Recent Court Decisions Highlight Operational Issues
by Robert M. Fells, Esq., general counsel
Individuals and companies involved in business disputes concerning funeral homes and cemeteries seem to be increasingly turning to the courts to resolve their differences. This month's column focuses on three recent cases where the lower courts' initial decisions may have serious implications for the entire industry. At this point, we assume that the decision in each case will be appealed.
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In North Carolina Board of Mortuary Science v. Crown Memorial Park, the state superior court considered whether a cemetery was acting in the capacity of an unlicensed funeral home by providing funeral services and merchandise to consumers. Specifically, the court held that unless the cemetery defendant, Crown Memorial Park, is duly licensed as a funeral establishment, it was prohibited from: offering to sell or arrange cremation services;
transporting or arranging to transport human bodies and cremated remains; and
advertising that it can make all necessary funeral arrangements. However, the court held that the cemetery could sell burial urns to the public, either at need or preneed, “without interference by the North Carolina Board of Mortuary Science.”
The most important aspect of the court's ruling concerned whether Crown Memorial Park could sell its “casket system” without licensure by the state board. On this issue, the court found that “certain parts” of the funeral licensing statute “violate the due process and equal protection clauses of the 14th Amendment to the Constitution of the United States and also violate the provisions of Sections 1 and 19 of the Constitution of the State of North Carolina, because they unreasonably deprive Crown of the right to engage in business and they impermissably discriminate against Crown.
“The restriction of preneed casket sales to licensed funeral establishments and their employees bears no rational relationship to the State's legitimate interest in protecting its citizens who purchase caskets in advance of death. There is no reasonable distinction between the preneed sale of caskets by licensed funeral establishments and the preneed sale of caskets by licensed cemeteries that are willing to be licensed for preneed sales and to submit to regulation of such sales.”
A statement published by the state board in late June indicates it is seeking support from the Legislature to amend the current statute by requiring the licensing by the board of all preneed sellers of merchandise. The decision is the latest in a series of court rulings during the last 12 months in Mississippi, Tennessee and Louisiana holding that laws restricting the sale of caskets to licensed funeral directors are unconstitutional.
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In Westfield Veterans Council v. Diocese of Springfield, a Massachusetts superior court prohibited a cemetery from removing American flags from grave sites. The court order is in the form of a temporary injunction that leaves the flags in place until the case has gone to trial. According to briefs filed in the case, the defendant cemetery permits the flying of American flags at veterans' graves for “seven days before and seven days after Memorial Day and Veterans Day.”
The cemetery argued that its regulation was reasonable because, “If the flags were left in place all summer, each flag would have to be moved by hand in order to mow around or over the stones, or each veteran's grave would have to be trimmed by hand. ... If a mower were to hit a flag holder or a flag, the object would become a projectile and could cause injury to the operator or cemetery visitors.”
The veterans council plaintiff argued that the cemetery's reasoning might justify an absolute year-round ban on the flags but not the current restriction to the two legal holiday time frames. In the preliminary ruling prior to trial, the court found the plaintiff's argument “compelling.” The court held, “It is beyond question that the flying of the United States flag in this manner constitutes an expression that is protected by the First Amendment.” The plaintiff also alleged “severe emotional distress” on families of the decedents caused by the cemetery's policy, which affects approximately 1,600 veterans' graves on the grounds.
The cemetery defendant is St. Mary Cemetery, a Catholic cemetery maintained by the Diocese of Springfield, Massachusetts. Courts generally have given a wide latitude to the rules of religious cemeteries, so this decision is unusual for its adjudication of such regulations. The ruling would also seem to apply to secular or non-denominational cemeteries under a similar fact pattern in the court's jurisdiction.
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The third court decision involves the requirement to arbitrate disputes in lieu of litigation concerning sales and marketing services provided by a third-party company on behalf of a cemetery owner. In The Redemptorists v. Coulthard Services Inc., a Maryland Court of Special Appeals decided whether certain claims in a lawsuit filed by the cemetery owner against a marketing firm defendant had to be dismissed, or at least postponed, due to an agreement to arbitrate any disputes.
Plaintiff alleged that defendants had breached their contract by a failure to pay $800,000 based on a percentage of the gross sales, and thereafter plaintiff terminated the contract and filed the litigation. The defendant company argued that the lawsuit should be dismissed because disputes arising under the contract were to be submitted to arbitration as specified under the provisions of the contract.
The appeals court held that “the arbitrable issue, namely the alleged withholding of funds representing the 'cause for termination' is at the heart of each of the six counts featured in The Redemptorists' complaint ... such that it cannot be severed from them.” The court ordered the issue to proceed to arbitration and stayed the litigation pending the outcome. “Should the arbitrator conclude that there was no material withholding of funds, this finding would be binding on the parties to the arbitration in the litigation of all six counts, so that there would be no need to litigate them.” This ruling suggests that even “standard” arbitration clauses in service contracts can be subject to controversy.
In sum, the three cases indicate a potential trend for business disputes in the funeral services, interment and memorialization industries to more frequently turn to litigation when the parties fail to settle their disagreements between themselves. However, unlike private settlements, court decisions can affect hundreds and thousands of businesses under their jurisdiction.