Judge opens door to funeral industry

Lifting of Md. curb could raise competition

October 18, 2007|By Tricia Bishop | Tricia Bishop,Sun reporter

A federal judge's decision yesterday could lead to more competition within Maryland's funeral industry and drive down funeral prices that now run about $800 above the national average.

U.S. District Judge Richard D. Bennett declared unconstitutional a decades-old provision in state law that prevents most corporations from owning funeral homes. The decision opens the door for more entrepreneurs to enter the funeral business under the legal and financial advantages afforded by incorporating.

"Maryland consumers have been negatively affected by the lack of competition resulting from the corporate prohibition," Bennett wrote. "This negative impact is reflected by the inflated cost of funerals in Maryland."

The Institute for Justice, a civil liberties law firm based in Arlington, Va., filed a lawsuit in March 2006 on behalf of entrepreneurs hoping to break into the Maryland funeral business. The suit was filed against the state's Board of Morticians.

Under Maryland law, a funeral home can only be owned by an unincorporated "licensed individual," the surviving spouse or estate executor of a licensed person, or a corporation that was licensed before June 1945. Only New Hampshire has a similar law.

Members of the state's Funeral Directors Association have said the requirements protect consumers by ensuring their funerals will be handled by small, family-owned businesses with qualified employees.

Of the state's 283 licensed funeral homes, 28 are owned by private businesses in Maryland while 30 of them are run by larger publicly held corporations and national chains that hold the grandfathered-in corporate licenses. Those licenses could be sold for more than $300,000, Board of Morticians member Marshall Jones Jr. testified.

Eleven homes are run by surviving spouses, and the rest are operated by licensed funeral directors who have completed years of training, but can't incorporate.

The Institute for Justice attorneys had been hoping to strike down the corporation restriction along with the legal provision requiring that funeral home owners be licensed. But Bennett upheld the licensing requirement.

"He seemed to be trying to split the baby in a way," said Jeff Rose, an attorney with the Institute for Justice who argued the case.

"It's definitely a win for entrepreneurs and for economic liberty in the sense that the judge affirmed that the commerce clause does not allow states to erect anti-competitive barriers. ... But there's still a question mark on whether that economic liberty extends to everyone or whether it just extends to licensed morticians."

Rose's group plans to ask the court for clarification on the decision, which members believe should allow anyone to own a funeral home as long as a licensed mortician is managing it.

The funeral industry has been growing as baby boomers age and prepare for the inevitable. The average funeral costs about $6,500, according to the National Funeral Directors Association, and the industry brings in more than $11 billion in revenue annually.

That has led some who hadn't previously considered the business to take a look.

The Maryland attorney general's office, which represented the state's Board of Morticians, was still reviewing the decision last night and had no comment on its significance or potential next steps, though appeal is an option.


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