to the dormant

Commerce Clause claim, the district court determined

that the Act does not discriminate against interstate

commerce in either its purpose or effect. Specifically,

the district court found that “there is simply no

evidence of discriminatory purpose,” and the Act

“regulates evenhandedly by treating in-state and out-

of-state interests the same.” App. 60 n.16, 62.

Nevertheless, the district court concluded that the

Act’s lhmits on corporate licensing violated the

dormant Commerce Clause on the ground that the

burden on interstate commerce exceeded the putative

local benefits. App. 63-69.

The Court of Appeals for the Fourth Circuit

affirmed the district court’s denial of the equal

protection and due process claims, App. 4, 24-28, and

the petitioners do not seek further review of that

portion of the rulings below. The court of appeals

reversed the district court’s decision as to the

dormant Commerce Clause claim. App. 4, 11-24.

Noting that the plaintiffs advanced “no contention”

that “the Morticians Act discriminates against

interstate commerce,” App. 13, the court of appeals

conducted the balancing analysis set forth in Pike v.

Bruce Church, Inc., 397 U.S. 137, 142 (1970). App.

13-24. The court of appeals concluded that the Act

“does not violate the dormant. Commerce Clause”

because it “does not place a barrier or burden on the

flow of interstate commerce,” and any arguable

“incidental burden would not be excessive in hght of

the putative benefits from the Act’s regulation.” App.

21.

Regulation of the Funeral Profession in

Maryland

The State of Maryland has regulated the

funeral profession since 1902, when the General

Assembly created the State Board of Undertakers,

required licensing of undertakers, and specified the

criteria for obtaining such a license. See 1902 Md.

Laws, ch. 160. Though the original legislation applied

only in Baltimore City, statewide licensing

requirements were established by 1910. See 1904

Md. Laws, ch. 389: 1908 Md. Laws, ch. 496; 1910 Md.

Laws, ch. 399. In 1924, the legislature also required

that embalmers become licensed. See 1924 Md. Laws,

ch. 575.

In the early years of regulation, Maryland law

permitted corporations to be licensed as undertakers.

See Md. Code Ann., art. 43, § 297 (1924 & Supp.

1935). In 1937, after nationwide calls for more

effective regulation of the funeral industry, the

General Assembly adopted various amendments that

included limits on licensing of corporations. The

legislation amended sections 290 through 309 of

Article 43 to create the State Board of Funeral

Directors and Embalmers, establish different

requirements for licensing, and substitute the term

“funeral director’ for “undertaker.” See 1937 Md.

Laws, ch. 503. ‘The 1937 amendments required “any

person, co-partnership or corporation .. . hcensed to

carry on the business of Funeral Directing in the

State of Maryland at the time of the passage of this

Act” to register with the Board: required the Board to

issue licenses to those persons and entities that

registered; and provided for the annual renewal of

those licenses. /d. ‘The provision that is most

pertinent to this case amended section 306 of Article

43 to provide as follows:

The Board shall not hereafter issue

licenses to, nor register any corporation,

nor shall any corporation be permitted

to conduct the business or profession of

Funeral Directing which has not already

been licensed and registered.

In 1945, to address the necds of servicemen and

women and their families, the General Assembly

authorized the Board to issue a license to any

corporation that was “formed during World War II to

carry on the business of any person who was hcensed

as a funeral director and was engaged in the business

of funeral directing or embalming at the time of

induction into the Armed Forces of the United States

during World War II,” as long as the corporation was

owned and operated by family members of the soldier.

See 1945 Md. Laws, ch. 741.

In 1962, the legislature again revised the

statutes regulating funeral directors and embalmers

to create a single license for funeral directing and

embalming. See 1962 Md. Laws, ch. 129. In 1971,

upon determining that the premises used for funeral

directing and embalming should also be licensed, the

General Assembly created the funeral establishment

license for that purpose. See 1971 Md. Laws, ch. 443.

Under the revised statute, only licensed funeral

directors and embalmers could obtain a funcral

establishment license. /d.

Following the 1962 creation of the unified

license for funeral directing and embalming, the

Board issued the new unified license to some

practitioners, but continued to issue funeral director

licenses to others. To resolve the situation, the Act

was amended in 1980 to prohibit the practice of the

unified occupation of funeral directing and embalming

without a license and to permit hcensees who held

funeral director licenses to continue to renew those

licenses. See 1980 Md. Laws, ch. 330. In 1981, the

State Board of Funeral Directors and Embalmers was

renamed the State Board of Morticians. See 1981 Md.

Laws, ch. 8, § 2. The legislation also discontinued the

use of the term “embalmer” and adopted the term

“mortician” as the appropriate title for heensees of the

new Board. Jd.

Today, the provisions of the Act are codified in

title 7 of the Health Occupations Article (“Health

Occ.”) of the Maryland Code. The express purpose of

the Act and each of its provisions is the protection of

the health and welfare of the public. See Md. Code

Ann., Health Oce. § 7-103. To accomplish that

purpose, the Act establishes a State Board of

Morticians and Funeral Directors (the “Board”),

which consists of 11 members, including six licensed

morticians or funeral directors and five consumer

members who are not employed by or affiliated with

the funeral industry. Health Occ. §§ 7-202(a), 7-

202(d). The Board has responsibility for licensing

morticians, funeral directors, and _ funeral

establishments: investigating alleged violations of the

Act; enforcing the provisions of the Act; inspecting

licensed funeral establishments: and establishing

standards for the practice of mortuary science. See

Health Occ. §§ 7-201, 7-205.

The Act defines four principal types of license:

mortician, funeral director, apprentice, and funeral

establishment. See Health Occ. §§ 7-302, 7-306, 7-310.

To become a licensed mortician or funeral director, an

applicant must complete an apprenticeship and

appropriate education courses, pass written national

and state examinations, and pass a_ practical

examination. See Health Occ. § 7-303. Section 7-306

lists the requirements for an apprentice license, and

§ 7-310 provides that only a licensed funeral director

or mortician may obtain a funeral establishment

license. The requirements for a licensed funeral

establishment are further specified in the Board’s

regulation promulgated as Code of Maryland

Regulations (““COMAR”) 10.29.03.04. One other type

of license, a corporation license, is available only to

those entities that held such a license before the

iegislature changed the licensing law to prohibit the

issuance of new licenses to corporations. See Health

Occ. § 7-309.

The Petitioners’ Efforts to Secure

Passage of Legislation to Expand

Corporate Licensing in the Funeral

Profession

Petitioners Charles Brown and Gail Manuel

each own a cemetery in Maryland, but neither is a

licensed mortician. App. 6-7. Petitioners Brian

Chisholm and Joseph Jenkins are licensed morticians,

each of whom owns his own funeral home business in

Maryland. /d. Mr. Chisholm is the only plaintiff who

does not reside in Maryland. Mr. Chisholm runs his

Maryland funeral business from his home in Florida.

ld. Each of the petitioners has expressed a desire to

form a corporation and to effect a merger between an

existing funeral home business and a cemetery. Jd.

In 1996, the Maryland General Assembly

created the Task Force to Examine the State's

Cemetery and Funeral Industry. See 1996 Md. Laws,

ch. 209. Petitioners Charles Brown and Joseph

Jenkins were both members of the Task Force. Jd.

The Task Force’s final report included a

recommendation that corporations be permitted to

practice mortuary science in Maryland. /d.

Every year from 1997 through 2005, legislation

was introduced to permit the issuance of some

additional corporate licenses. Petitioners Brown,

Jenkins, and Chisholm lobbied or testified in favor of

each of these bills.

In recent years, the legislature has considered

and rejected at least thirteen such bills, each of which

took a slightly different approach to amending the

statute. See 2004 Session, S.B. 340; 2004 Session,

H.B. 795, H.B. 1341; 2003 Session, H.B. 956; 2002

Session, H.B. 1113; 2001 Session, H.B. 1036: 2001

Session, H.B. 1464; 2000 Session, H.B.188, H.B. 503;

1999 Session, H.B. 107, H.B. 475; 1998 Session, H.B.

591; 1997 Session, H.B. 1321.

Recent Maryland Legislation

Addressing the Funeral Profession

Although the legislature has declined to relax

licensing requirements in the manner favored by the

petitioners, in 2007 the General Assembly revised

those requirements to establish the funeral director

license. See 2007 Md. Laws, chs. 185, 186. This

license category was added to accommodate

professionals who, for religious or personal reasons,

prefer not to be trained or licensed to embalm bodies.

The adoption of the funeral director license also

benefits out-of-state funeral directors who are not

trained in embalming, by enabling them to become

licensed in Maryland. The General Assembly also has

responded to constituent concerns by enacting recent

legislation to create a guarantee fund for all pre-need

contracts, as a means of protecting consumers from

sharp practices in the funeral home industry. See

2008 Md. Laws, ch. 532.

The Current Makeup of the Funeral

Profession in Maryland

As of April 24, 2007, there were 870 active

mortician licenses, 17 active funeral director licenses,

and 283 funeral establishment licenses issued by the

Board of Morticians. App. 37. Of those 283 funeral

establishment licenses, 11 were held by surviving

spouse licensees, 214 were held by licensed morticians

or funeral directors, and 58 were keld by corporate

licensees. /d. Thirty of the 58 corporate licenses were

owned by publicly held corporations and national

chains, and 28 were privately held by Maryland

corporations. App. 6.

REASONS FOR DENYING THE WRIT

THE PETITION DOES NOT PRESENT A

SUBSTANTIAL FEDERAL QUESTION.

A. The Court of Appeals’ Decision Does

Not Conflict With Any Decision of

Another Federal Court of Appeals or

State Court of Last Resort.

Further review of this case is unwarranted

because the petition does not identify any decision of

another federal court of appeals or a state court of last

resort that actually conflicts with the conclusion

reached by the Fourth Circuit Court of Appeals in this

matter. Though laws limiting professional licenses to

individual licensees, rather than corporations, are

typical of licensing schemes for lawyers, physicians,

and other professions throughout the various States,

the petition does not cite a single decision of a federal

appellate court or a state high court disagreeing with

the Fourth Circuit's holding that such an individual

licensing requirement does not offend the dormant

Commerce Clause.

The purported split of authority suggested by

the petitioners is not a genuine conflict. Differences

among the multiple appellate decisions cited in the

petition are primarily attributable to the respective

courts’ application of established constitutional

principles to widely divergent facts and diverse

regulatory schemes.' Of the supposedly conflicting

‘For example, among the_ disparate

circumstances and regulatory schemes addressed in

the cases cited by the petitioners are a State law

preventing automobile manufacturers from owning

decisions cited in part I of the petition, only one found

a dormant Commerce Clause violation, Govt

Suppliers Consol. Servs., Inc. v. Bayh, 975 F.2d 1267,

1279 (7th Cir. 1992). Unlike this case, in which the

challenged statute is conceded to. be

nondiscriminatory, Gov't Suppliers involved a waste-

hauling regulation that was found to “discriminate in

dealerships, Ford Motor Co. v. Texas Dept of

Transportation, 264 F.3d 493 (5™ Cir. 2001)(rejecting

dormant Commerce Clause challenge on the ground

that plaintiff failed to show either discrimination or

any actual burden on interstate commerce); a State

law preventing insurance companies from affiliating

with savings and loans, Ford Motor Co. v. Murr, 874

F.2d 926 (3d Cir. 1989)(same); a local ordinance

requiring scrap metal dealers to “tag and hold” scrap

metal for a 10-day period, Jenn. Scrap Recyclers Assn

v. Bredesen, 556 F.3d 442 (6'" Cir. 2009) (same); a

State statute requiring that attorneys who act as

trustees with respect to in-state real property must

maintain an office in the State, A/leznsmith v.

Shurtleff 571 F.3d 1033 (10 Cir. 2009)(same); a

State statute requiring automobiles sold or leased in

state to have a “bumper quality label” stating the

results of impact tests, Assin of Int7 Auto. Manufrs,

Inc. v. Abrams, 84 F.3d 602 (2d Cir. 1996)(remanding

on the ground that factual dispute precluded summary

judgment); a State statute limiting the number of

other items that may be hauled in trucks used to haul

municipal waste, Govt Suppliers Consol. Servs., Inc.

v. Bayh, 975 F.2d 1267 (7 Cir. 1992) (finding a

dormant Commerce Clause violation because the

statute had a direct, discriminatory effect on interstate

commerce).

practical effect against interstate commerce,” and,

therefore, was “subject to the higher level of scrutiny”

required for discriminatory regulations. /d. at 1279.

See Dep't of Revenue of Ky. v. Davis, 128 S. Ct. 1801,

1808 (2008) (a “discriminatory law is ‘virtually per se

invalid”)(citation omitted).

At most, the petition adumbrates some possible

variation in language or emphasis in the cited

opinions, but these do not amount to a conflict that is

outcome determinative. Notably absent from the

petition is any discussion of appellate court decisions

that have either acknowledged or discussed the

supposed split of authority described in the petition.

The absence of such an illuminating discourse in the

appellate case law indicates that the purported

conflict remains, at most, an inchoate difference of

approach that has not percolated sufficiently to

warrant this Court’s review at this time.

B. The Court of Appeals’ Decision Does

Not Conflict With Any Relevant

Decision of This Court.

Nor does the petition purport to show that the

holding of the court of appeals below conflicts with the

holding in any relevant decision of this Court. On the

contrary, the petition faults the court of appeals for

adhering to this Court's precedents. Compare

Petition at 14 (criticizing this Court’s decision in C7'S

Corp. v. Dynamics Corp. of America, 481 U.S. 69

(1987), and its application of Exxon Corp. v. Governor

of Maryland, 437 U.S. 117 (1978)) with court of

appeals’ decision at App. 16, 18-19, 22 (applying

Exxon, 437 U.S. at 126-28, and CTS Corp., 481 U.S. at

93). The “confusion” that petitioners purport to find

in these precedents, Petition at 12, 14, is belied by

this Court’s recent case law, which indicates no such

doubt as to their meaning or proper application. See

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

Waste Management Auth’y, 550 U.S. 330, 344

(2007)(qucting Exxon, 437 U.S. at 127, for the

proposition that the “Commerce Clause does not

protect ‘the particular structure of method of

operation’ of a market”). As the petition itself

acknowledges, the decision in this case does not

conflict with the holding of the other Supreme Court

decision cited by the petitioners, Lewis v. BT Inv.

Managers, Inc., 447 U.S. 27 (1980). See Petition at 10

(acknowledging that “Lewis did not expressly hold”

the proposition for which the petitioners cite it, .¢.

“that interstate investment capital and professional

expertise are articles of commerce’).

C. The Court of Appeals Properly Applied

Established Principles Governing

Commerce Clause Challenges.

Thus, as the petition effectively confirms, the

court of appeals followed this Court’s precedents in

determining that Maryland’s Morticians and Funeral

Directors Act does not violate the dormant Commerce

Clause. See App. 11-14 (citing Dennis v. Higgins,

498 U.S. 439, 447 (1991); Healy v. Beer Inst., 491 U.S.

324, 326 n.1 (1989); Dep’t of Revenue of Ky. v. Davis,

128 S. Ct. at 1808; HP. Hood & Sons, Inc. v. Du

Mond, 336 U.S. 525, 535 (1949); Oregon Waste Sys.,

Inc. v. Dept of Envrt] Quality of Oregon, 511 U.S. 93,

98 (1994); Pike v. Bruce Church, Inc., 397 U.S. at

142).

The court of appeals first observed that the Act

does not “purport to regulate activity outside

Maryland.” App. 14. The court then determined that

the Act does not discriminate against interstate

commerce because it “does not treat persons from out-

of-state any differently than persons in-state,” and

the Act permits those corporate lhcenses that are

authorized to be owned by “any person or corporation,

out-of-state or in-state,” including “publicly-held out-

of-state corporations.” App. 15. The petition does not

challenge any of these portions of the court of appeals’

ruling.

The court of appeals then determined that the

Act does not. unjustifiably burden interstate commerce

because the Act’s limits on corporate licensing address

only “the particular structure or methods of operation

in a retail market” and do not “prohibit the flow of

interstate goods, place added costs upon them,” or

otherwise affect “the flow of articles of commerce

across state lines.” App. 16, 19 (quoting Hxxon, 437

U.S. at 127, 126). The court concluded that, even if

the Aci were deemed to place some incidental] burden

on commerce, that incidental burden “is not excessive

and is justified by th. very real benefits of protecting

the public health, safety, and welfare by encouraging

familiarity of the owner of a funeral business with the

day-to-day workings of that business and creating

accountability to regulators and to clients.” App. 23-

24.

To support this conclusion, the court of appeals

noted that “promoting familiarity between an owner

and his business 1n a licensed and regulated industry”

has been recognized by this Court as “a legitimate

local interest.” App. 22 (citing North Dakota State

Bd. of Pharmacy v. Snyder’ Drug Stores, Inc., 414

U.S. 156, 166-67 (1973)). The court of appeals also

cited this Court's finding that a State “has a

substantial interest in preventing the corporate form

from becoming a shield for unfair business dealing.”

App. 22 (quoting C7'S Corp., 481 U.S. at 93). To

further demonstrate that the Act’s general insistence

on individual rather than corporate’ licensing

“provides individual liability and therefore more

direct accountability for owners of funeral

establishments,” the court of appeals quoted from the

plaintiffs’ own statement that “they desire to use the

corporate form because they ‘want to be insulated

from personal liability for... negligence.” App. 23.

Therefore, the court of appeals applied

established precedent to reach a_ reasonable

conclusion that does not warrant the exercise of this

Court’s discretionary review.

CONCLUSION

For the reasons stated, the petition should be

denied.

Respectfully submitted,

DOUGLAS F. GANSLER