Washington Report 012001
by Robert M. Fells, Esq., general counsel
On November 22, the ICFA filed an amicus curiae or "friend of the court" brief in litigation pending in the U.S. District Court for the Northern District of New York challenging the constitutionality of a 1998 state law regulating cemeteries. Supporting plaintiffs, including the New York State Association of Cemeteries, the ICFA urged the court to overturn Chapter 560, which, among other things, prohibits New York cemeteries from selling upright markers, memorials and monuments; prohibits cemeteries 30 acres or more in size from having relationships with funeral homes; and prohibits cemeteries from having management contracts with anything other than a nonprofit cemetery corporation.
The ICFA stated in its brief to the court: "The prohibitions in this statute appear to have no rational basis but are anti-competitive and anti-consumer in effect. The only logical purpose served by the prohibitions in Chapter 560 is to maintain the status quo market shares of existing industry segments and to insulate those entities from competition." The ICFA provided corroborating evidence of its views through rulings and opinions from the Federal Trade Commission and the Internal Revenue Service, and from two recent federal court decisions in Tennessee and Mississippi that found as unconstitutional laws restricting the retail sale of caskets exclusively to licensed funeral directors.
The ICFA stated that prohibitions similar in nature to Chapter 560 "undermine the ability of cemeteries to function in the best interests of their lot owners and families, bar new entrants into the marketplace, and retard price competition -- all to the detriment of consumers whom Chapter 560 purportedly seeks to 'protect.' " The court is considering plaintiffs' motion for summary judgment, while briefs arguing to uphold the statute will be filed by the defendants, including the New York State Cemetery Board, and also by the New York Funeral Directors Association as amicus curiae in support of defendants.
Restrictions on the activities of New York cemeteries supposedly have been justified due to their nonprofit status. However, the ICFA demonstrated to the court that "the sale of markers, memorials and monuments by nonprofit cemeteries is a well-established practice consistent with IRS policy. Likewise, the combined operation of cemeteries and funeral homes has met with approval from the FTC, and from the IRS for nonprofit cemeteries when the relationship is structured in an arms'-length manner. Similarly, cemeteries should be permitted to contract with for-profit management firms when such relationships are in the best interests of the lot owners." The ICFA amicus brief may be viewed at /sites/default/files/amicus_brief.pdf.