Court rules on grave opening/closing rights
by ICFA General Counsel Robert M. Fells, Esq.
A recurring question in cemetery law involves the issue of whether a cemetery may reserve to its own staff the exclusive right to perform all grave openings and closings within its grounds.
A number of states have enacted statutes specifically granting cemeteries such rights, but none of these laws, to our knowledge, has been tested by the courts until now.
In January, the Indiana Court of Appeals published its decision in SCI Indiana Funeral Services Inc. v. D.O. McComb & Sons Inc., which held that a 1997 state statute establishing that cemeteries may exclusively open and close graves is reasonably necessary to protect public health, safety and welfare.
The case involved the issue of whether a settlement agreement entered into by a cemetery's previous owner with a third party also bound the new owner to the terms of the agreement with that third party.
The settlement ended litigation in 1993 wherein the third party, D.O. McComb & Sons Inc., had challenged Highland Park Cemetery's policy of exclusive grave openings and closings.
The agreement provided, among other things, that McComb's employees could sell and open/close graves at the cemetery. According to the court, subsequent to the agreement McComb took no steps to file any documentation with the county recorder to make the agreement a matter of public record, nor did McComb actually open or close any graves at Highland Park.
In 1997 two events occurred that resulted in the current litigation. First, McComb was notified that the cemetery was being sold to SCI and that the new owner would no longer comply with the agreement. Second, the Indiana legislature enacted the Exclusive Rights Act that provided in part: "Because the owner of a cemetery is responsible for the performance of the care and maintenance of the cemetery, a cemetery owner has the exclusive right to [among other things] open and close a grave or grave space, burial space, crypt, or niche in the cemetery." Violations of the act would result in criminal prosecution under the Indiana code.
In 2000, McComb filed a complaint against SCI alleging breach of the agreement, intentional interference with a contractual relationship, damages and injunctive relief to compel compliance with the terms of the agreement.
The trial court ruled in McComb's favor by interpreting the Exclusive Rights Act as protecting only a limited group of citizens who have deceased relatives buried at Highland Park, and not the general public.
SCI appealed on the basis that the settlement agreement violated the Exclusive Rights Act, which did reasonably protect the public interest. Therefore, SCI's appeal said, complying with the agreement would subject the company "to the neverending possibility of criminal prosecution.
The appeals court reversed the trial court by stating that the lower court erroneously interpreted the Exclusive Rights Act.
According to the appeals court, "In our view, the Exclusive Rights Act seeks to limit potential problems, such as damage to existing gravesites, by limiting the right to open and close graves to the cemetery owner...The trial court did not recognize that the number of people affected by the decision will continually expand so long as Highland Park remains in operation. Hence, the Exclusive Rights Act is, indeed, reasonably necessary for the protection of the health, safety and welfare of the general public, and the trial court erred in finding to the contrary."
The case was remanded back to the trial court with instructions that summary judgment should be granted to SCI.
Courts to Funeral Service: Don't Litigate, Legislate
by Robert M. Fells, Esq., general counsel
From mid-December to early February, four courts handed down decisions in which they refused to overturn state laws affecting funeral and burial services that were alleged to be anti-competitive and anti-consumer.
The message from each court, two federal and two state, was clear: These laws may not be wise, but ask your legislators to change them, not us. This month's column will briefly highlight each of the decisions that suggest that ICFA members may want to consider new strategies when challenging unfair laws and regulations.
Singling Out For-Profit Cemeteries
In the first decision, Georgia Cemetery Association v. Cox, (353 F.3d 1319), the U.S. Court of Appeals for the 11th Circuit affirmed a lower federal court ruling that upheld a cemetery law passed by the Georgia legislature in 2000 imposing regulations on for-profit cemeteries but exempting religious, fraternal and municipal cemeteries.
The cemetery association, which the ICFA Government and Legal Fund had financially assisted in the case, argued that the law should be invalidated because public hearings conducted by the secretary of state "revealed complaints mostly about church operated-and not privately owned-cemeteries. Georgia Cemetery [Association] also points to further record evidence revealing that 50-60 percent of the church owned cemeteries are abandoned and in complete disrepair. The secretary of state argued that a purpose behind the regulation of private cemeteries is the legislature's belief that churches and other fraternal organizations are more likely to care for their cemetery grounds and have a closer relationship with their consumers, which generally precludes concern about fraud."
The appeals court stated that in order to find the new law constitutionally valid, "all there need be is a conceivable rational basis for the legislation. ... Under this standard, two things become irrelevant to the inquiry [italics in the original]. First: whether the conceived reason was in fact the reason for the legislation. ... Second: ... even if the legislation is based on 'faulty premises,' so long as there is any 'conceivable rational basis' to differentiate between cemeteries...the court cannot become involved in an evidentiary contest as to whether this is an actual rational basis for such differentiation."
In other words, even if the claims asserted by the association are accepted by the court, it still must uphold the law.
Regulating Preneed Casket Sales
In the second case, the North Carolina state appeals court came to a similar conclusion on January 20 in Board of Mortuary Science v. Crown Memorial Park, 590 S.E. 2d 467, involving a state law that limited the preneed sale of caskets to licensed funeral directors. The trial court had found the statute invalid as violating the due process and equal protection clauses of the U.S. and North Carolina constitutions, but the appeals court reversed the decision.
Among other issues, Crown Memorial stated that "the statutory restrictions are premised upon an ulterior motive to protect licensed funeral establishments from legitimate competition in an 'anti-consumer' fashion."
The court disagreed, noting, "Even if we interpret the surrounding circumstances as capable of supporting defendant's assertion that there was an ulterior motivation so as to make the statute otherwise unconstitutional, we would be constrained from doing so."
Here the court cited cases that held "statutes enacted by the legislature are presumed constitutional and will be upheld as such unless the party challenging the legislation shows unmistakably, clearly and positively that it is unconstitutional" and "where a statute is susceptible to two interpretations, one constitutional and one unconstitutional, the court should adopt the interpretation resulting in a finding of constitutionality."
The court therefore concluded that "there is a rational relationship between consumer protection and limiting the preneed sale of funeral merchandise to licensed funeral home directors."
Regulating Preneed Cremation Sales
In the third case, the Pennsylvania Supreme Court echoed the same thinking on January 22 in Cornerstone Family Services v. Bureau of Professional and Occupational Affairs, No. 106 MAP 2002. Cornerstone appealed an adverse lower court decision upholding the state funeral board's determination that only licensed funeral directors can sell preneed cremation services.
The lower court held that Cornerstone must exhaust its administrative remedies with the board prior to appealing to the courts. In a per curiam ruling, that is, a ruling without an explanation or opinion, the state supreme court denied Cornerstone's motion to change the lower court's ruling.
The ICFA had submitted a "friend of the court" brief urging the court to open competition in preneed marketing and, in an interesting sidelight, the state funeral board and the state funeral directors association filed motions to strike and suppress the ICFA brief. The court ruled against these motions.
The Associated Press ran a story on the decision headlined, "Cremation costs may rise after court's ruling."
Restricting Combination Operations
The fourth decision was published by the U.S. District Court for the Northern District of New York on February 4 in New York State Association of Cemeteries Inc. v. Richard Fishman, et al., No. 99-CV-00664. In this case, the state association challenged the constitutionality of a 1998 law that prohibits cemetery-mortuary combinations, prohibits cemeteries over 30 acres from selling upright monuments and prohibits cross-marketing, among other restrictions.
The ICFA Government and Legal Fund provided financial assistance to the state association and also filed a "friend of the court" brief in support of the association's pro-competitive efforts.
The state agency argued that the law "is in the public interest and a valid exercise of the state's police powers to regulate cemeteries." The federal district court quoted the U.S. Supreme Court stating that courts should not act as "a super legislature to judge the wisdom or desirability of legislative policy determinations made in areas that neither affect fundamental rights nor proceed along suspect lines. ... The fact that in an individual case the statute operates in a burdensome manner against persons acting in good faith is not grounds for its invalidation."
Most tellingly, the court noted that, "Courts do not use due process to strike down state laws, regulatory of business and industrial conditions, because they may be unwise, improvident or out of harmony with a particular school of thought." A state statute "may be wise or unwise; relief, if any be needed, lies not with the courts but the body constituted to pass laws for the state. The existence of facts supporting the legislative judgment is to be presumed."
While this decision is hardly a vote of confidence in the New York statute, the court's ruling is consistent with the three earlier opinions that urge parties to seek legislation, not litigation, to amend laws having anti-competitive consequences.
The ICFA Government and Legal Affairs Committee will be discussing the impact of these court rulings during its general session presentation at the ICFA Annual Convention & Exposition in Nashville.