Opinion
99-CV-00664
January 27, 2004
JAMES D. FEATHERSTONHAUGH, ESQ., NADINE FEIDEN SHADLOCK, ESQ., FEATHERSTONHAUGH, CONWAY, WILEY CLYNE, Albany, NY, of counsel For Plaintiffs
JEFFREY S. SHELLY, ESQ, BOIES, SCHILLER FLEXNER, LLP, Albany, NY, of Amicus Curiae for Plaintiffs
ROGER TIPPY, ESQ., Voorheesville, NY, of Amicus Curiae for Defendants
BACKGROUND
New York State Association of Cemeteries, Inc., and Mount Calvary Cemetery, Inc. ("plaintiffs") instituted this declaratory judgment action under 42 U.S.C. § 1983 against various state officials in their official and individual capacities, and the New York State Cemetery Board ("the Board") to challenge the constitutionality of Chapter 560 of the Laws of 1988 ("Chapter 560").
Plaintiffs are seeking an order and judgment: (1) declaring the Chapter unconstitutional because it deprives them of their rights under the Equal Protection and Due Process Clauses of the United States and New York State Constitutions and the Commerce and Contract Clauses of the United States Constitution, (2) enjoining defendants from enforcing Chapter 560; and (3) awarding plaintiffs' attorneys fees pursuant to 42 U.S.C. § 1988.
State supervision of cemeteries is not a new phenomenon. Cemeteries have been regulated since ancient times. See, P. Jackson, The Law of Cadavers and of Burial Places 187-94 (2d Ed. 1950), and courts have long recognized the right of a state to enact cemetery regulatory legislation reasonably related to its police power, even though such laws may interfere with the contractual relations and commercial freedoms of private parties. Home Building Loan v. Blaisdell, 290 U.S. 298, 54 S.Ct. 231, 78 L. Ed 413 (1934).
New York public cemetery corporations are regulated under Article 15 of the State's N-FPL. § 1504 of the statute created the New York State Board of Cemeteries ("the Board") within the Division of Cemeteries in the Department of State ("DOCS"). The Board is comprised of the New York Secretary of State, the Attorney General and the Commissioner of Health or their appointed representative(s). The Board's purpose is to ensure that state regulated cemeteries are operated in a not-for-profit capacity, and to make sure that these cemeteries are managed for long term financial stability and perpetuity. The Board's responsible to one of public interest and public care particularly with families and individuals that may be dealing with issues at a distinctly sensitive and troubling part of their lives.
In the late 1980s, the Board became concerned that plans were being prepared to develop a number of cemetery and funeral entity combinations, and began reviewing these proposals. Combinations were a threat to undermine the not-for-profit natures of cemeteries and to financially impair neighboring cemeteries by capitalizing on the distinctions between cemetery and funeral entity corporate and regulatory structures. Additionally, the development of management agreements between cemetery corporations and for-profit corporations was weakening the not-for-profit status of cemeteries where such agreements were in place, was shriveling the cemetery corporations' fiscal resources and jeopardizing the performance of its perpetual care obligations.
The Board's combinations review intensified in 1994, and, on March 6, 1996, the Board convened a public meeting and took testimony and written comments regarding cemeteries/funeral homes combinations in New York State. A sizeable majority of the presenters were strongly opposed to combinations. The Board also examined the experience of other states where combinations were more common. On February 14, 1997, the Board issued a comprehensive report regarding the combinations issues. The report entitled, Policy Issues Impacting New York State Cemeteries, included the following findings:
Combination formats:
Generally defined, combinations include any legal relationship between a cemetery and one or more components of the death care industry. The death care industry consists of monument retailers, wholesale suppliers to the retail monument industry, cemetery operators and funeral entities. Most combinations take place between not-for-profit cemeteries and for-profit funeral homes. Until the mid 1990s, the only combinations in New York State were a few where for-profit funeral homes operated not-for-profit crematories. At that point, two multi-national for-profit funeral corporations took control of several not-for-profit cemeteries, and several other types of combinations have been proposed.
One of the proposed combinations would have a funeral home corporation, or other business corporation, buying the certificates of indebtedness of a not-for-profit cemetery corporation, thereby obtaining virtual control over the election of the cemetery corporation's board of directors. After gaining control, representatives of the funeral home are elected to the board of directors. The cemetery corporation then enters into contractual agreements with the for-profit business or its related parties. The cemetery is then operated in a manner that allows the for-profit corporation to withdraw funds from the cemetery, as profit, that otherwise would have been used to improve operations of the cemetery or invested to insure future financial viability.
Two other proposed combinations were also proposed The first would have a cemetery creating a for-profit subsidiary and then building a funeral home on the cemetery's property. The second would take place by a funeral home corporation creating a not-for-profit subsidiary that later opens a cemetery. In the aftermath of these combinations, various contractual arrangements, essentially beneficial to the for-profit operation, would be entered.
Impact of combinations:
Combinations promise increased services and lower prices, but they actually reduce competition, service levels and higher prices.
For-profit corporation or business control of statutory prescribed not-for-profit cemetery corporations will result in the syphoning off, through direct and indirect means, of cemetery revenues, in the pursuit of management strategies that benefit individuals or stockholders. This is contrary to the philosophy underlying the not-for-profit corporation law.
By diverting cemetery funds from operations and from trust fund accumulation, combinations will deplete cemeteries assets until the cemeteries cannot sustain themselves. At that point, the cemeteries will be abandoned and become a burden on the local taxpayers though conveyance of fiscal and operational responsibility to the towns and villages, as mandated under Town Law § 291.
Combinations threaten the financial viability of other cemeteries, funeral homes and monument companies by drawing business away from these other businesses. This is expected to drive some cemeteries into insolvency and, thus, into becoming a burden on towns and villages.
The rights of lot owners and potential lot owners will be jeopardized as combinations would create multiple avenues and unsavory marketing and sales techniques such as high pressure telephone and door-to-door solicitation and bait and switch techniques. Up until now, these methods have been foreign to bona fide cemetery operators who are sensitive to the nature of their business and their interaction with people at a time of personal loss.
Cemetery personnel could be used to fraudulently practice funeral directing without a license, depriving the public of the protections assured by the training and licensure of funeral directors.
The Board was also concerned about its continued ability to protect the public and cemeteries through audit of cemeteries' books and records. Combinations would result in corporate assets and business relationships becoming commingled with for-profit funeral homes, whose books and reports are not subject to audit. This would create opportunities for deceptive and fraudulent practices.
The Board concluded that immediate legislation was needed prohibiting the creation of combinations in New York State. As a result, Chapter 560 implementing the Board's positions, was introduced and passed in both houses of the New York State Legislature. § 1 of the statute recites the Legislature's reasons for its enactment.
Chapter 560 Laws of 1988
" § 1. Legislative findings and declarations. The legislature finds and declares that the state has a vital interest in the oversight of its cemeteries and in their viability as not-for-profit entities, as well as the protection of its citizens when making important and difficult decisions regarding the burial of loved ones. The combination of profit making ventures with not-for-profit ventures often raises conflicting business interests. The combinations of interests in the management of not-for-profit cemeteries are ordinarily threatening to vital state interests and should be prohibited. New York courts have repeatedly held that the regulation of cemeteries is a valid exercise of the state police power, and that the operation of a cemetery is imbued with a public purpose, and that therefore any contract or business activity in relation to the operation of a cemetery is subject to changes in the state law. The regulation of the sale of monuments is also a concern and interest of the state because of its relationship to the not-for-profit status of cemeteries.
Chapter 560 prohibits not-for-profit, religious, municipal, private and family cemetery corporations from engaging in certain activities with a funeral entity. New York Not-For-Profit Law ("N-FPL") § 1502 defines a cemetery corporation as " . . . any corporation formed under a general or special law for the disposal or burial of deceased human beings, by cremation or in a grave, mausoleum, vault, columbarium or other receptacle but does not include a family cemetery corporation or a private cemetery corporation." Chapter 560 defines a funeral entity as, "[a] person, partnership, corporation, limited liability company or other form of business organization providing funeral home services, or owning or controlling, conducting or affiliated with a funeral home, any subsidiary thereof or an officer, director or stockholder having ten per centum or greater proprietary, beneficial, equitable or credit interests in a funeral home."
Chapter 560 of the Laws of 1998 ("Chapter 560") amended several New York State statutes concerning the ownership, operation and administration of cemeteries, including the Not-For-Profit ("N-FPL"), N.Y. Religious Corporations Law, N.Y. Village Law General Municipal Law, N.Y. Town Law, N.Y. County Law and the N.Y. Public Health Law.
The portion of Chapter 506 that is the main thrust of this lawsuit is 1506(a) of the N-FPL. This state establishes two classes of cemeteries, over and under 30 acres in size. It prohibits over 30 acre cemeteries from selling or renting to a funeral entity as well as a cemetery's use of cemetery land for a funeral entity. The law also grandfathers a funeral entity's ownership of a not-for-profit crematory subsidiary, but does not permit reciprocal involvement by a cemetery.
Over 30 acre cemeteries are limited in other permissible activities and forbids all contracts and all competition with funeral entities. These cemeteries cannot sell or lease land to a funeral entity, commingle funds with a funeral entity or authorize control of cemetery related business or affairs of a funeral entity.
The enactment allows an over 30 acre cemetery to sell or lease its cemetery land to any other for profit entity including, e.g. a florist, caterer or fast food restaurant. These cemeteries can commingle their funds, cross market its goods and authorize control of cemetery related businesses and affairs for any for-profit entity, except a funeral entity.
This 30 acre exemption was used in the statute because many cemeteries this size depend on the local funeral home to furnish basic administrative services where noone else is available or competent enough to supply them. These cemeteries are usually operated by unpaid, part-time volunteers. The local funeral home renders many of the services and record keeping requirements that are typically the obligation of the paid cemetery operator. Without this help from the local funeral directors, these cemeteries could not continue to operate. Many small church cemeteries around the state rely on the funeral director to furnish the cemetery with many of the primary supplies and services that are regularly paid for at bigger, stronger financed cemeteries. These relationships work to the advantage of all those involved, the funeral home, the cemetery and the family.
Because the acreage of all cemeteries is a matter of public record, the exempt or non-exempt status of any cemetery is easily obtainable. The 30 acre demarcation differentiates between those cemeteries that are large enough and have substantial activity to employ staff and draw in competent and knowledgeable officers, and those who do not. It also makes a distinction between cemeteries which need protection from the funeral entity/combination industry, and those not requiring it.
Chapter 560 also amended N-PCL § 1506(i)(1)(C) forbidding the sale or disposition of cemetery property to a funeral entity. Chapter 560 prohibit certain financial activities between funeral entity and cemetery corporation, such as cross-marketing or funeral/cemetery goods or services. Chapter 560's provisos are inapplicable to the operation of a crematorium or act of cremation performed by a funeral entity if the funeral entity was performing these activities prior to January 1, 1998, or had filed an application with the state Cemetery Board for the operation of a crematory or crematorium prior to January 1, 1998.
As the demand for crematory facilities grew through the years in the State in many urban and some rural communities, traditional cemeteries built crematories to meet this demand. In some of these communities, and in others where no crematories existed, other not-for — profit corporations were organized to operate stand alone crematories.
This exception permits continued operation of stand alone crematories run by not-for-profit corporations in which funeral directors have significant roles. These crematories only provide cremation related services, unlike traditional cemeteries which provide a wide range of internment services. There are only 17 of them, constituting only 1% of the regulated cemeteries in the state. Many are located in small rural communities where funeral homes are the only providers of cremation services. The exception was made to ensure that death care industry consumers throughout the State would have cremation services available to them without the incurring the high costs of transporting bodies to distant crematories.
The Board and the Legislature also recognized that if public interest in cremation continued to grow, it will become financially feasible for other cemeteries to construct and run other crematories. This will remove any future need to construct new stand alone crematories operated by not-for-profit corporations having funeral directors in important roles, and Chapter 560's prospective prohibition on developing such crematories will not have negative public interest consequence.
Another portion of Chapter 560 added § 1516 to the N-PCL. Although Chapter 560 restricted the sale of monuments by not-for-profit cemeteries, the addition allowed some cemeteries in the Buffalo, N.Y. area which have historically sold flush granite markers to keep on selling these types of monuments. Chapter 560 continues to authorize all cemeteries to sell flush bronze markers.
For over fifty years, the rules and regulations of the Board prohibited cemeteries from selling monuments, except for flush bronze markers. In western New York state, cemeteries had an established tradition approved by the Board, of offering plot owners a choice between bronze or granite flush markers in sections where flush markers were used. This tradition continues in five western New York cemeteries and, unlike many cemeteries, the five cemeteries who offer this choice do not require the plot holders to pay annual care charges. The choice off markers was permitted to continue for the mutual benefit of their plot owners. Chapter 560 just implemented a long standing restriction on the sale of monuments along with its exceptions and practices.
Plaintiffs contend that the prohibitions and incongruous provisions of Chapter 560 cannot be reconciled with the established rational basis that a state legislative enactment must have or with respect to public policy purpose. The result of this is that Chapter 560 violates the the United States Constitution's Contract Clause, Due Process Clause, Equal Protection Clause, and Interstate Commerce Clause, as well as the New York State Constitution's Due Process Clause and Equal Protection Clause.
Defendants assert that Chapter 560 is in the public interest and a valid exercise of the State's police power to regulate cemeteries.
Currently before the court are cross motions for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure.
DISCUSSION
Rule 56 of the Federal Rules of Civil Procedure permits summary judgment where the evidence demonstrates that "there is no genuine issue of any material fact and the moving party is entitled to judgment as a matter of law." Anderson v. Liberty Lobby. Inc., 477 U.S. 2452, 247, 106 S.Ct. 2505, 2509, 91 L.Ed.2d 202 (1986). Summary judgment is properly regarded as an integral part of the Federal Rules as a whole, which are designed to "secure the just, speedy and inexpensive determination of every action." Chelates Corp. v. Citrate, 477 U.S. 317, 327, 106 S.Ct. 2548, 2554, 91 L.Ed.2d 265 (1986) (quoting Federal Rule of Civil Procedure 1). In determining whether there is a genuine issue of material fact a court must resolve all ambiguities and draw inferences against the moving party. United States v. Diebold, 369 U.S. 654, 655, 82 S.Ct. 993, 994, 8 L.Ed.2d 176 (1962)( per curiam). An issue of credibility is insufficient to preclude the granting of summary judgment. Neither side can rely on conclusory allegations or statements in affidavits. The disputed issue of fact must be supported by evidence that would allow a "rational trier of fact to find for the non-moving party." Mashusita Electric Industries Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986).Unsupported allegations will not suffice to create a triable issue of fact. Goenga v. March of Dimes Birth Defects Foundation, 51 F.3d 14, 18 (2d Cir. 1995). Nor will factual disputes that are irrelevant to the disposition of the suit under governing law preclude any entry of summary judgment. Anderson, 477 U.S. at 247, 106 S.Ct. at 2509.
The states of Michigan and Wisconsin have statutes similar to Chapter 560. See Mich. Comp. Laws § 339.1812; Mich. Stat. Ana. § 18.425; Wis. Stat. §§ 157.067 (1999) and 445.12. The respective courts of the two states have held theses statutes to be constitutionally valid. Deepdale Memorial Gardens v. Administrative Secretary of Cemetery Relations, 69 Mich. App. 705, 426 N.W.2d 785 (Mich. Cy. App. 1988); Cemetery Services, Inc. and SCI Wisconsin Funeral Services. Inc. v. Wisconsin Department of Regulation Licensing, et al , 221 Wis.2d 817, 586 N.W.2d 181 (Wis. Cy. App. 1988, review denied, 255 Wis.2d 488, 594 N.W.2d 383 (Wis.S.Ct. 1999).
The Michigan court ended its Fourteenth Amendment assessment by remarking that the Michigan legislature "had an ample, rational reason basis to conclude that competition in the cemetery and funeral businesses was preserved by prohibiting one agency from both acting as a cemetery and acting as a mortician." Deepwell Memorial Gardens, at 169 Mich App. at 712, 426 N.W.2d at 789.
Plaintiffs contend that authority for declaring Chapter 560 unconstitutional is found in recent United States District Court opinions, Casket Royale. Inc. v. State of Mississippi, 124 F. Supp.2d 434 (S.D. Miss. 2000), and Craigmiles v. Giles, 110 F. Supp.2d 658 (E.D. Term. 2000), aff d., 312 F.3d 220 (6th Cir. 2002).
Craigmiles, concerned a state law which permitted only licensed funeral directors to sell caskets. The court found that the law did not meet the rational basis test because licensure was not a rational means of achieving a legitimate state purpose and held that the Equal Protection and Due Process Clauses of the Fourteenth Amendment.
In Casket Royale, the court also invalidated a state law giving licensed funeral directors the exclusive right to sell caskets on the same unconstitutional grounds ruling that the law did not have a rational basis nor did it serve the state's legitimate interest in consumer protection.
Plaintiff's maintain that Chapter 560 is anti-competitive, protectionist to funeral entities, and deprives New York cemeteries of opportunities to improve traditional cash flow by the sale of traditional cemetery products such as monuments, which are fundamental to the death care industry.
In their supplemental submissions and oral arguments, neither side in this law suit made reference to the recent case of Powers, et al. v. Harris et al. , 2002 WL 32026155 (W.D. Okla, 2002). In this case, plaintiffs conduct a casket sales business over the internet making sales, inter alia, to Oklahoma residents. They assert that the Oklahoma Funeral Services Licensing Act, 59 O.S. § 395.1[14-395.1] et seq. ("the FSLA") that requires that casket sellers in Oklahoma must have a state issued funeral establishment license as well as a funeral director's license, violates four clauses of the United States Constitution: the Due Process, Equal Protection, and Privileges and Immunities Clauses of the Fourteenth Amendment, and the Commerce Clause of Article I, Section.
After a non-jury trial, the court found the FSLA does "not unconstitutionally deprive plaintiffs of federal due process of law or of equal protection guarantees because the restrictions imposed by Oklahoma's funeral services laws are rationally related to the legitimate public purpose of consumer protection. Oklahoma's funeral service laws also do not deny any constitutionally protected privileges or immunities of citizenship. Powers v. Harris, 2002 WL 32026155 at * 18. The court did not act on the Commerce Clause violation claim finding that there was not a case or controversy sufficient to provide jurisdiction to determine plaintiffs' Commerce Clause claim. Id. at * 7.
In reaching its decision in Powers v. Harris, the District Court considered in detail the three cases cited by defendants as determinative in the instant case, and disagreed with their holdings. The court's opinion observed that the three decisions improperly balanced the degree to which the writing court finds the challenged statute, in fact, constitute a service or disservice to the public, and concluded that "[t]he rational evaluation of a statute's potential service or disservice to any variety of public interests is immaterial to the question of whether the statute embodies at least one conceivably reasonable means of furthering at least legitimate public policy goal." Id. at 16.
This court agrees with the Oklahoma District Court's comments, and finds that these three cases cited by defendants will be not determining factors in the decision in the case at bar.
It is irrelevant whether a statute will in fact promote the Legislature's intended purpose. Minnesota v. Clover Leaf Creamery Company, 449 U.S. at 464, 101 S.Ct. at 724. All that is required is that the statute be nor palpably arbitrary or in other words, that the Legislature could have decided rationally that it would likely further the underlying goals of the enactment. Id. 449 U.S. at 466, 101 S.Ct. at 725. That unequal treatment should result from the statute and the subsequent regulatory schemes is of no import where a statute has been adopted rationally. Dandridee v. Williams, 397 U.S. 471, 486-87, 90 S.Ct. 1153, 11162-63, 25 L.Ed.2d 491 (1970).
Under the rationality test, a statute will be upheld "if there is a rational relationship between the disparity of treatment and some legislative government purpose." Heller v. Doe. 509 U.S. 312, 322, 113 S.Ct. 2637, 2644, 1215 L.Ed.2d 75 (1993). The rational basis standard "is not a license for courts to judge the wisdom, fairness or logic of legislative logic." FCC v. Beach Communications. Inc., 508 U.S. 307, 313, 113 S.Ct. 2096, 2101, 124 L.Ed.2d 211 (1993).The Supreme Court has counseled that the judiciary 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." New Orleans v. Dukes, 427 U.S. 297, 303, 96 S.Ct. 2513, 2517, 49 L.Ed.2d 511 (1976). A court must uphold the challenged classification "if there is any reasonably conceivable state of facts that could provide a rational basis" for it. FCC v. Beach Communications Inc., 508 U.S. at 313, 113 S.Ct. at 2101. The legislature "has no obligation to produce evidence to sustain the rationality of a statutory classification. . . .[A] legislative choice is not subject to courtroom fact finding and may be based on rational speculation unsupported by evidence or empirical data."Heller v. Doe, 509 U.S. at 320, 113 S.Ct. at 2643. "Further, a legislature that creates these categories need not actually articulate at any time the purpose or rationale supporting its classification." Id. It is not enough for a plaintiff to demonstrate "an imperfect fit between means and ends." Id. "The burden is on the one attacking the legislation to negative every conceivable basis which might support it. . . . whether or not the basis has a foundation on the record." Id., Minnesota v. Clover Leaf Creamery Company, 449 U.S. 456, 464, 101 S.Ct. 715, 66 L.Ed.2d 659 (1981)(Thus, "those challenging the legislative judgment must convince the court that the legislative facts on which the classification is apparently based could not reasonably be conceived to be true by the government decision maker.")
The court will discuss plaintiffs' Federal and State constitutionality issues seriatim.
CONTRACT CLAUSE —
Courts have long recognized the right of a state to enact laws reasonably related to its police power, even though such laws may interfere with the contractual relations and commercial freedom of private parties. Home Builders Loan v. Blaisdell, 290 U.S. 398, 54 S.Ct. 231, 78 L.Ed. 413 (1934). Statutes that interfere with the sale or disposition of cemetery property have been upheld by the New York Court of Appeals as a reasonable exercise of the police power. Grove Hill Realty Company, 7 N.Y.2d 403, 408, 198 N.Y.S.2d 292 (1960). (upholding constitutionality of section that requires certain percentage of sale deposited into maintenance funds); Jackson v. Elmont Cemetery. Inc., 300 N.Y. 526, (1994) (upholding validity of section that limits percentage of proceeds that can be paid to vendors of cemetery land). The question is not whether the legislation affects contracts directly or indirectly but, rather, whether the legislation is addressed to a legitimate end taken are reasonable to that end. Matter of People of the State of New York. Title Mortgage Gguarantee of Buffalo, 264 N.Y. 690, 190 N.E. 153 (1934). So tested, Chapter 560 is not constitutionally invalid since it was intended to curb economic wrongs.
Parties, by entering into contracts, may not estop the legislature to enact laws intended for the public good. That the government may be required, in times of public stress so to nullify private contracts is an implied term of the law in every contract, so that such legislation, if enacted, does nor impair the obligation of the contract within the meaning of the limitation.
Chapter 560 is a valid exercise of the State's police power. The legislature could have rationally believed it necessary to prevent the commercial exploitation of cemeteries by combinations. It is sufficient that the method chosen be reasonable. Williamson v. Lee Optical Company, 348 U.S. 483, 488, 75 S.Ct. 461, 464, 99 L.Ed.2d 250, 251 (1955). 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. City of New Orleans v. Dukes, 427 U.S. 297, 96 S.Ct. 2513, 49 L.Ed.2d 511(1976).
In view of the significant and legitimate purposes behind this statute and the reasonable means chosen by the Legislature to accomplish these purposes, any impairment of contractual relationships the statute will produce in the heavily-regulated cemetery industry does not rise to a level of constitutional concern.
EQUAL PROTECTION CLAUSE —
Rational basis review is used in equal protection analysis, and a statute will be upheld against equal protection challenge if there is any reasonably conceivable state of facts that could provide a reasonable basis for the statute's passage by the legislature. Heller v. Doe, 509 U.S. at 520, 113 S.Ct. at 2096. The Equal Protection Clause is satisfied so long as there is a plausible policy reason for the classification.United States Railroad Retirement Board v. Fritz, 449 U.S. 166, 174, 179, 101 S.Ct. 453, 66 L.Ed.2d 368 (1980), the legislative facts upon which the classification is ostensibly founded could be deemed accurate by the Legislature, Vance v. Bradley, 440 U.S. 93, 111, 99 S.Ct. 939, 950, 59 L.Ed.2d 171 (1979), and the relationship of the classification to its goal is not so attenuated as to render the distinction arbitrary or irrational. Cleburne v. Cleburne Lining Center. Inc., 473 U.S. 432, 446, 105 S.Ct. 3249, 87 L.Ed.2d 313 (1985).
At the time Chapter 560 was enacted, facts existed that demonstrated to the legislature that such a law was necessary to ensure the financial viability of all cemeteries, particularly small cemeteries, to protect the state's citizens when they are making important and difficult decisions regarding the burial loved ones, and to shield them from such potential problems as price fixing and lack of variety and/or choice in planning a funeral, purchasing a cemetery plot and monument. These considerations were a sufficient rational basis for the legislature to take the action it did, and did not violate the Equal Protection Clause.
THE COMMERCE CLAUSE —
Plaintiffs contend that Chapter 560 violates the Commerce Clause because it restricts and discourages large cemetery corporations or large for-profit entities, including those incorporated in other states, from purchasing, earning or operating the cemeteries in the State of New York, and is no more than a thinly veiled attempt to protect New York Funeral entities at the expense of cemeteries at a great cost to the consumer.
Courts interpreting the Commerce Clause have held that although the Clause is phrased as an affirmative grant of congressional power, it. . . .[also] contains a negative or 'dormant' aspect that 'denies the States the power unjustifiably to discriminate against or burden the interstate flow of articles of commerce.'" Oregon Waste System. Inc. v. Department of Environmental Quality, 511 U.S. 93, 98, 114 S.Ct. 1345, 128 L.Ed.2d 13 (1994). This negative or dormant aspect of the Commerce Clause is often referred to as the Dormant Commerce Clause.
When faced with a Dormant Commerce Clause challenge, "the threshold question. . . . is whether a state or local government is regulating."Haulers Association. Inc. v. Oneida-Herkimer Solid Waste Authority, 261 F.3d 245, 254 (2d Cir. 2001).If the state is "regulating," the next question is whether the regulation "affects interstate commerce." Brown Williamson Tobacco Corporation v. Pataki, 320 F.3d 200, 208 (2d Cir. 2003). If that question is answered in the affirmative, the final step is to determine "whether the regulation discriminates against interstate commerce or regulates evenhandedly with incidental effect on interstate commerce." Id.
Where the challenged state statute regulates evenhandedly to effectuate a legitimate local public interest, and its effects on interstate commerce are clearly incidental, the statute will survive a dormant Commerce Clause attack unless the burden on interstate commerce is clearly excessive in relation to the putative local benefits. Pike v. Brice Church. Inc., 397 U.S. 137, 142, 90 S.Ct. 844, 25 L.Ed.2d 174 (1970). Chapter 560 operates evenly on domestic and foreign corporations. A firm, wherever incorporated, which acquires and runs funeral homes can purchase and operate funeral homes in New York, and a firm, wherever, incorporated, which buys and operates not-for-profit cemeteries can buy and run not-for-profit cemeteries in New York. The prohibition against combinations applies equally to New York corporations and foreign corporations.
The party challenging a non-discriminatory statute under the dormant Commerce Clause must show that the incidental burden on the Commerce Clause is excessive compared to the local interest. Hughes v. Oklahoma, 441 U.S. 322, 336, 99 S.Ct. 1727, 1736, 60 L.Ed.2d 250 (1979). Plaintiffs have failed to produce any evidence of such excessiveness in relation to the benefits Chapter 560 provides.
The primary purposes of Chapter 560 is to preserve and promote competition within the cemetery industry and the funeral profession, protect consumers by ensuring the independence of the funeral profession, preserve and maintain the personal and professional service aspects of funeral directing, and ensuring public accountability of funeral professionals. These purposes are legitimate state interests and easily fall within the state's police powers. This statute does not burden interstate commerce to a greater extent than it will promote these interests.
DUE PROCESS —
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."Ferguson v. Skrupa, 372 U.S. 726, 731-32, S.Ct. 10 L.Ed.2d 93 (1963). 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."Id. The existence of facts supporting the legislative judgment is to be presumed. United States v. Carolene Products Company, 304 U.S. 144, 152 (1938). As long as legislative responses are not arbitrary or capricious, judges should refrain from reviewing the wisdom of those laws. West Coast Hotel Company v. Parrish, 300 U.S. 379, 398, 57 S.Ct. 57, 81 L.Ed.2d 703 (1937).
In the realm of economic legislation, the Due Process Clause, of its own force, imposes no affirmative obligations on the states, and prohibits very little. It condemns neither competition nor monopolies nor lower prices or higher prices. Nebbia v. People of New York, 291 U.S. 502, 529-32, 54 S.Ct. 505, 516, 78 L.Ed. 940 (1934). The legislature may determine without interference from the Due Process Clause, that protection of the consumer lies in the creation of a carte-like scheme for protection of an industry. Id. at 538-39.
Plaintiffs have not established that the State legislature acted unreasonably or arbitrarily beyond the occasion and necessity of the situation in formulating and passing Chapter 560.
PENDENT STATE CONSTITUTIONAL CLAIMS
The court declines to exercise pendant jurisdiction over plaintiff's state law claims under the New York State Constitution. When the federal law claims have been dropped out of the lawsuit in its early stages and only state law claims remain, the federal court should decline to exercise pendant jurisdiction by dismissing the case without prejudice. This judgment will not foreclose plaintiff's pursuit of his state law claims in state court. Buckley v. Consolidated Edison Company of New York, 155 F.3d 150, 157 (2d Cir. 1998) (en banc).
Accordingly, plaintiffs' motion for summary judgment is DENIED, defendants' motion for summary judgment is GRANTED with prejudice as to plaintiff's federal claims, plaintiffs' state law claims are DISMISSED without prejudice.
In Young v. New York City Transit Authority, 903 F.2d 146, 163-164 (2d Cir. 1990), cert. denied, 498 U.S. 984, S. Ct, L. Ed.2d (1990), the Second Circuit reversed a portion of the district court's finding that a state statute was unconstitutional under New York State's constitution, holding that such an exercise of jurisdiction over a claim based upon the State's constitution "would violate fundamental principals of federalism and comity."
The court in Young cited the Supreme Court case of Pennhurst State School v. Halderman, 465 U.S. 89, 106 (1984) which held that the Eleventh Amendment precludes federal courts from considering claims against state officials that are based upon state law. Therefore, this court declines to exercise jurisdiction over plaintiff's state law claims. This judgment will not foreclose plaintiffs' pursuit of their state law claims in state court. Buckley v. Consolidated Edison Company of New York, 155 F.3d 150, 157 (2d Cir. 1998).
Under new § 1506(a) of the N-PCL, religious, private and family cemetery corporations cannot take part these specified activities with a funeral entity; (1) selling or leasing its real property; (2) commingling its funds; (3) directing or carrying on its business: (4) controlling its business or affairs; (5) selling or cross-marketing goods and services;(6) entering into a management or services contract for cemetery operation; and (7) entering into a management or services contract with any entity, other than a cemetery services corporation. Cemeteries less that 30 acres in size are exempt from compliance with all but the first two of the listed restrictions. New York state contains 1,873 regulated cemeteries. 1,682 are under thirty acres, and 191 are over 30 acres in N.Y. N-FPL § 1590, Article 15 regulated cemeteries corporations are not-for-profit corporations. The not-for-profit cemetery, except those controlled by religious corporations, must receive approval from the Board for all charges for services, N.Y. N-FPL § 1503. Consequently, the State's cemetery corporations cannot adjust charges at will and the need for Board approval prevents them from charging unreasonably high or low prices.