*3 SHEDD, Cirсuit Judges. dormant Commerce Clause. support its dormant Commerce Clause ruling, part Affirmed part by reversed in court said that the “corporate Act’s [own- published opinion. Judge NIEMEYER ership] prohibition severely limits the abili- opinion, wrote the Judge ty of out-of-state businesses from opening joined. TRAXLER Judge SHEDD wrote Maryland.” home The parties separate concurring opinion. filed cross-appeals. follow, For the reasons that we affirm OPINION the district court’s respect conclusions with NIEMEYER, Judge: Circuit Equal to the Protection Clause and the Brown, Jenkins, Joseph Charles Brian Due Process Clause for substantially the Chisholm, Manuel, and Gail who refer same given by reasons the district court. themselves as “funeral and cemetеry en- Maryland’s And licensing because require- trepreneurs,” commenced this action to unjustifiably ments do not burden inter- strike as Mary- down unconstitutional the state we reverse the district land Morticians and Funeral Act Directors court’s dormant Commerce ruling. Clause of 3 of Currently, the stock Morti- its owners. bottom, conclude we
At the hands remains in corporations of the the 58 to each as constitutional Act is cians owners, stock of 30 and the original challenges. plaintiffs’ by out-of- held corporations those I national public individuals requires Act The Morticians it can claim The plaintiffs chains. mortuary science “practice who wish $250,000 the stock to purchase toup cost Mary- licensed [Maryland],” to be to hold grandfathered corporation aof Md. Board of Morticians. land State license. 7-301(a). qualify To § Health Occ.Code *4 good oper- be of and license, must wish to plaintiffs an individual own for a The four an completed character; through must have funeral establishments moral ate edu- specified individually being must have a without apprenticeship; form must have background; Maryland and resident cational is a Brown licensed. Maryland examina- and Ma- cemetery Hagerstown, national passed a who owns 303(b). § that tions. Id. a home funeral ryland, and who built 7— his Because operated by son. is now any individual who requires Act also under the Morticians not licensed Brown is to license a establishment” owns “funeral home he Act, the funeral he cannot own structure, ie., establishment, “building, a through built, like to do so he but would of which business from premises or corporation. conducted.” mortuary science is practicing 7-101(h). 7-310, indi- §§ Unlicensed Id. is Maryland who is a resident Jenkins establish- a funeral may not own viduals super- He is the as a mortician. licensed of executors ment, spouses and except a funeral establishment vising mortician §§ '7- individuals. Id. deceased licensed Maryland, County, George’s in Prince 7-308, 310(c)(2), 7-308.1. family. He indi- by his was built grandfa- except those Corporations, own like to own his would cates he 1945, licensed may not be corpora- thered as a through funeral establishment directors, §id. 7- or funeral morticians as afford to that he cannot He asserts tion. establish- may not own a funeral and corpora- grandfathered of a buy the stock ment, grandfa- § Under the 7-310. see id. going a license because tion that owns 1945, corporation, clause, a enacted ther $250,000.” “up rate is 1, 1945, that on that held a license June Maryland resident a former Chisholm is renewed, may own continually has been licensed in Florida. isHe who now resides funeral a establishment operate owns a a mortician and by Maryland as corpora- long so as as continue to do in Timoni- funeral establishment licensed exists, “any practice provided tion relocating to Florida um, Maryland. Since for the that is conducted mortuary science has business that his he statеs by a licensed indi- practiced corporation is ... as by a operated “subcontractor been 7-309(b), (d). parties § Id. vidual.” like would mortician.” He supervising corporations there are agree Maryland funeral expand his business 309(b), § that are under grandfathered 7— “ordinary corporation.” business as pro- in the business engage licensed to who, Maryland is a resident Manuel directing or embalm- “funeral fession of cemetery in owns corporation, a a through operate own and allowing them to ing,” not a Although she is Waldorf, Maryland. establishments, the stock of funeral mortician, like Manuel would by licensed freely is transferable corporations these operate, through own a corporatiоn, they are not currently pur- on grounds establishment suing because of the restriction[s]. This cemetery her “owning because a business substantial barrier to entry into Mary- through corporation way is the best to land funeral home industry imposes an states, operate.” however, She that her undue on burden interstate commerce in plans paying cannot include the “exorbi- comparison legitimate with the local inter- $250,000,” tant price, as much as for the protected law, ests by the which in fact are grandfathered stock of a corporation. none” and that therefore the restrictions on corporate and unlicensed individual short, plaintiffs each of the wants to ownership violate the dormant Commerce engage in the practice mortuary science Clause. through corporation, and two to do wish becoming
so without licensed. individually On cross-motions for summary judg- ment, each challenging Maryland’s Therefore rejected district court the plain- right to bar from li- being tiffs’ challenges the Morticians Act un- censed as morticians and owning licensed der the Equal Protection and Due Process *5 funeral Clauses, establishments and to require the concluding that “the Maryland owner of a funeral establishment to be a General Assembly could rationally have “licensed individual.” health, determined public’s that the safety and welfare are by furthered requiring The plaintiffs commenced this action that a licensеd mortician own the funeral against Maryland the State Board of Mor- home mortuary where science is prac- ticians and Funeral (“Mary- Directors court, however, ticed.” The sustained the land”) to declare the restrictions unconsti- plaintiffs’ challenge to the Act’s corporate enjoin tutional and to their enforcement. ownership prohibition under the dormant complaint, their plaintiffs the allege that Clause, Commerce concluding that it is “a they have been equal protection denied of protectionist piece legislation” of law, in violation Equal of the Protec- “clearly anti-competitive.” The court rea- tion Amendment, Clause of the Fourteenth soned: because there is no rational why reason The corporate prohibition severely limits they are not permitted to own funeral of ability out-of-state businesses homes through either a corporate form from opening a funeral home in Mary- grandfathered when corporations can do land. if Even one of the fifty-eight li- so or unlicensed as individuals when sur- available, censes does become a prospec- viving spouses and executors can do so. tive purchaser out-of-state pay must an They also contend that the Act price inflated for the license. un- The denies right them the “to earn honest disputed record in this case indicates living in the occupation of their choice that these burdens are intolerable imposing restrictions on ownership of clearly excessive in any relation to bene- funeral rationally homes are not relat- fits proffered by [Maryland]. ed to legitimate public purpose,” in violation the Due Process Clause The district court also held that the Morti- Fourteenth Amendment. they al- Finally, requirement cians Act’s that funeral estab- lege but for Maryland’s restrictions lishments be owned licensed individuals on corporate unlicensed individual was not properly challenged under ownership homes, of funeral persons and dormant Mary- Commerce Clause and that companies outside of the State pur- land could require corporations “would wishing to sue home funeral business opportunities in own funeral establishments to be them- benefits,” of the dor- in violation public directors by licensed owned
selves Clause. mant Commerce morticians. that the restrictions Maryland responds portion of from the appeal plaintiffs individual and unlicensed corporate on judgment upholding the district court’s com- not burden ownership do against equal Act Maryland Morticians [they] greater merce, result[] if “even challenges, as process due protection compa- certain costs or inefficiencies consider the refusal to the court’s well as between that “differences nies.” It notes ownership requirement licensed individual concededly ‘even handed’ and Maryland’s Clause. Commerce under dormant licensure stat- nondiscriminatory corporate portion from Maryland appeals And are to laws of other be ute and the states ruling that judgment mistaken for a should not be expected, and Act the Morticians ownership restriction Mary- commerce.” on interstate ‘burden’ Clause. Commerce the dormant violates the restrictions on funeral argues that land down court struck Because the district rationally jus- are ownership establishment Com- under the dormant Morticians Act the use tified because Clause, analysis by begin our we merce by peo- owned “causes such business be addressing that issue. anything know about” ple who do not fos- becаuse the restrictions business and II accountability greater degree ter regulators. It claims that following sup- claim the plaintiffs *6 Assembly had a basis for rational General that the port argument their “limiting home li- believing that funeral Unli- and on Act’s restrictions would foster to licensed individuals censes of funeral es- ownership censed individual accountability regu- to degree of greater Com- violate the dormant tablishments licensing the than would continued lators (1) the that result of as a merce Clause: inherently de- which are corporations, of in- restrictions, rate of “the out-of-state responsibility personal signed limit industry Maryland funeral vestment judg- legislative rational That of owners. ab- than would be significantly lower it is yield reаsonably expected be ment could (2) restrictions”; that challenged sent allowing the by [Morti- putative benefits effectively out-of- the restrictions exclude ‘protect the health Board to better cians’] industry “from entrepreneurs funeral state ” (Quoting public.’ Md. of welfare market, their despite funeral 7-103). § Health Occ.Code it,” “the because strong to enter desire states, Clause inves- The Commerce way for out-of-state only practical have Power ... Congress shall To Maryland is “The homes in tors to own funeral (3) among ... the several regulate Commerce ownership”; through corporate Const, I, 8, 3, § cl. States,” art. U.S. industry insiders “Maryland that this affirmative it is well-established a decade to indefatigably for ovеr fought “negative” authority implies a or grant of Assembly from elimi- prevent General power of on the suppress “dormant” constraint nating restrictions these legislation that interferes industry to enact States supply [in competition interstate commerce. See They profits.” with burdens Maryland] windfall with 447, 439, 111 498 Higgins, Dennis v. U.S. the restric- ways these conclude that (1991) (“It 865, L.Ed.2d 969 inter- S.Ct. 112 on “impose significant tions burdens however, clear, the Commerce countervailing also commerce without state
363
does more than confer power
Clause
on to economic
protectionism,
“discriminato-
Government;
it
ry
Federal
is also a sub
law is virtually per
Davis,
se invalid.”
(internal
permissible
stantive restriction on
The for determining operation which includes the of funeral whether a state establishments, law violates the dormant preparation the of dead proceeds Commerce Clause on two tiers. bodies for disposition, and the arrange- tier, inquires On the first it whether the disposition ment for final of dead bodies. state against law discriminates interstate §§ See Md. 7-301(a), Health Occ.Code 7- 302, commercе. Unless discrimination is de 7-101(p),(q). practice of mortu- monstrably justified by a factor unrelated ary inherently science is profession, a local by the Morticians imposed tions that are to have the by relatives used
typically
education, expe-
professional
to
Act relate
prepared
family members
dead
of
bodies
Thus, entry
accountability.
rience, and
pro-
disposition
or other
for burial
market
Maryland funeral services
into the
visitation, mourning, and
facility for
vide a
the indi-
choices of
only by the
is limited
providing
Indeed,
than
other
services.
his or her
allocate
to how best to
vidual as
caskets,
are not
out-of-state
Act, the
time and resources.
the Morticians
way regulated
оf
through
practice
the
provided
service
Clause
The dormant Commerce
within
and ends
begins
mortuary science
placed on
by burdens
implicated
flow
the State.
goods,
flow of
interstate commerce—the
of
es-
and the
profession
licensing
commerce
materials,
articles of
and other
practiced,
it is
at which
tablishments
Sys.,
Oregon Waste
lines.
across state
See
purport
not
Act does
Maryland Morticians
(stating that
at
In plaintiffs the challenging are ing public injured by will be the loss of way the Maryland authorizes them to do high-volume, low-priced the op- stations business within profession the State in. a independent refiners, erated the but the exist- by giving Harley-Davidson, the wis- and relates to argument that
again
cre-
protest
statute,
ing
right
on
dealers
not to its burden
of the
dom
pro-
a
dealership through
a
ation of
new
commerce.
resolve,”
years to
that “could take
cess
127-28,
2207.
98 S.Ct.
Id. at
Yam-
were “frivolous.”
protest
if the
even
us, the Mor-
case before
in the
Likewise
(internal quotation
aha,
at 571
401 F.3d
the flow of
prohibit
Act “does not
ticians
omitted). Moreover, a
and citation
marks
upon
added costs
place
goods,
interstate
of a
appointment
protest
could
dealer
and
in-state
them,
distinguish between
dealership
if the new
even
new dealer
mar-
in the retail
companies
out-of-stаte
State,
500 miles
some
across
were
Exxon,
98 S.Ct.
at
ket.”
U.S.
the rele-
indisputably outside of
away and
con-
fact,
funeral home
large
In
2207.
for
protesting dealer
market of the
vant
Mary-
in the
presence
a
have
glomerates
Yamaha, an out-
motorcycles.
Id.
selling
market,
not as
albeit
land
services
and distributor
manufacturer
of-state
that
But the
like.
fact
large
they would
as
under
challenged the statute
motorcycles,
regu-
permissible
of this
the burden
Clause, arguing
Commerce
the dormant
may
that
have
on
lation falls
unjust-
created
Virginia statute
that the
itself,
not, by
“does
operations
interstate
on interstate commerce
ifiable burden
the dormant Com-
a
[violation
establish
ability to distribute
burdening Yamaha’s
Id.
Clause].”
merce
Agreeing with
motorcycles
Virginia.
in
Further,
companies
the oil
just like
claim,
concluded
the Vir-
Yamaha’s
we
Exxon,
complain that
plaintiffs
signifi-
indeed
ginia
“ereate[ ]
statute did
Maryland consumers
Act hurts
Morticians
entry ... because
cant barrier
market
The
up the
of funerals.
and drives
costs
certainty
protest
of a
when-
virtual
however, falls on
regulation,
of this
burden
authorize
attempts to
a manufacturer
ever
consumers, not on interstate
Maryland
(internal quotation
dealership.” Id.
a new
bur-
complaint
about this
and
omitted). Because the
marks
citations
[Mary-
wisdom
den “relates
increasing
face of
in costs in the
delay
statute,
on [inter-
not to its burden
land]
motorcycles
caused
Virginia
demand
Exxon,
at
state] commerce.”
forego
Harley-Davidson to
Yamaha
added).
(emphasis
98 S.Ct.
dealers, we
establishing new
concluded
heavily on
deci-
rely
our
plaintiffs
“heavy
imposed
Virginia
that the
statute
v.
Corp., U.S.A.
Yamaha
sion in
Motor
in-
on out-of-state
predominantly
burdens
(4th
Inc.,
Because the Morticians Act
regulators
does not
than would the continued licens-
place a barrier or burden on the flow of
ing
corporations,
inherently
are
commerce,
it
violate
designed
does not
the
personal
to limit the
responsibili-
dormant Commerce Clause. But
if
ty
even it
of owners. That
legislative
rational
place
was considered to
an incidental bur-
judgment could reasonably be expected to
den on
yield
incidental burden
putative
by allowing
benefits
would not
in light
be excessive
of the
Board to
‘protect
[Morticians’]
better
”
putative
from
regulation.
benefits
the Act’s
health and welfare of
public.’
(Quot-
7-103).
ing
§
Md. Health Occ.Code
And
Maryland
While
does not have extensive
position
State’s
is
by
indeed advanced
Act,
explaining
purpose
records
complaint
in this case and the affida-
Supreme
recognized
Court has
plaintiffs
vits of the
they
where
assert that
promoting familiarity between an owner
they desire to use the corporate form be-
and his business in a
regulat
licensed and
cause they “want to be insulated from
industry
legitimate
ed
is a
local interest.
personal
liability for
...
negligence.”
See North Dakota State Bd.
Pharmacy
This is precisely the kind of personal re-
Stores,
Snyder’s
Inc.,
v.
Drug
414 U.S.
sponsibility that the Morticians Act wishes
156, 166-67,
407,
94 S.Ct.
368 in good by registered pharmacists a the owner of owned familiarity of
couraging
day-to-day
in the
day-to-day
standing
work-
who are active
with
funeral business
creating account-
association.
ings
corporation
of that business
affairs
Ac-
to clients.
ability
regulators
corpo
on
upholding
In
those restrictions
the district court’s
reverse
cordingly, we
ex
ownership,
Supreme
Court
rate
the dor-
the Act violates
conclusion
relationship
a rational
exists
plained that
mant
Clause.
Commerce
ownership
restricting corporate
between
quoting
approval
Ill
with
professions,
and the
in
dissenting opinion
Holmes’
Justice
Due Pro
addressing plaintiffs’
In
Liggett
Baldridge,
K.
Co. v.
Louis
argu
Equal Protection Clause
cess and
57,
105, 114-15,
L.Ed. 204
49 S.Ct.
73
ments,
court’s
agree with the district
we
(1928) (Holmes,
dissenting):
J.
Be
rejecting
arguments.
these
reasoning
Act is an economic
cause the Morticians
criticism of the use of cor-
standing
“A
un
may not strike it down
regulation, we
it
in business is that
causes
porations
arbitrary, without
“wholly
it is
less
by people
to be owned
such business
Inc. v.
in reason.” Guardian Plans
basis
it. Ar-
anything
do not know
about
who
Cir.1989)
(4th
F.2d
Teague, 870
supposed to be
gument has not been
(internal
marks and citation
quotation
necessary in
that the di-
order
show
omitted).
words,
such
In other
to survive
power
of control and
vorce between
only
Act need
be “rational
challenges, the
selling of
knowledge is an evil. The
interest.”
legitimate
to a
ly related
in
knowledge
calls for
drugs
poisons
Id.
after en-
high degree,
a
and [the State]
already recognized
has
Our court
safeguards has
acting a series of other
“legitimate
interest
that a State has
that in that matter the divorce
provided
health,
safety
and welfare
protecting
course, not-
not be allowed. Of
shall
of the funer
through regulation
its citizens
withstanding
requirement
Plans,
F.2d
profession.”
al
Guardian
formed all the
corporations hereafter
may “ration
legislature
at 126. A State’s
pharma-
shall
licensed
stockholders
be
arrange
ally
keeping
determine[ ]
cists,
for a
possible
it still would be
of funerals in the hands of licensed
ment
to content himself with
stockholder
would benefit
professionals
and to take no hand
drawing dividends
in funeral
public by ensuring competence
obviously
affairs. But
company’s
arrangement.
inquiry
Our
[under
likely
be more
to observe
he would
Due Process Claus
Equal Protection and
intelligent eye
than a
with
business
ends here.” Id.
es]
only
casual investor who looked
to the
Moreover,
there is a rational basis
standing of the stock in the market.
corporate and unlicensed individu-
restrict
it a
The Constitution does not make
ownership
professional
al
businesses.
that it
preventive legislation
condition of
Bd., 414
Pharmacy
See North Dakota
U.S.
It
perfect
work a
cure.
should
166-67,
Dakota
ing operation the temporary of the funeral does not violate the dormant Commerce to wind establishment down the affairs of Clause, accordingly we reverse the the business. The fact that the General district judgment court’s in that regard. Assembly created exemp- these rational alsoWe conclude that the Act does not tions does not undermine the overall ra- violate the Equal either Protection Clause tionality of the Morticians Act based on its Clause, or the Due accоrding- Process relationship legitimate government to a ly we affirm the district court in that re- purpose. Goldfarb, See 766 F.2d 862- gard. 63. plaintiffs’ position boils down to a judgment of the district court is
disagreement Assembly’s with the General therefore judgment in refusing to authorize a differ- AFFIRMED IN PART AND RE- ent structure for practicing mortuary sci- IN PART. VERSED in Maryland. ence disagreement, This however, is not a basis on which to render SHEDD, Judge, Circuit concurring: the Morticians Act unconstitutional. may needless, law exact a
[A] wasteful I judgment concur reached requirement many majority. eases. But it is for As to the dormant Commerce legislature, courts, issue, not the to balance Clause I concur to the extent advantages and disadvantages of the we find “that the Morticians Act’s inciden- ... requirement. tal burden on interstate commerce is not very real by the justified excessive health, public protecting
benefits *13 encouraging famil- welfare
safety, and a funeral business owner of
iarity of the that busi- workings of day-to-day
with regu- accountability to creating
ness Op. at Majority clients.” See
lators and to
367-68. America, STATES
UNITED
Plaintiff-Appellee,
v. MADRIGAL-VALADEZ,
Eliazer
Defendant-Appellant.
No. 07-4681. Appeals, States Court
United Circuit.
Fourth 29, 2009.
Argued: Jan. April 2009.
Decided: