Heffner v. Murphy

745 F.3d 56

Ernest F. HEFFNER; Harry C. Neel; Bart H. Cavanagh, Sr.; John Katora; Brian Leffler; Rebecca Ann Wessel; Mark Patrick Dougherty; Cynthia Lee Finney; Nathan Ray; Todd Eckert; Ben Blascovich; Matthew Morris; William Sucharski; John McGee; Amber M. Scott; Erika Haas; Nicolas Wachter; David Halpate; Patrick Connell; Eugene Connell; Matthew Connell; James J. Connell, Jr; Jefferson Memorial Park, Inc; Jefferson Memorial Funeral Home, Inc.; Wellman Funeral Associates Inc., doing business as Forest Park Funeral Home; East Harrisburg Cemetery Company, doing business as East Harrisburg Cemetery & Crematory; Robert Lomison; Craig Schwalm; Gregory J. Harvilla; Betty Frey

v.Donald J. MURPHY; Joseph A. Fluehr, III; Michael J. Yeosock; Bennett Goldstein; James O. Pinkerton; Anthony Scarantino; Basil Merenda; Michael Gerdes; Peter Marks; C.A.L. Shields, Appellants.

No. 12–3591.

United States Court of Appeals, Third Circuit.

Argued: June 11, 2013.

Opinion filed: Feb. 19, 2014.

Held Unconstitutional

63 P.S. § 479.8(a, b, d), 479.9(a)James K. Kutz (argued), Jason G. Benion, Post & Schell, P.C., Harrisburg, PA, for Appellees.

Kathleen G. Kane, Attorney General, John G. Knorr, III, Chief Deputy Attorney General (argued), Maryanne M. Lewis, Senior Deputy Attorney General, Office of Attorney General, Harrisburg, PA, for Appellants.

Before: McKEE, Chief Judge, AMBRO and GREENBERG, Circuit Judges.

OPINION OF THE COURT

McKEE, Chief Judge.

Contents

I.

Facts and Procedural History

62

II.

Discussion

65

A.

Jurisdiction and Standard of Review

65

B.

Facial versus As–Applied Challenge

65

C.

Fourth Amendment

66

D.

Dormant Commerce Clause

70

1.

Restrictions on Ownership and Alienability of Funeral Establishments

71

2.

Preparation Room Requirement

77

3.

Place of Practice and Full–Time Supervisor Requirement

78

E.

Substantive Due Process

79

1.

“One–and–a–Branch” Limitation

79

2.

Licensing Restrictions

81

3.

“Place-of-practice” and Full–Time Supervisor Requirement

82

4.

The Preparation Room Requirement

84

5.

Restriction on Serving Food

85

6.

Trusting Requirement

86

F.

First Amendment

88

1.

Restriction on Use of Trade Names

88

2.

Payment on Commissions to Unlicensed Salespeople

92

G.

Contract Clause

93

III.

Conclusion

94

The Pennsylvania Board of Funeral Directors (the “Board”) appeals the grant of summary judgment that the District Court awarded based upon its conclusion that several provisions of Pennsylvania's Funeral Director Law (“FDL”), 63 Pa. Stat. Ann. § 479.1 et seq., violate various provisions of the U.S. Constitution. The suit was brought by individuals and entities who are either involved in, or wish to be involved in, Pennsylvania's “death care industry.”¹ In relevant part, the Plaintiffs challenged statutory provisions that: (1) permit warrantless inspections of funeral establishments by the Board; (2) limit the number of establishments in which a funeral director may possess an ownership interest; (3) restrict the capacity of unlicensed individuals and certain entities to hold ownership interests in a funeral establishment; (4) restrict the number of funeral establishments in which a funeral director may practice his or her profession; (5) require every funeral establishment to have a licensed full-time supervisor; (6) require funeral establishments to have a “preparation room”; (7) prohibit the service of food in a funeral establishment; (8) prohibit the use of trade names by funeral homes; (9) govern the trusting of monies advanced pursuant to pre-need contracts for merchandise; and (10) prohibit the payment of commissions to agents or employees.

As a threshold matter, we surmise that much of the District Court's conclusions regarding the constitutionality of the FDL, enacted in 1952, stem from a view that certain provisions of the FDL are antiquated in light of how funeral homes now operate. That is not, however, a constitutional flaw. Thus, for the reasons that follow, we reverse the District Court's judgment striking down the FDL's warrantless inspection scheme on Fourth Amendment grounds. We also reverse the District Court's judgments concerning the Plaintiffs' dormant Commerce Clause challenges to certain provisions of the FDL. We reverse as well the District Court's conclusions that the disputed FDL provisions violate the substantive component of the Due Process Clause. We also reverse the District Court's ruling that the Board's actions unconstitutionally impair the Plaintiffs' private contractual relations with third parties in violation of the Constitution's Contract Clause. We will affirm the District Court's ruling that Pennsylvania's ban on the use of trade names in the funeral industry runs afoul of First Amendment protections, but reverse its ruling that the ban on the payment of commissions to unlicensed salespeople violates the Constitution. Finally, we remand to the District Court to modify its order in accordance with this opinion.

I. Facts and Procedural History

The FDL was enacted in 1952 to “provide for the better protection of life and health of the citizens of [Pennsylvania] by requiring and regulating the examination, licensure and registration of persons and registration of corporations engaging in the care, preparation and disposition of the bodies of deceased persons....” 63 Pa. Stat. Ann. § 479.1. The FDL created the Board, it entrusts the Board with enforcing the FDL, and “empower[s] [it] to formulate necessary rules and regulations not inconsistent with [the FDL] for the proper conduct of the business or profession of funeral directing and as may be deemed necessary or proper to safeguard the interests of the public and the standards of the profession.” Id.§ 479.16(a); see also id. § 479.19.

The FDL requires individuals to obtain a license to be a funeral director or own funeral homes in Pennsylvania.²Id.§ 479.13(a). Generally, only licensed funeral directors or partnerships of two or more licensed funeral directors may own funeral homes. Id.§ 479.8(a). The statute also restricts the types of individuals and entities that may obtain such licenses. However, upon the death of a licensee, the FDL authorizes the Board to issue a license to the licensee's estate for a period of three years or to the licensee's surviving spouse while s/he remains unmarried. Id. The statute authorizes restricted corporations (“RBCs”) to obtain licenses, provided that they are formed for the sole purpose of conducting a funeral directing practice. Id.§ 479.8(b).³ The FDL prohibits an RBC from having an ownership interest in any other funeral establishment and requires that at least one of its principal officers be a licensed funeral director. Id. Upon the death of a shareholder funeral director, shares or stock of an RBC may be transferred to members of the decedent's immediate family. Id.

The FDL also codifies Pennsylvania's prohibition of general business corporations owning funeral directing licenses. See id.§ 479.8(d). Prior to 1935, Pennsylvania issued funeral directing licenses to individuals as well as corporations. However, in 1935 the General Assembly imposed restrictions. Consistent with a 1936 decision of the Pennsylvania Supreme Court, see Rule v. Price, 323 Pa. 139, 185 A. 851 (1936), the legislature eventually allowed a total of seventy-seven “pre–1935” licenses to be “grandfathered” into the new law. Currently, any person or entity—including general business corporations—may own an interest in one of these licenses and own and operate a funeral establishment pursuant to the authority granted by that license.

Licensed funeral directors are limited to operating at one principal place of business with no more than one branch location. 63 Pa. Stat. Ann. § 479.8(e). These establishments must be conducted under the name of a licensed principal or that of a predecessor establishment. Id. §§ 479.8(a)-(c). In addition, the FDL requires that each establishment retain a licensed funeral director as a “full-time supervisor,” id., and include a “preparation room ... for the preparation and embalming of human bodies,” id.§ 479.7. Food service is generally prohibited inside a funeral establishment. Only “non-intoxicating” beverages may be served, and they may only be served in rooms “not used for the preparation and conduct of [ ] funeral service[s].” Id.

As the administrative entity entrusted with enforcing the FDL, the Board's inspectors are authorized to conduct warrantless and unannounced inspections of funeral establishments. Specifically, Section 16(b) of the FDL authorizes the Board to appoint inspectors who have:

[T]he right of entry into any place, where the business of funeral directing is carried on, or advertised as being carried on, for the purpose of the inspection and for the investigation of complaints coming before the board and for such other matters as the board might direct.

Id.§ 479.16(b).

Finally, the FDL also contains two provisions relating to the “pre-need” sale of funeral arrangements that are at issue here.⁴ First, Section 11(a)(8) of the FDL provides that a funeral director or funeral home's license may be suspended or revoked if a licensed funeral director pays unlicensed employees commissions on sales. See id.§ 479.11(a)(8) (“The board ... may refuse to grant, refuse to renew, suspend or revoke a license of any applicant or licensee ... for ... (8) paying a commission ... to any person ... for ... business secured....”). Second, the FDL requires that a funeral director who enters into a pre-need contract to provide funeral services deposit 100% of any advance payments into an escrow or trust account. Id.§ 479.13(c).

In May 2008, the Plaintiffs initiated this suit against the Board, asserting claims under 42 U.S.C. § 1983 and 28 U.S.C. § 2201 for alleged violations of their rights under the U.S. Constitution. Specifically, the Plaintiffs' amended complaint asserted that the above-referenced FDL provisions violated several constitutional provisions, including the Commerce Clause, the Contract Clause, the First...