E. Glen Porter, III v. State of Wisconsin , 382 Wis. 2d 697 ( 2018 )

2018 WI 79
SUPREME COURT OF WISCONSIN
CASE NO.: 2016AP1599
COMPLETE TITLE: E. Glen Porter, III and Highland Memorial Park,
Inc.,
Plaintiffs-Appellants-Petitioners,
v.
State of Wisconsin, Laura Gutierrez and
Wisconsin Funeral Directors Examining Board,
Defendants-Respondents.
REVIEW OF DECISION OF THE COURT OF APPEALS
Reported at 378 Wis. 2d 117, 902 N.W.2d 566
PDC No: 2017 WI App 65 - Published
OPINION FILED: June 27, 2018
SUBMITTED ON BRIEFS:
ORAL ARGUMENT: April 19, 2018
SOURCE OF APPEAL:
COURT: Circuit
COUNTY: Waukesha
JUDGE: Patrick C. Haughney
JUSTICES:
CONCURRED:
DISSENTED: R.G. BRADLEY, J., and KELLY, J., dissent
(opinion filed).
NOT PARTICIPATING:
ATTORNEYS:
For the plaintiffs-appellants-petitioners, there were
briefs filed by Thomas C. Kamenick, Richard M. Esenberg, Michael
Fischer, Clyde Taylor, and Wisconsin Institute for Law &
Liberty, Milwaukee. There was an oral argument by Richard M.
Esenberg.
For the defendants-respondents, there was a brief filed by
Ryan J. Walsh, chief deputy solicitor general, with whom on the
brief were Brad D. Schimel, attorney general, and Sopen B. Shah,
deputy solicitor general. There was an oral argument by Ryan J.
Walsh, chief deputy solicitor general.
An amicus curiae brief was filed on behalf of Institute for
Justice by Lee U. McGrath, Anthony B. Sanders, and Institute for
Justice, Minneapolis, Minnesota, with whom on the brief were
Erica Smith and Institute for Justice, Arlington, Virginia.
2
2018 WI 79
NOTICE
This opinion is subject to further
editing and modification. The final
version will appear in the bound
volume of the official reports.
No. 2016AP1599
(L.C. No. 2014CV1763)
STATE OF WISCONSIN : IN SUPREME COURT
E. Glenn Porter, III and Highland Memorial
Park, Inc.,
Plaintiffs-Appellants-Petitioners,
FILED
v.
JUN 27, 2018
State of Wisconsin, Laura Gutierrez and
Wisconsin Funeral Directors Examining Board, Sheila T. Reiff
Clerk of Supreme Court
Defendants-Respondents.
REVIEW of a decision of the Court of Appeals. Affirmed.
¶1 SHIRLEY S. ABRAHAMSON, J. This is a review of a
published decision of the court of appeals affirming a judgment
of the Circuit Court for Waukesha County, Patrick C. Haughney,
Judge.1
1
Port. v. State, 2017 WI App 65, 378 Wis. 2d 117, 902
N.W.2d 566.
No. 2016AP1599
¶2 The plaintiffs-appellants-petitioners, E. Glenn
Porter, III, and Highland Memorial Park, Inc.,2 challenge the
constitutionality of two statutes: Wis. Stat. §§ 157.067(2)3 and
445.12(6)4 (2015-16).5 The parties refer to these two statutes
2
E. Glenn Porter, III, is the president and one of the
principal owners of Highland Memorial Park, a cemetery located
in New Berlin, Wisconsin. Mr. Porter and Highland Memorial Park
shall be referred to collectively as "Porter."
3
Wisconsin Stat. § 157.067(2) provides:
No cemetery authority may permit a funeral
establishment to be located in the cemetery. No
cemetery authority may have or permit an employee or
agent of the cemetery to have any ownership, operation
or other financial interest in a funeral
establishment. Except as provided in sub. (2m), no
cemetery authority or employee or agent of a cemetery
may, directly or indirectly, receive or accept any
commission, fee, remuneration or benefit of any kind
from a funeral establishment or from an owner,
employee or agent of a funeral establishment.
4
Wisconsin Stat. § 445.12(6) provides:
No licensed funeral director or operator of a funeral
establishment may operate a mortuary or funeral
establishment that is located in a cemetery or that is
financially, through an ownership or operation
interest or otherwise, connected with a cemetery. No
licensed funeral director or his or her employee may,
directly or indirectly, receive or accept any
commission, fee, remuneration or benefit of any kind
from any cemetery, mausoleum or crematory or from any
owner, employee or agent thereof in connection with
the sale or transfer of any cemetery lot, outer burial
container, burial privilege or cremation, nor act,
directly or indirectly, as a broker or jobber of any
cemetery property or interest therein.
5
All subsequent references to the Wisconsin Statutes are to
the 2015-16 version unless otherwise indicated.
2
No. 2016AP1599
as the "anti-combination laws." Generally, these laws prohibit
the joint ownership or operation of a cemetery and a funeral
home. Porter argues that the anti-combination laws violate his
rights to equal protection and substantive due process under the
Wisconsin and United States constitutions.6
¶3 In the circuit court, the State moved for summary
judgment. It argued that rational basis scrutiny applied to
Porter's claims because he had not alleged the creation of a
suspect class or the violation of a fundamental right. See
Aicher ex rel. LaBarge v. Wis. Patients Comp. Fund, 2000 WI 98,
¶56, 237 Wis. 2d 99, 613 N.W.2d 849. The State asserted that
the anti-combination laws survived rational basis review because
they were rationally related to three legitimate government
interests: (1) preserving competition in the death care services
industry; (2) protecting consumers from higher prices and poor
services; and (3) reducing the potential for abuses from
commingling of cemetery and funeral revenues.
¶4 The circuit court granted the State's motion for
summary judgment. It concluded that the anti-combination laws
are constitutional because they are rationally related to a
number of legitimate government interests, namely "preserving
competition, avoiding commingling of funds, preserving consumer
choices, avoiding higher prices, fostering personal service,
[and] avoiding undue pressure on consumers . . . ." The circuit
6
U.S. Const. amend. XIV, § 1; Wis. Const. art. I, § 1.
3
No. 2016AP1599
court explained that it was "satisfied . . . that if there are
arguments over whether some of this works or some of that
doesn't work, it stands as proof then that there is a basis for
the law . . . ."
¶5 Porter appealed. The parties disagreed on the proper
scope of rational basis review and whether the anti-combination
laws have a rational basis.
¶6 The court of appeals held that regardless of the scope
of rational basis review employed, the anti-combination laws
were not unconstitutional on either equal protection or
substantive due process grounds.7 The court of appeals explained
that the anti-combination laws were rationally related to the
legitimate government interests of protecting consumers and
limiting the possibility for abuse of trusting requirements.
¶7 Applying the standard set forth in Mayo v. Wisconsin
Injured Patients & Families Compensation Fund, 2018 WI 78, ___
Wis. 2d ___, ___ N.W.2d ___, we conclude that the anti-
combination statutes do not violate the equal protection or due
process clauses of the Wisconsin and United States
constitutions. The anti-combination statutes are rationally
related to the legitimate government interests of protecting the
welfare of particularly vulnerable consumers and limiting or
minimizing the manipulation of funds required to be held in
trust by funeral directors and cemetery operators.
7
Port. v. State, 2017 WI App 65, ¶2, 378 Wis. 2d 117, 902
N.W.2d 566.
4
No. 2016AP1599
¶8 Accordingly, we affirm the decision of the court of
appeals.
I
¶9 E. Glenn Porter is the president and one of the
principal owners of Highland Memorial Park, a cemetery located
in New Berlin, Wisconsin. Porter would like to expand his
business by operating a funeral establishment in conjunction
with his existing cemetery operations. However, the anti-
combination laws prevent him from doing so.
¶10 As a result, Porter filed the instant lawsuit,
asserting the anti-combination laws are facially
unconstitutional on both equal protection and substantive due
process grounds.
¶11 In support of his equal protection challenge, Porter
alleged that the anti-combination laws create anticompetitive,
irrational, and arbitrary distinctions between classes of
Wisconsin citizens in that only cemetery operators are
prohibited from operating or obtaining ownership interests in
funeral establishments, and only funeral directors are
prohibited from obtaining ownership interests in cemeteries.
¶12 In support of his substantive due process challenge,
Porter alleged that the anti-combination laws arbitrarily and
irrationally prevent cemetery operators from owning an interest
in a funeral establishment and owners and operators of funeral
establishments from having an ownership interest in a cemetery.
¶13 As relief, Porter sought (1) a declaratory judgment
that the anti-combination laws violate the equal protection and
5
No. 2016AP1599
due process clauses of the Wisconsin and United States
constitutions; (2) an order permanently enjoining the State from
enforcing the anti-combination laws; and (3) reasonable costs
and attorney fees.
¶14 The State moved for summary judgment. It argued that
rational basis scrutiny applied to both of Porter's claims
because he had not alleged the creation of a suspect class or
the violation of a fundamental right. The State asserted that
the anti-combination laws were rationally related to three
legitimate government interests: (1) preserving competition in
the death care services industry; (2) protecting consumers from
higher prices and poor service; and (3) reducing the potential
for abuses from commingling of cemetery and funeral revenues.8
¶15 Porter argued that even if he has not definitively
established that the anti-combination laws are unconstitutional,
he has raised a genuine issue of material fact with regard to
8
On appeal, the State asserts that the anti-combination
laws are rationally related to two legitimate government
interests: (1) protecting consumers from increased prices; and
(2) limiting or minimizing the manipulation of funds required to
be held in trust by funeral directors and cemetery operators.
As we explain below, we agree with the State that the anti-
combination laws are rationally related to the two legitimate
government interests articulated by the State on appeal.
Accordingly, we do not address whether the anti-combination
laws are rationally related to any other legitimate government
interests. A.O. Smith Corp. v. Allstate Ins. Cos., 222
Wis. 2d 475, 491, 588 N.W.2d 285 (Ct. App. 1998).
6
No. 2016AP1599
whether the anti-combination laws actually advance the State's
asserted interests.
¶16 In support of its motion, the State submitted a report
authored by economics professor Jeffrey Sundberg, who rendered
an opinion to a reasonable degree of professional certainty that
the anti-combination laws serve the State's claimed interests.
¶17 Sundberg opined that the anti-combination laws
"protect the interest of consumers" by "encourag[ing], or
prevent[ing] the discouragement of, competition." Sundberg
explained that combination firms, if permitted, would "have an
opportunity to significantly reduce the amount of competition
they face" through a process called "foreclosure." According to
Sundberg:
[A] cemetery with a financial interest in a funeral
home could easily create an advantage by charging a
normal or perhaps lower price for burials from its
partner home, and a higher price for burials from
other funeral homes. This would allow the combination
to achieve a higher market share and create a
disadvantage for rival firms, as long as the number of
cemeteries was limited. This at least appears to be a
consumer-friendly result, as long as it lasts.
However, as the combination captures more market
share, the amount of competition will decline and the
firm can then charge full prices that include the
artificially higher cost of the burial plot previously
charged to other firms. Prices faced by consumers
will rise.
¶18 Although Sundberg conceded that foreclosure is "not a
common result," he asserted that it is "most likely to work in a
case where one part of the integrated firm is a special
resource, one that cannot easily be replicated by others."
Sundberg explained that "[t]his is likely to be the case with
7
No. 2016AP1599
cemeteries" because there are far fewer cemeteries in the United
States than funeral homes. Sundberg continued:
Given the land, capital, and regulatory requirements,
it is reasonable to believe that entering the cemetery
industry is much more difficult than starting a new
funeral home.
As a result, a funeral home that is owned by, or owns,
a cemetery has access to a scarce resource, one that
gives it an advantage over other funeral homes. As
other firms exit the market it becomes advantageous
for the combination to use its market power to extract
more money from consumers, perhaps by charging higher
prices or perhaps by simply encouraging distraught
consumers with few alternatives to add more features
to their loved one's service.
The small number of cemeteries and the barriers to
creating new ones, especially in urban areas, give a
special advantage to well-capitalized large firms that
can afford to purchase multiple funeral homes. With
enough funeral homes, it may be profitable for a
cemetery to completely exclude burials from funeral
homes owned by others.
¶19 As to whether the anti-combination laws limit or
minimize the manipulation of funds required to be held in trust
by funeral directors and cemetery operators, Sundberg opined
that the anti-combination laws "reduce[] the potential for
abuses from commingling of cemetery and funeral revenues." He
explained:
[T]here is some potential for abuse when combinations
exist. The amount of money set aside is supposed to
be 15% of the value of [a cemetery] plot. By
providing funeral services as well as cemetery plots,
a firm could potentially exploit [the trusting
requirement for cemetery plots] by increasing the
price of something like burial vaults and reducing the
price of the plot itself, collecting the same amount
of revenue while being required to set aside less
8
No. 2016AP1599
money for perpetual care, without actually reducing
the actual expenses of perpetual care.
Sundberg opined that having a single firm selling more
categories of merchandise "makes the commingling potentially
easier to disguise, if a firm were interested in doing so." At
a minimum, Sundberg asserted, "detecting such activity would be
more difficult" without the anti-combination laws. Sundberg
also explained, without contradiction, that having more
categories of merchandise makes the commingling of funds with
different trusting requirements easier to disguise and more
difficult to detect.
¶20 In response, Porter submitted a report and affidavit
authored by economics professor David Harrington, who opined to
a reasonable degree of professional certainty that the anti-
combination laws do not actually advance the State's claimed
interests.
¶21 Harrington opined that the anti-combination laws
actually increase the cost of death care services to Wisconsin
consumers. Harrington explained that it is less costly to
produce funeral services at combination firms because those
firms are able to benefit from economies of scale and scope.
Harrington also disputed Sundberg's assertion that permitting
combination firms would lead to foreclosure:
Perhaps the best evidence for this point is [the] fact
that combination firms already exist and do business
in almost all of the states. Although I have not
deliberately investigated the possibility, I can say
that over the many years I have studied the industry I
have not seen any evidence that combination firms
actually engage in the kind of exclusionary behavior
9
No. 2016AP1599
that [Sundberg] says that he fears. If they did so,
their conduct would likely have been the subject of a
challenge under the antitrust laws. I am not aware
that any such case has ever been brought in the states
where combination firms are permitted to do business.
¶22 Harrington further opined:
Wisconsin has a state statute (Wis. Stat. § 157.11[9])
designed to ensure that cemeteries are cared for in
9
Presumably, Harrington is referring to Wis. Stat.
§ 157.11(9g), which reads as follows:
(9g) Care fund for cemetery lots.
(a)
1. Except as provided in ss. 66.0603(1m)(c) and
157.19(5)(b), funds that are received by a cemetery
authority for the care of a cemetery lot shall be
invested in one or more of the following manners:
a. Deposited and invested as provided in s. 157.19.
c. If not invested as provided in subd. 1.a.,
otherwise deposited by the cemetery authority in an
investment approved by the cemetery board if the care
funds are segregated and invested separately from all
other moneys held by the cemetery authority.
2. The manner in which the care funds are invested may
not permit the cemetery authority to withdraw the care
fund's principal amount. The income from the
investment of a care fund for the care of cemetery
lots may be used only to maintain the cemetery lots
and grounds, except that if the amount of income
exceeds the amount necessary to maintain the cemetery
lots or grounds properly, the excess amount may be
used to maintain any other portion of the cemetery,
including mausoleums.
(b) Anyone having in custody or control any cemetery
care trust fund received other than by testament
shall, upon demand, deliver it to the cemetery
authority to be handled as provided in this
subsection.
(continued)
10
No. 2016AP1599
perpetuity. This statute applies to cemeteries
operated by combination firms to the same extent that
it applies to any cemetery. Abuse or misuse of funds
is no more or less likely simply because a cemetery
firms [sic] operates a funeral establishment. By
defendant's logic, a cemetery should be precluded from
operating a flower shop because of the possibility
that funds could be comingled [sic]. Wisconsin law
does not prohibit cemeteries from engaging in the
flower business or from selling any other
complementary goods other than funeral services.
¶23 The circuit court granted the State's motion for
summary judgment. It concluded that the anti-combination laws
are constitutional because they are rationally related to the
legitimate government interests of "preserving competition,
avoiding commingling of funds, preserving consumer choices,
avoiding higher prices, fostering personal service, [and]
avoiding undue pressure on consumers." The court explained that
it was "satisfied . . . that if there are arguments over whether
some of this works or some of that doesn't work, it stands as
proof then that there is a basis for the law . . . ." The
circuit court concluded that it did not "need to go beyond
summary judgment and to have a trial on the matter,
(c) Except as provided in sub. (11), any cemetery
authority that sells a cemetery lot on or after
November 1, 1991, shall deposit 15 percent of each
payment of principal into a care fund under par. (a)
within 30 business days after the last day of the
month in which the payment is received, except as
provided in sub. (7)(d) and s. 157.115(2)(f). The
total amount deposited must equal 15 percent of the
total amount of all payments of principal that have
been received, but not less than $25.
11
No. 2016AP1599
because . . . there's enough information before the court that
the court finds the law is constitutional."
¶24 Porter appealed. He argued that the anti-combination
laws must be examined under the "rational basis with teeth"
standard that this court applied in Ferdon ex rel. Petrucelli v.
Wisconsin Patients Compensation Fund, 2005 WI 125, 284
Wis. 2d 573, 701 N.W.2d 440. Under this standard, Porter
argued, the State must demonstrate that the anti-combination
laws bear a "real and substantial connection" to a legitimate
government purpose.
¶25 The court of appeals held that regardless of the
standard of review employed (i.e., traditional rational basis or
"rational basis with teeth"), the anti-combination laws were not
unconstitutional on either equal protection or substantive due
process grounds. The court of appeals explained that the anti-
combination laws were rationally related to the legitimate
government interests of protecting consumers and limiting the
possibility for abuse of trusting requirements.
¶26 The court of appeals also held that a remand for
further proceedings would be inappropriate. It explained that
although evidence, including expert opinions, had been presented
in the instant case, "the court must determine the relative
merit of that evidence during a constitutional challenge."10
II
10
Porter, 378 Wis. 2d 117, ¶48.
12
No. 2016AP1599
¶27 We begin by setting forth the general standards of
review and principles of law applicable to Porter's
constitutional challenges.
¶28 Porter raises facial challenges to the
constitutionality of the anti-combination laws. "A facial
constitutional challenge to a statute is an uphill endeavor."
State v. Dennis H., 2002 WI 104, ¶5, 255 Wis. 2d 359, 647
N.W.2d 851. To succeed, Porter must demonstrate that the anti-
combination laws cannot be constitutionally enforced under any
set of circumstances; that is, "a facial challenge is '[a] claim
that a statute . . . always operates unconstitutionally[.]'"
Voters with Facts v. City of Eau Claire, 2018 WI 63, ¶60, ___
Wis. 2d ___, ___ N.W.2d ___ (quoting Olson v. Town of Cottage
Grove, 2008 WI 51, ¶44 n.9, 309 Wis. 2d 365, 749 N.W.2d 211).
The constitutionality of a statute presents a question of law
that we review independently. Aicher, 237 Wis. 2d 99, ¶18.
¶29 In assessing Porter's constitutional challenges, we
presume the anti-combination laws are constitutional. Aicher,
237 Wis. 2d 99, ¶18; Riccitelli v. Broekhuizen, 227 Wis. 2d 100,
119, 595 N.W.2d 392 (1999). "The court indulges every
presumption to sustain the law if at all possible, and if any
doubt exists about a statute's constitutionality, we must
resolve that doubt in favor of constitutionality." Aicher, 237
Wis. 2d 99, ¶18; State ex rel. Hammermill Paper Co. v. La
Plante, 58 Wis. 2d 32, 46-47, 205 N.W.2d 784 (1973). This
strong presumption of statutory constitutionality "is the
product of our recognition that the judiciary is not positioned
13
No. 2016AP1599
to make the economic, social, and political decisions that fall
within the province of the legislature." Aicher, 237
Wis. 2d 99, ¶20; State ex rel. Carnation Milk Prods. Co. v.
Emery, 178 Wis. 147, 160, 189 N.W. 564 (1922).
III
¶30 We now turn to the merits of Porter's constitutional
challenges. We first establish the scope of rational basis
review applicable to Porter's claims. We then apply that
standard to the anti-combination laws.
A
¶31 Porter challenges the constitutionality of Wis. Stat
§§ 157.067(2) and 445.12(6). Generally speaking, these statutes
prohibit the joint ownership or operation of a cemetery and a
funeral home.
¶32 The parties dispute how rational basis scrutiny is to
be applied under the specific circumstances of the instant case.
¶33 Porter argues that the anti-combination laws must be
examined under the "rational basis with teeth" standard that
this court applied in Ferdon ex rel. Petrucelli v. Wisconsin
Patients Compensation Fund, 2005 WI 125, 284 Wis. 2d 573, 701
N.W.2d 440. Porter argues that under this standard, the State
must demonstrate that the anti-combination laws bear a "real and
substantial connection" to a legitimate government purpose. The
State argues that Porter's constitutional challenges should be
analyzed under the traditional rational basis test, but that the
anti-combination laws pass constitutional muster under either
traditional rational basis or "rational basis with teeth."
14
No. 2016AP1599
¶34 On the same day that we heard arguments in the instant
case, we heard arguments in Mayo v. Wisconsin Injured Patients &
Families Compensation Fund, 2018 WI 78, ___ Wis. 2d ___, ___
N.W.2d ___.11 Noting that "[t]he analysis under both the due
process and equal protection clauses is largely the same[,]"12
the Mayo court disposed of an equal protection and due process
challenge to Wis. Stat. § 893.55 under the following
articulation of the rational basis standard:
A classification created by legislative enactment will
survive rational basis scrutiny upon meeting five
criteria:
(1) All classification[s] must be based upon
substantial distinctions which make one class
really different from another.
(2) The classification adopted must be germane
to the purpose of the law.
(3) The classification must not be based upon
existing circumstances only. [It must not be so
constituted as to preclude addition to the
numbers included within a class.]
(4) To whatever class a law may apply, it must
apply equally to each member thereof.
(5) That the characteristics of each class
should be so far different from those of other
classes as to reasonably suggest at least the
11
We scheduled the release of the instant opinion to be
contemporaneous with the release of our opinion in Mayo v.
Wisconsin Injured Patients & Families Compensation Fund, 2018 WI
78, ___ Wis. 2d ___, ___ N.W.2d ___. We apply Mayo in the
instant case.
12
Mayo, ___ Wis. 2d ___, ¶39 (quoting State v. Quintana,
2008 WI 33, ¶78, 308 Wis. 2d 615, 748 N.W.2d 447).
15
No. 2016AP1599
propriety, having regard to the public good, of
substantially different legislation.
Mayo, ___ Wis. 2d ___, ¶42; see also Aicher, 237 Wis. 2d 99,
¶58.
¶35 This five-step analysis is the proper standard to
apply in the instant case to Porter's constitutional claims.
See Mayo, ___ Wis. 2d ___, ¶¶39, 42.
B
¶36 Applying the five-step analysis relied upon in Mayo,
we conclude that the anti-combination laws do not violate equal
protection or substantive due process.
¶37 First, we determine whether the classifications
created by the anti-combination statutes are based upon
"substantial distinctions" which makes the classes different
from one another. This step is satisfied.
¶38 Cemetery operators and funeral establishment directors
both serve a particularly vulnerable class of consumers: those
who have suffered the loss of a loved one. Moreover, certain
goods and services in the death care industry are subject to
statutory trusting requirements so that persons can pay for them
"pre-need" with assurance that the necessary funds will exist
when the need arises. See, e.g., Wis. Stat. §§ 157.11(9g)(c)
(requiring sellers of cemetery plots to entrust 15% of the
principal paid to cover perpetual care expenses);
445.125(1)(a)1. (requiring sellers of caskets to hold in trust
100% of funds paid before death until the "death of the
potential decedent"). Thus, the classifications created by the
16
No. 2016AP1599
anti-combination laws are based upon "substantial distinctions"
that make the classes different from one another.
¶39 Second, we determine whether the classifications
adopted are germane to the purpose of the laws. This step is
satisfied.
¶40 The State argues that the anti-combination laws are
rationally related to two legitimate government interests: (1)
protecting consumers from increased prices; and (2) limiting or
minimizing the manipulation of funds required to be held in
trust by funeral directors and cemetery operators.13
¶41 As the court of appeals correctly explained, "[b]oth
interests conceivably serve to protect consumers in markets
encountered by virtually everyone, and at a time in their lives
when they may be particularly vulnerable to questionable
marketing influences due to the loss of loved ones." Porter,
378 Wis. 2d 117, ¶34.
¶42 Moreover, the State's expert, Jeffrey Sundberg,
explained at length how the anti-combination laws advanced these
legitimate government interests. See supra ¶¶16-19.
¶43 As to the State's first articulated interest (i.e.,
protecting consumers), Sundberg opined that without the anti-
13
Because we agree with the State that the anti-combination
laws are rationally related to the two legitimate government
interests posited by the State, we do not address whether the
anti-combination laws are rationally related to any other
legitimate government interests. A.O. Smith Corp., 222 Wis. 2d
at 491.
17
No. 2016AP1599
combination laws, combination firms would, in the short run,
offer lower prices than stand-alone funeral homes and limit
stand-alone firms' access to cemeteries. This would drive
stand-alone funeral homes from the market at which point
combination firms would increase their prices.
¶44 As to the State's second articulated interest (i.e.,
limiting or minimizing the manipulation of funds required to be
held in trust), Sundberg also opined that the potential for
abuse arises when a combination firm sells both cemetery plots
and other merchandise subject to higher trusting requirements
because such a firm could charge more for merchandise that is
subject to a lower trusting requirement and lower its prices for
merchandise that is subject to a higher trusting requirement.
Doing this would give the combination firm immediate access to
more funds at the risk that funds are not available when the
pre-need purchaser dies and needs the paid-for merchandise.14
¶45 Accordingly, the classifications created by the anti-
combination laws support the purposes of those laws.
¶46 Third, we determine whether the statutory
classifications are based solely upon existing circumstances.
The anti-combination laws do nothing to "preclude addition to
14
We do not recite Porter's contrary evidence because doing
so would be unnecessary. Sundberg's report provides an
independent and sufficient basis for concluding that the anti-
combination laws advance legitimate government interests, and
Harrington's report and affidavit to the contrary does not
compel a different conclusion.
18
No. 2016AP1599
the numbers included within a class" and "allow expansion of the
class[es]" to include additional members in the future. Aicher,
237 Wis. 2d 99, ¶69. Therefore, the third step is satisfied.
¶47 Fourth, we determine whether all members of each class
are treated equally. There is nothing in the anti-combination
laws that would treat some cemetery operators differently than
other cemetery operators. See Wis. Stat. § 157.067(2).
Further, there is nothing in the anti-combination laws that
would treat some funeral directors differently than other
funeral directors. See Wis. Stat. § 445.12(6). Therefore, the
fourth step is satisfied.
¶48 Fifth, and finally, we determine whether the
characteristics of each class are so different from those of the
other class to "reasonably suggest" that the legislation is for
the public good. This step is satisfied.
¶49 Both funeral establishment directors and cemetery
operators serve a particularly vulnerable class of consumers:
those who have suffered the loss of a loved one. Both funeral
establishment directors and cemetery operators are subject to
trusting requirements for the products and services they sell.
The unique characteristics of funeral establishment directors
and cemetery operators "reasonably suggest" that the anti-
combination laws serve the public good by protecting vulnerable
consumers and making it more difficult for funeral directors and
cemetery operators to disguise the commingling of funds with
different trusting requirements.
19
No. 2016AP1599
¶50 According, we conclude that the anti-combination laws
are constitutional.15
IV
¶51 We conclude that summary judgment was properly granted
in favor of the State. The anti-combination statutes do not
violate the equal protection or due process clauses of the
Wisconsin and United States constitutions. The anti-combination
statutes are rationally related to the legitimate government
interests of protecting the welfare of particularly vulnerable
consumers and limiting or minimizing the manipulation of funds
required to be held in trust by funeral directors and cemetery
operators.
By the Court.—The decision of the court of appeals is
affirmed.
15
Because we conclude that the anti-combination laws are
constitutional as a matter of law, we need not decide whether
Porter has raised an issue warranting a trial. We do, however,
highlight a passage from the court of appeals opinion:
We decline Porter's invitation to remand this case for
further proceedings, as none are necessary. . . . In
addition to being unprecedented, allowing for a fact-
finding hearing would improperly elevate a so-called
factual determination——presumably one made under a
mere preponderance-of-the-evidence standard——as
dispositive of the question of the anti-combination
laws' constitutionality——which determination we know
involves a more stringent standard that is a question
of law.
Porter, 378 Wis. 2d 117, ¶48.
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¶52 REBECCA GRASSL BRADLEY, J. and DANIEL KELLY, J.,
(dissenting). The people of Wisconsin vest distinct
constitutional powers of governance in each branch of
government, but consistent with founding principles of limited
government and individual freedom, the people also impose
constraints on the exercise of those powers. The Wisconsin
Constitution begins with a Declaration of Rights, echoing
language from our nation's Declaration of Independence,
recognizing that the proper role of government——the very reason
governments are instituted——is to secure our inherent rights,
including liberty:
All people are born equally free and independent, and
have certain inherent rights; among these are life,
liberty and the pursuit of happiness; to secure these
rights, governments are instituted, deriving their
just powers from the consent of the governed.
Wis. Const. art. I, § 1 (emphasis added). "Too much dignity
cannot well be given to that declaration." State v. Redmon, 134
Wis. 89, 101, 114 N.W. 137 (1907). An inherent right to liberty
means all people are born with it; the government does not
bestow it upon us and it may not infringe it. Our nation's
founders dissolved "all Allegiance to the British Crown" in
order to restore liberty to the people.1 "Give me liberty or
give me death," Patrick Henry's impassioned plea during those
revolutionary times, embodies the fundamental importance of
1
The Declaration of Independence para. 32 (U.S. 1776).
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liberty, our "[f]reedom from arbitrary, despotic, or autocratic
control."2
¶53 While the people empower the legislature to enact laws
and make policy, the constitution compels the judiciary to
protect the liberty of the individual from intrusion by the
majority. "[C]ourts of justice are to be considered as bulwarks
of a limited Constitution against legislative
encroachments . . . ." The Federalist No. 78, at 469 (Alexander
Hamilton) (Clinton Rossiter ed., 1961). Consistent with that
duty, courts must earnestly scrutinize laws that are challenged
for infringing constitutional rights.
¶54 Because government exists to protect and safeguard
liberty, the legislature may restrict it only for a legitimate
government purpose. Applying even the most deferential review
of the laws challenged in this case, we discern no legitimate
government interest underlying the anti-combination statutes.
We would reverse the court of appeals and declare the anti-
combination laws unconstitutional. We respectfully dissent.
I
¶55 Mr. Porter argues that Wis. Stat. §§ 157.067(2)3 and
445.12(6),4 commonly referred to as the anti-combination laws,
2
Liberty, Oxford English Dictionary (3d ed. 2010).
3
Wisconsin Stat. § 157.067(2) provides:
No cemetery authority may permit a funeral
establishment to be located in the cemetery. No
cemetery authority may have or permit an employee or
agent of the cemetery to have any ownership, operation
or other financial interest in a funeral
establishment. Except as provided in sub. (2m), no
(continued)
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are unconstitutional under Article I, Section 1 of the Wisconsin
Constitution because those laws deny him his fundamental right
to economic liberty——here, the right to earn a living in the
lawful occupation of his choice. The challenged laws prohibit
contemporaneous ownership or operation of both a funeral home
and a cemetery. Mr. Porter owns and operates Highland Memorial
Park Cemetery and would like to operate a funeral home in
addition, but the anti-combination statutes prohibit him from
doing so. He asserts that these laws were passed at the behest
of the funeral directors seeking to limit competition from
cemetery owners. Indeed, funeral directors drafted the original
statutory language and submitted it to the legislature on
Wisconsin Funeral Directors and Embalmers Association
cemetery authority or employee or agent of a cemetery
may, directly or indirectly, receive or accept any
commission, fee, remuneration or benefit of any kind
from a funeral establishment or from an owner,
employee or agent of a funeral establishment.
4
Wisconsin Stat. § 445.12(6) provides:
No licensed funeral director or operator of a funeral
establishment may operate a mortuary or funeral
establishment that is located in a cemetery or that is
financially, through an ownership or operation
interest or otherwise, connected with a cemetery. No
licensed funeral director or his or her employee may,
directly or indirectly, receive or accept any
commission, fee, remuneration or benefit of any kind
from any cemetery, mausoleum or crematory or from any
owner, employee or agent thereof in connection with
the sale or transfer of any cemetery lot, outer burial
container, burial privilege or cremation, nor act,
directly or indirectly, as a broker or jobber of any
cemetery property or interest therein.
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letterhead. The law went into effect in 1939, and was amended
in 1943, as a "measure requested and sponsored by the Wisconsin
Funeral Directors and Embalmers Association." See Drafting
File, 1939 WI Act 240, p.2, Legislative Reference Bureau,
Madison, Wis.5 Mr. Porter believes there is no legitimate
governmental interest supporting the anti-combination laws, and
he submitted evidence demonstrating that the 39 states without
these laws experience no monopolistic or price-fixing behavior
in the industry. Mr. Porter contends favoritism toward funeral
directors at the expense of cemetery owners motivated the
legislature to enact these protectionist laws.
¶56 The State argues the statutes protect against funeral
industry monopolies, which would stifle competition, violate
anti-trust laws, and ultimately result in higher prices for
grieving customers. The State points to eight other states that
enacted prophylactic statutes discouraging or forbidding joint
operation of funeral homes and cemeteries as evidence of the
need for Wisconsin's anti-combination statutes. It notes the
heavy consumer protection regulations in the death industry due
to the vulnerability of individuals who must make important
financial decisions within hours of the loss of a loved one.
The State's position is that these laws are rationally related
to the following legitimate government interests: (1)
protecting consumers from higher prices and (2) reducing the
5
Wisconsin's anti-combination laws have been revised and
rewritten over the years and now appear in Wis. Stat.
§§ 157.067(2) and 445.12(6).
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potential for evasion of Wisconsin's death care trusting
requirements.
¶57 Mr. Porter's constitutional challenge is a facial one;
he asserts the statute is unconstitutional in every
circumstance. See State v. Smith, 2010 WI 16, ¶10 n.9, 323
Wis. 2d 377, 780 N.W.2d 90 (discussing difference between facial
and as-applied constitutional challenges). The burden to prove
a statute unconstitutional rests with the party challenging it.
This court describes that burden as a "heavy" one because the
court presumes the legislation is constitutional, engages in
every attempt to uphold the statute, and requires a party
challenging a law to prove it "is unconstitutional beyond a
reasonable doubt." Id., ¶8; see also, Borgnis v. Falk Co., 147
Wis. 327, 348, 133 N.W. 209 (1911) ("In approaching the
consideration of the present law, we must bear in mind the well-
established principle that it must be sustained, unless it be
clear beyond reasonable question that it violates some
constitutional limitation or prohibition."). This is the law
and we are bound to apply it. But see Mayo v. Wis. Injured
Patients & Families Comp. Fund, 2018 WI 78, ¶___, ___
Wis. 2d ___, ___ N.W.2d ____ (R. Grassl Bradley, J., concurring)
(questioning whether beyond a reasonable doubt is an appropriate
burden to impose on a person challenging the constitutionality
of a statute).
II
¶58 Before assessing whether the anti-combination statutes
violate the Wisconsin Constitution, it is necessary to decide
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what level of judicial review applies: (1) rational basis; (2)
rational basis "with teeth"; or (3) strict scrutiny. The State
advocates for the basic rational basis test while Mr. Porter
requests rational basis "with teeth" review, couching it as the
"real and substantial" standard historically applied to strike
down protectionist laws in Wisconsin lacking a real and
substantial link to some legitimate governmental purpose. This
court, however, overruled the supreme court case that created
the rational basis with teeth standard, thereby eliminating this
level of review. See id., ¶38 (majority opinion) (overruling
Ferdon ex rel. Petrucelli v. Wis. Patients Comp. Fund, 2005 WI
125, 284 Wis. 2d 573, 701 N.W.2d 440). Only two options for
judicial review of challenged legislation remain: (1) the
traditional rational basis test or (2) the strict scrutiny
standard.
A
¶59 The level of judicial scrutiny depends upon the nature
of the challenged legislation. State v. Alger, 2015 WI 3, ¶39,
360 Wis. 2d 193, 858 N.W.2d 346. When the statute implicates a
fundamental right or discriminates against a suspect class, this
court applies strict scrutiny and the law will be upheld "only
if narrowly tailored 'to serve a compelling state interest.'"
Id. (quoting Milwaukee Cty. v. Mary F.-R., 2013 WI 92, ¶35, 351
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Wis. 2d 273, 839 N.W.2d 581).6 In all other challenges, we
review the law under the rational basis test and uphold it
"unless it is 'patently arbitrary' and bears no rational
relationship to a legitimate government interest." Id. (quoting
Smith, 323 Wis. 2d 377, ¶12).
¶60 No one argues the challenged statutes discriminate
against a suspect class, but Mr. Porter does assert the statute
implicates a fundamental right——liberty. Wisconsin case law
defines "fundamental rights" as "those which are either
explicitly or implicitly based in the Constitution." State v.
Martin, 191 Wis. 2d 646, 651-52, 530 N.W.2d 420 (Ct. App. 1995).
This court reaffirmed that definition in Vincent v. Voight, 2000
WI 93, ¶80, 236 Wis. 2d 588, 614 N.W.2d 388 ("Fundamental rights
are based on the Constitution either explicitly or implicitly."
(citing Martin, 191 Wis. 2d at 652)).
B
¶61 The Wisconsin Constitution explicitly identifies
liberty as an inherent right and establishes state government
for the express purpose of securing liberty, among other rights.
The question then becomes whether economic liberty falls within
liberty's protection. The Wisconsin Constitution does not
define liberty, but the framers of our state constitution
6
Whether strict scrutiny or rational basis applies to a
statute involving a fundamental right may also depend on the
extent the law burdens the right. See State v. Alger, 2015 WI
3, ¶39 n.16, 360 Wis. 2d 193, 858 N.W.2d 346. A severe
restriction compels strict scrutiny review but a reasonable
restriction, which does not cause significant restriction, may
trigger rational basis review. Id.
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expressly incorporated language from the Declaration of
Independence, including liberty among those inherent rights
governments are instituted to protect. Therefore, we may
ascertain the original public meaning of liberty by considering
the documented perspective of our nation's founders, in
particular the principal author of the Declaration of
Independence, Thomas Jefferson.
¶62 Thomas Jefferson's understanding of "liberty" was
influenced by the writings of Enlightenment thinkers and Whig
intellectuals.7 At the time of Independence, the concept of
"liberty" was "quite broad, encompassing economic liberty as
well as other forms of liberty less tangible than mere freedom
from physical restraint."8 Cato's Letters, from which Jefferson
and other Framers conceptualized economic and political
doctrine, defined "liberty" as follows:
[T]he Right of every Man to pursue the natural,
reasonable, and religious Dictates of his own Mind; to
think what he will, and act as he thinks, provided not
to the Prejudice of another; to spend his own Money
himself, and lay out the Produce of his Labour his own
Way; and to labour for his own Pleasure and Profit,
and not for others who are idle, and would live and
riot by pillaging and oppressing him, and those that
are like him.[9]
7
David N. Meyer, Liberty of Contract: Rediscovering a Lost
Constitutional Right 14 (2011).
8
Id.
9
Id. at 15 (quoting "Cato," An Enquiry into the Nature and
Extent of Liberty (Letter No. 62) (Jan. 20, 1721), in John
Trenchard & Thomas Gordon, 2 Cato's Letters: Or, Essays on
Liberty, Civil and Religious, and Other Important Subjects 244-
45, 248 (1733).
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Cato's Letters, a major influence upon Jefferson, envisioned
"liberty" to encompass economic freedom and the right of
individuals to choose the means and manner of their labor, free
from restraint.
¶63 Jean Jacques Burlamaqui, a Swiss jurist, heavily
influenced the Framers' language in the Declaration of
Independence.10 Burlamaqui regarded liberty as a natural right
of individuals "[to] dispos[e] of their persons and property,
after the manner they judge most convenient to their happiness."
With Jefferson grounding his philosophy in Burlamaqui and Cato's
Letters, the concept of "liberty" that formed the basis for
Independence naturally encompasses economic freedom.11
¶64 James Madison regarded a government that would
infringe individual economic liberty as unjust: "That is not a
just government, nor is property secure under it, where
arbitrary restrictions, exemptions, and monopolies deny to part
of its citizens that free use of their faculties, and free
choice of their occupations . . . ."12 Just as our nation's
founders recognized the importance of economic freedom, over a
century ago this court adopted an expansive interpretation of
10
Id. at 14.
11
See id. at 14-17 (arguing that Jefferson, as well as most
other Framers, understood "liberty" and the "Pursuit of
Happiness" as broad concepts based on Cato's Letters and
Burlamaqui).
12
James Madison, Property, Nat'l Gazette, Mar. 29, 1792,
reprinted in The Founder's Constitution 598 (Philip B. Kurland &
Ralph Lerner eds., 1987).
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liberty. The term "liberty" in our constitution "does not mean
merely immunity from imprisonment,"
[but] include[s] the opportunity to do those things
which are ordinarily done by free men, and the right
of each individual to regulate his own affairs, so far
as consistent with rights of others.
State ex rel. Zillmer v. Kreutzberg, 114 Wis. 530, 533-34, 90
N.W. 1098 (1902). Early in Wisconsin history, this court
repeatedly and consistently recognized economic liberty——the
right to earn a living in any lawful occupation without
unnecessary government interference——as a fundamental,
constitutional right.13
¶65 In Maxwell v. Reed, 7 Wis. 493 (*582), 499 (*594)
(1859), this court recognized the right to earn a living as "one
of the great bulwarks of individual freedom" "guarded
by . . . fundamental law." The Maxwell court emphasized the
need to protect and preserve the right every citizen has to
attain "the means of living." Id. at 498 (*594). In Taylor v.
State, 35 Wis. 298, 301 (1874), this court declared location
restriction laws imposed on businesses posing no danger to the
public to be invalid and "an unjustifiable restriction upon, and
interference with, the fundamental rights of the citizen." In
13
Economic liberty is also rooted in our nation's history.
See Patel v. Tex. Dep't of Licensing & Regulation, 469 S.W.3d
69, 93 (Tex. 2015) (Willett, J., concurring) ("The U.S. Supreme
Court has repeatedly declared that the right to pursue a lawful
calling 'free from unreasonable governmental interference' is
guaranteed under the federal Constitution, and is 'objectively,
deeply rooted in this Nation's history and tradition.'"
(footnotes omitted)).
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State ex rel. Winkler v. Benzenberg, 101 Wis. 172, 176, 76
N.W. 345 (1898), this court noted that unreasonable laws
"interfer[ing] with the right of the citizen to pursue his
calling," which "invade the right of the citizen to pursue a
lawful business" cannot be upheld. This court has long
acknowledged that laws unreasonably interfering with "the right
of the citizen to pursue his calling" run afoul of the
constitution. Id. at 176-78 (voiding a law as
unconstitutionally discriminating against solo plumbers by
granting "special privileges" to plumbers in partnership).
¶66 This court's protection of economic liberty continued
into the 20th century, when the court held that "[t]he general
right of every person to pursue any calling, and to do so in his
own way, provided that he does not encroach upon the rights of
others, cannot be taken away from him by legislative enactment."
Kreutzberg, 114 Wis. at 534 (emphasis added) (quoted source
omitted). The court later identified an employer's
constitutional right to employ whom he will, see, e.g., A.J.
Monday Co. v. Auto., Aircraft & Vehicle Workers of America,
Local No. 25, 171 Wis. 532, 539-541, 177 N.W. 867 (1920) ("The
right of an employer to exercise his constitutional privilege as
to whom he will employ has been fully established in this
state." (citing Kreutzberg, 114 Wis. at 534)); and upheld a
citizen's constitutional right to carry on a lawful business,
see, e.g., McGraw-Edison Co. v. Sewerage Comm'n of Milwaukee, 11
Wis. 2d 46, 53, 104 N.W.2d 161 (1960) ("Prohibition of the use
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of a suitable and legitimate product certainly interferes with
plaintiffs' right to carry on a lawful business.").
¶67 In several cases, this court specifically recognized
the limits on legislative power to confer economic prerogatives
on certain groups to the exclusion of others. For example, the
court declared unconstitutional a law banning the sale of
oleomargarine, which was passed to protect the dairy industry
from competition posed by makers of butter substitutes. John F.
Jelke Co. v. Emery, 193 Wis. 311, 321-22, 214 N.W. 369 (1927).
Criticizing the legislature for violating its constitutional
duty to protect personal liberty, the John F. Jelke court noted:
"The constitution is the mandate of a sovereign people to its
servants and representatives, and no one of them has a right to
ignore or disregard its plain commands." Id. at 321. The John
F. Jelke court also emphasized limits on legislative power when
its exercise touches constitutional rights, as well as the
judicial duty to employ a more exacting scrutiny of legislation
that oppresses the people:
[F]rom the standpoint of constitutional right the
Legislature has no more power to prohibit the
manufacture and sale of oleomargarine in aid of the
dairy industry than it would have to prohibit the
raising of sheep in aid of the beef cattle industry,
or to prohibit the manufacture and sale of cement for
the benefit of the lumber industry. In some cases a
proper exercise of the police power results in
advantage to a particular class of citizens and to the
disadvantage of others. When that is the principal
purpose of the measure, courts will look behind even
the declared intent of Legislatures, and relieve
citizens against oppressive acts, where the primary
purpose is not to the protection of the public health,
safety, or morals.
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Id. at 323 (emphasis added).
¶68 In Dairy Queen of Wis., Inc. v. McDowell, 260
Wis. 471, 478c, 51 N.W.2d 34 (1952), reh'g denied, 260 Wis. 471,
52 N.W.2d 791, Dairy Queen challenged a ban on its lower fat
ice-cream-like product in Wisconsin. Organizations associated
with the dairy industry filed amicus briefs, which the court
construed as "promot[ing] a restricted market" for that
industry. Id. The Dairy Queen court rejected the notion "that
the legislature or the court should be party to an act which
appears to have no purpose except to protect the interests of
the . . . manufacturers of ice cream . . . against the
competition of Dairy Queen." Id. at 478b-78c. Instead, the
court applied John F. Jelke in holding the statute invalid.
¶69 In State ex rel. Grand Bazaar Liquors, Inc. v. City of
Milwaukee, 105 Wis. 2d 203, 313 N.W.2d 805 (1982), this court
declared unconstitutional a Milwaukee ordinance that granted
liquor licenses only if the licensee's business received at
least 50 percent of its income from the sale of intoxicants.
Id. at 204-06. The ordinance had an anti-competitive purpose
"to keep large retail stores out of the retail liquor business."
Id. at 209-10. The court, applying the rational basis test,
cautioned that "we should not blindly rubber stamp legislation
enacted under the guise of the city's police power when careful
review has revealed no logical link between the legislation and
the objective it was enacted to effect." Id. at 218.
Accordingly, the court determined that the ordinance did "not
accomplish the articulated goals" and was "an arbitrary and
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irrational exercise of the city's police power and a denial of
equal protection." Id. at 212.
¶70 Permeating these decisions is the notion of individual
freedom, which may not be subjugated by majoritarian impulses or
the success of certain interest groups in prevailing upon
legislators for special privileges at the expense of individual
rights: "Free will in making private contracts, and even in
greater degree in refusing to make them, is one of the most
important and sacred of the individual rights intended to be
protected." Kreutzberg, 114 Wis. at 540.
¶71 Courts and legal commentators increasingly recognize
the importance of an engaged judiciary in protecting economic
liberty, and modern courts are abandoning the reflexive rubber-
stamping of legislative acts that infringe it. See, e.g., Patel
v. Tex. Dep't of Licensing & Regulation, 469 S.W.3d 69 (Tex.
2015) (Willett, J. concurring) (discussing economic liberty as
fundamental right under state constitution); Randy E. Barnett,
Does the Constitution Protect Economic Liberty?, 35 Harv. J.L. &
Pub. Pol'y 5 (2012) (concluding the Constitution protects
economic liberty as a fundamental right that may be reasonably
regulated but not infringed); see also Saint Joseph Abbey v.
Castille, 712 F.3d 215, 226-27 (5th Cir. 2013) (striking down
anticompetitive law restricting the sale of funeral merchandise
to state-licensed funeral directors in challenge by Benedictine
monks wanting to sell handcrafted pine coffins); Merrifield v.
Lockyer, 547 F.3d 978, 991-92 n.15 (9th Cir. 2008); Craigmiles
v. Giles, 312 F.3d 220, 222, 224 (6th Cir. 2002) (invalidating
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state law banning sale of caskets by anyone other than funeral
directors as infringement of economic liberty and concluding
that "protecting a discrete interest group from economic
competition is not a legitimate governmental purpose"); Casket
Royale, Inc. v. Mississippi, 124 F. Supp. 2d 434, 436-37 (S.D.
Miss. 2000); Santos v. City of Houston, 852 F. Supp. 601, 607-08
(S.D. Tex. 1994) ("[A] statute based on pure favoritism which
creates a closed class will likely be declared
unconstitutional."); Shoul v. Commonwealth, 173 A.3d 669, 677
(Pa. 2017) (quoting Gambone v. Commonwealth, 101 A.2d 634, 636-
37 (Pa. 1954) for the proposition, "Under the guise of
protecting the public interests, the legislature may not
arbitrarily interfere with private business or impose unusual or
unnecessary restrictions upon lawful occupations."); David E.
Bernstein, The Due Process Right To Pursue a Lawful Occupation:
A Brighter Future Ahead?, 126 Yale L.J.F. 287 (Dec. 5, 2016).
Regardless of the standard of review employed, the court in this
case overlooked an opportunity to thoroughly scrutinize
legislation that advances the economic interests of one group
over the liberty interests of another at the level of inquiry it
deserves.
III
A
¶72 Economic liberty——the right to pursue a lawful
occupation or business endeavor——predates the establishment of
Wisconsin statehood, as well as our nation's founding. "[A]t
the Common Law no man might be forbidden to work in any lawful
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Trade . . . ." The Case of the Tailors of Habits &c. of Ipswich
(1614) 12 James I (KB), reprinted in 1 The Selected Writings of
Sir Edward Coke 392 (Steve Sheppard ed., 2003). As Blackstone
noted, "[a]t common law every man might use what trade he
pleased."14
¶73 Historically, Wisconsin courts rejected laws grounded
solely in economic protectionism. In doing so, as Wisconsin
case law illustrates, this court demonstrated its longstanding
commitment to protecting the people's constitutional liberty
interest, enshrined in Article I, Section 1, of the Wisconsin
Constitution as an inherent and fundamental right.
¶74 Because Article I, Section 1 of the Wisconsin
Constitution includes economic liberty within its general
guarantee of liberty as an inherent and fundamental right, we
question whether rational basis review is the appropriate
standard to apply in assessing the constitutionality of the
anti-combination statutes in this case. When fundamental
constitutional rights are implicated, we generally apply strict
scrutiny review. The anti-combination statutes completely
prohibit funeral homes and cemeteries from combining operations,
thereby flatly forbidding Mr. Porter to "do those things which
are ordinarily done by free men" and infringing "the right of
each individual to regulate his own affairs." See Kreutzberg,
114 Wis. at 534. Specifically, the statutes deny Mr. Porter his
inherent right to earn a living in the lawful occupation of his
14
2 William Blackstone, Commentaries *427.
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choice by precluding him from providing funeral home services
solely because he already operates a cemetery. Because the
statutes infringe a fundamental right and the burden imposed
upon the right is a severe restriction, strict scrutiny review
would seem to be appropriate. See Alger, 360 Wis. 2d 193, ¶39
n.16.
¶75 The parties here, however, did not brief or argue
application of strict scrutiny to the asserted infringement of
economic liberty under the declaration of inherent rights in
Article I, Section 1; therefore, we leave that analysis for
another case. Instead, we address the issues presented by the
parties: whether the anti-combination statutes violate the
constitutional guarantee of equal protection, and under the
rational basis test, do the anti-combination statutes bear a
relationship with any legitimate government interest?
B
¶76 As applicable to Mr. Porter, the effect of the anti-
combination laws is to create a class of people who may not have
a financial interest in funeral establishments. That class
consists exclusively of cemetery associations' employees and
agents. Wis. Stat. § 157.067(2). As for Highland Memorial, the
laws create a class of organizations that may not host funeral
establishments on their property. That class consists
17
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exclusively of cemetery associations.15 Mr. Porter and Highland
Memorial say these classifications, and the attendant
differential treatment, violate their equal protection rights.
We agree.
¶77 The United States Constitution promises Mr. Porter and
Highland Memorial the equal protection of the laws. See U.S.
Const. amend. XIV, § 1 ("No state shall . . . deprive any person
of life, liberty, or property, without due process of law; nor
deny to any person within its jurisdiction the equal protection
of the laws."). So does Wisconsin's Constitution. See Wis.
Const. art. 1, § 1 ("All people are born equally free and
independent, and have certain inherent rights; among these are
life, liberty and the pursuit of happiness; to secure these
rights, governments are instituted, deriving their just powers
from the consent of the governed."). When a law divides people
into classes, it creates the potential for differential
treatment under the law. That is why, when we encounter such
classes, our first question is whether the law treats them
differently. Aicher ex rel. LaBarge v. Wis. Patients Comp.
Fund, 2000 WI 98, ¶56, 237 Wis. 2d 99, 613 N.W.2d 849 ("Parties
15
Because the anti-combination laws are interlocking as
between cemetery associations and funeral establishments, the
law also creates a class of people who may not have a financial
interest in cemetery associations, or locate their businesses on
cemetery grounds. That class comprises funeral directors and
operators. Wis. Stat. § 445.12(6). We could conduct the equal
protection analysis from the perspective of either (a) funeral
directors and operators, or (b) cemetery association employees
and agents. Because the petitioners fall into the latter
category, we will address their perspective.
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seeking to challenge the constitutional[ity] of a statute on
equal protection grounds must demonstrate that the statute
treats members of a similarly situated class differently."). If
so, we then evaluate the legitimacy of the law's purpose, and
whether there is an acceptable fit between the purpose and the
means by which the law attempts to achieve it. See, e.g., State
v. West, 2011 WI 83, ¶90, 336 Wis. 2d 578, 800 N.W.2d 929 ("The
right to equal protection does not require that such similarly
situated classes be treated identically, but rather requires
that the distinction made in treatment have some relevance to
the purpose for which classification of the classes is made.").
When the classification does not affect a fundamental right, we
review the "fitness" aspect under the rational basis standard of
scrutiny. Castellani v. Bailey, 218 Wis. 2d 245, 264, 578
N.W.2d 166 (1998) ("Where . . . a suspect classification is not
alleged, and fundamental constitutional rights are not at stake,
the statute must be sustained unless it is patently arbitrary
and bears no rational relationship to a legitimate government
interest." (internal quotations and citation omitted)). For
purposes of this section of our opinion, we assume the anti-
combination laws do not touch on a fundamental right.
Therefore, we will conclude the "legislative classification
satisfies the rational basis test if it meets five criteria":
(1) All classification[s] must be based upon
substantial distinctions which make one class really
different from another.
(2) The classification adopted must be germane to the
purpose of the law.
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(3) The classification must not be based upon existing
circumstances only. [It must not be so constituted as
to preclude addition to the numbers included within a
class].
(4) To whatever class a law may apply, it must apply
equally to each member thereof.
(5) That the characteristics of each class should be
so far different from those of other classes as to
reasonably suggest at least the propriety, having
regard to the public good, of substantially different
legislation.
Aicher, 237 Wis. 2d 99, ¶58 (brackets in original).
¶78 The second and fifth elements of this test, which lie
at the heart of this contest, are best evaluated together.
Combined, they instruct us to consider whether the law's
classification is germane to its purpose, and reasonably
suggests the propriety of imposing on the different classes
substantially different rights or disabilities. The State
proffers two explanations in satisfaction of these requirements.
First, it says, the anti-combination laws "reasonably restrict
anti-competitive commercial activity through prophylactic
antitrust-like rules forbidding the formation of potentially
monopolistic firms." And second, it says "the anti-combination
laws are also rationally related to the State's interest in
limiting the manipulation of funds required to be held in
trust."
1. Anti-Competitiveness
¶79 The State's first justification for the anti-
combination laws rests on what might be the firmest possible
grounds. Protecting consumers from monopolistic practices is an
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exercise of the state's police powers.16 And when the State
exercises its police powers, it is operating in an arena where
it has maximum flexibility to craft and implement its policies.17
But the arena, like all arenas, has boundaries. It is our
responsibility to point them out and adjudge whether the State's
chosen policy has fallen out of bounds. And even though we
presume the policies fall on the lee side of the line, our
rational basis scrutiny is neither feckless nor lackadaisical.
We insist that there really be a rational, non-fanciful
connection between the law's purpose and the means by which the
law pursues that purpose. The guiding principle of this type of
scrutiny is bound up in its name——"rational basis." Something
is rational only if there are reasons that support it. Reasons
16
See, e.g., Carlson & Erickson Builders, Inc. v. Lampert
Yards, Inc., 190 Wis. 2d 650, 662, 529 N.W.2d 905 (1995)
("Antitrust laws are intended to prevent restraints on free
competition, restraints which can harm purchasers, consumers of
goods and the public. The importance of the antitrust laws in
preventing monopolies and encouraging competition, 'the
fundamental economic policy of this state,' is directly
reflected in the statement of legislative intent in sec. 133.01,
Stats. 1991–92, and in the case law.").
17
See Kahn v. McCormack, 99 Wis. 2d 382, 384, 299
N.W.2d 279 (Ct. App. 1980) ("The state's police power has been
defined as 'the inherent power of government to promote the
general welfare.' This power is broad, and includes the right
to regulate the use of property and the conduct of business."
(quoted source and internal citation omitted)); see also
Bisenius v. Karns, 42 Wis. 2d 42, 54, 165 N.W.2d 377 (1969)
("[O]nce within the area of proper exercise of police power, it
is for the legislature to determine what regulations, restraints
or prohibitions are reasonably required to protect the public
safety and only the abrogation of a basic and substantial
individual liberty would justify judicial intervention to set
aside the legislative enactments.").
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require logic, and logic is communicable from one person to
another. So the anti-combination laws survive rational basis
scrutiny only if the State can provide to us a logical
explanation for how they accomplish their legitimate purpose.
¶80 The State's argument requires us to unpack some
economic theory before we can determine whether there is a
logical connection between the anti-combination laws and the
monopoly-averting objective they are to achieve. The State's
concern lies with what it believes might occur if cemeteries and
funeral establishments were allowed to combine into one company.
It fears that such an integrated company would consolidate so
much market share that the resulting control of the field would
allow it to charge higher prices for its goods and services than
would be possible absent the integration. The general concept
is sound, and courts have regularly affirmed that legislatures
may adopt laws protecting against that danger. See, e.g.,
Carlson & Erickson Builders, Inc. v. Lampert Yards, Inc., 190
Wis. 2d 650, 662, 529 N.W.2d 905 (1995) . And the State need
not wait until the injury comes to pass before acting;
legislatures properly deploy anti-combination laws prospectively
to prevent the monopolistic seeds from taking root. See, e.g.,
Paramount Pictures, Inc. v. Langer, 23 F. Supp. 890, 900 (D.
N.D. 1938) (per curiam) (acknowledging that a state legislature,
in exercising its police power, may enact laws "'to prevent a
practice conceived to be promotive of monopoly with its
attendant evils'" and stating the court's opinion "that the
existence of unusual power to deal with competitors
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unfairly . . . is probably a sufficient basis for legislative
action to prevent the possibility of its exercise." (citation
omitted)); see also May's Drug Stores v. State Tax Comm'n, 45
N.W.2d 245, 247 (Iowa 1950) (stating that in considering the
validity of various legislation addressing fair trade, unfair
discrimination, and unfair competition, "the courts always
recognized that the promotion of free competition was a proper
legislative endeavor under the police power.").
¶81 Because all of that spadework has already been
accomplished, we can narrow our work to a fine point. We need
only explore whether there is something about cemeteries and
funeral establishments that gives rise to a monopolistic dynamic
if they are allowed to integrate. If there is, then we must
conclude there is a rational basis for the anti-combination
laws. If there is not, then we will have to move on to the
State's second justification for these laws.
¶82 Anti-competitive behavior can present in any number of
different forms. The one immediately of concern here is the
"foreclosure" effect that can follow from the "vertical
integration" of two or more companies. Although the jargon is
technical, what it describes is not especially complicated.
"Vertical integration," the State explained, "occurs when a
company merges with another company that provides a necessary
input in the product supply chain." It says higher prices may
result from such a combination, "specifically when a company
combines with a firm that provides a scarce resource and when
other would-be sellers of that scarce resource face high
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barriers to entry." The foreclosure effect occurs when the
integrated firm uses its control of the scarce resource to give
itself a price advantage in the marketplace that it can pass
along to its customers. It accomplishes this by making the
scarce resource more expensive to its competitors, either by
controlling so much of the market that competition for the
remaining resources causes a supply-demand upward spiral, or by
selling the scarce resource to competitors at an inflated price,
or by denying its competitors access to the resource altogether.
As the State explained, "a combined firm——one with access to the
resource through ownership——can charge its consumers a lower
price for the resource and charge rival firms a higher price,
thus gaining market share."
¶83 There is nothing inherently wrong, of course, with one
company obtaining more market share than its competitors. The
problem, if there is to be a problem, comes later. An
integrated firm with control of a scarce resource can use that
control to underwrite lower prices for its own customers while
inflating the cost of its competitors' products. Eventually,
with that price advantage, the integrated firm could not only
obtain greater market share, but also drive its competitors from
the market. Finding itself alone, or virtually alone, in its
product category, the State says, the integrated firm will do an
about-face and "charge all consumers higher prices." There is a
real danger that the remaining player on the field can
thereafter maintain its dominant (or even exclusive) position
because its control of the scarce resource makes it either too
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expensive for potential competitors to re-enter the field, or
entirely impossible. The validity of this theoretical construct
is accepted broadly enough that it has generated no dispute
between the parties here.
¶84 As we now consider how this theory applies to
cemeteries and funeral establishments, remember that vertical
integration is about obtaining a company that has a resource
necessary to production of the integrated firm's goods or
services; the key to understanding the theory (and the analysis
below) is keeping a watchful eye on where that resource appears
in the supply chain. If the scarce resource is to empower the
company to produce a maleficent effect, its place in the supply
chain must precede the ultimate product. The importance of that
resource's place in the supply chain is the power it gives the
company to make its final product more competitive through the
foreclosure effect. But if the ultimate product is itself the
scarce resource, then vertical integration has added nothing to
the company's power to exert economic pressure on its
competitors.
¶85 The State says the scarce resource in this calculation
is burial plots: "[C]emeteries provide a relatively scarce good
(burial plots), and it is difficult for would-be cemetery
operators to break into this market." Its expert also agreed
that the burial plots are the scarce resource, particularly when
compared to funeral homes: "As economist Dr. Sundberg
explained, '[g]iven the land, capital, and regulatory
requirements, it is reasonable to believe that entering the
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cemetery industry is much more difficult than starting a new
funeral home.'" (Alteration in original.) Therefore, the State
says, integrated cemetery/funeral homes are problematic because,
"having access to the scarce resource of burial plots, [the
integrated firm] would be well positioned to use its market
share to set inflated burial-plot prices for consumers coming
through competitors' standalone funeral homes while charging its
own consumers reduced prices." (Alteration in original.) The
State goes on to say that "[t]he small number of cemeteries and
the barriers to creating new ones, especially in urban areas,
give a special advantage to well-capitalized large firms that
can afford to purchase multiple funeral homes. With enough
funeral homes, it may be profitable for a cemetery to completely
exclude burials from funeral homes owned by others."
¶86 Notice the direction of economic movement through the
supply chain. The customer goes through the funeral home to the
cemetery. The scarce resource (the burial plot) already belongs
to the cemetery before it vertically integrates. Vertical
integration theory, however, teaches us to look for the scarce
resource in the part of the supply chain the cemetery does not
already own. So when the State looks in the proper spot, all it
sees is funeral homes, which it admits (as does its expert) is
not the scarce resource. Therefore, vertically integrating with
a funeral home will not empower the cemetery to foreclose its
competitors, or make itself into a price-gouging monopoly. The
thing the State fears cannot be accomplished through the
mechanism of vertical integration. Here's why.
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¶87 Imagine that Highland Memorial and Mr. Porter
vertically-integrated with a funeral home; if this gives it the
power to turn itself into a monopoly, we should be able to watch
it happen in our mind's eye as the theory described by the State
comes to life and governs Highland Memorial's economic progress
in the market. But as we will see, if Highland Memorial
attempted the foreclosure gambit, it would undoubtedly be
disappointed by the results. Lowering the cost of burial plots
for those who use its funeral home services and raising it for
others is not likely to bring it additional market share. This
price reduction must be accounted for somewhere. There are
three possibilities: (1) Highland Memorial absorbs the loss as
a short-term hit in an attempt to gain market share, after which
it raises prices back to an economically-viable level (or higher
if it captures enough market share); (2) Highland Memorial
raises the cost of its funeral home services to make up the
difference; or (3) the profits from its funeral home operations
subsidize its cemetery operations to such an extent that
Highland Memorial can operate profitably even with the reduced
rates on burial plots. If the first option describes Highland
Memorial's operations, it will be able to put economic pressure
on competing cemeteries——but its ability to do so has nothing to
do with the funeral home; it could have done the same thing
without integrating. If the second option is the operative
scenario, then Highland Memorial can put no economic pressure on
competing cemeteries at all because the combined cost for
cemetery plots and funeral home services does not change.
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Option three presents the most likely scenario in which Highland
Memorial may make a sustainable bid for market share because the
combined operations allow it to offer a cumulative price to its
customers that stand-alone cemeteries and funeral homes cannot
match.
¶88 But not even option three gives Highland Memorial the
power to foreclose its competitors. The key, as mentioned
above, is the position of the scarce resource in the supply
chain. A cemetery competing with Highland Memorial has no need
to acquire such a resource to remain competitive. It is the
scarce resource. The only thing it needs to remain on par with
Highland Memorial is the addition of funeral home services. And
as the State and its expert admitted, those are not scarce.
Once the competing cemetery obtains its own funeral home, it's
back to parity with Highland Memorial, and neither has any
inborn advantage as they compete for market share.
¶89 But let's assume Highland Memorial is a very well-
capitalized cemetery (a scenario the State posits as
particularly dangerous), and it uses its reserves to snap up one
funeral home after another until it believes it can direct all
funeral traffic to itself. Here, the State's concession that
funeral homes are not scarce is especially important, and
explains why Highland Memorial can gain no advantage. Highland
Memorial could burn through the most generous stack of cash and
never acquire a controlling interest in the funeral home market.
That supply is theoretically unlimited, and if Highland Memorial
made an attempt to corner the market, it would find itself
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paying parlors full of funeral directors with not enough work to
keep them busy. Meanwhile, the competing cemetery would simply
send an employee through the funeral-director licensing process,
after which its overhead would be substantially lower than the
funeral-director heavy Highland Memorial. The free market's
creative destruction would have its way with Highland Memorial,
after which the competitor, not Highland Memorial, would be left
standing.
¶90 The only way vertical integration could create the
type of danger the State fears is an exact reversal of the
State's well-capitalized cemetery scenario. In this
hypothetical, the cemeteries and funeral homes switch places,
and it is the well-capitalized funeral home that goes on a
spending spree. Here, the funeral home would use its resources
to acquire a large number of cemeteries, such that anyone
wishing to be buried must use its services. That would at least
position the scarce resource (the burial plots) in the supply
chain where it could give the well-capitalized funeral home the
power to foreclose its competitors. The State likely did not
advance this alternative scenario because there is nothing for
the anti-combination laws to do under such circumstances.
Vertical integration cannot create a funeral-home monopoly
without preliminarily creating another monopoly——a monopoly in
cemeteries. So the aspiring proprietor of a funeral-home
monopoly will find himself stymied by the statutes that have as
their purpose the prevention of that harmful preliminary
monopoly. See Wis. Stat. ch. 133 (Trusts and Monopolies).
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Without the ability to form the cemetery monopoly, vertical
integration will do nothing to advance his plans for a funeral
home monopoly. Consequently, the anti-combination laws have
nothing to do with the prevention of anti-competitive behavior
under these circumstances.
¶91 It is not a trifling thing when our laws prevent some
of Wisconsin's citizens, but not others, from engaging in lawful
economic activity. There must be an acceptable reason for doing
so, and it must be expressible in logical terms. The court, in
deciding there is such a reason, provided no analysis. It
instead chose to simply paraphrase the State's expert:
As to the State's first articulated interest
(i.e., protecting consumers), [the State's expert]
opined that without the anti-combination laws,
combination firms would, in the short run, offer lower
prices than stand-alone funeral homes and limit stand-
alone firms' access to cemeteries. This would drive
stand-alone funeral homes from the market at which
point combination firms would increase their prices.
Majority op., ¶43. As we demonstrated, supra, the expert
provided no logical connection between the anti-combination laws
and the asserted interest in protecting against anti-competitive
behavior. Because the court provided no independent analysis,
we have no way of knowing what it believes the connection to be.
The bench and bar would benefit from the court's own analysis
rather than a paraphrase of the State's argument.
¶92 Our conclusion with respect to this part of the
State's argument should not be understood as questioning the
legislature's wisdom in enacting the anti-combination laws. We
question only whether they have any rational relationship to
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preventing anti-competitive behavior. Because they do not, we
must consider the second asserted justification for their
existence.
2. Trust Requirements
¶93 Wisconsin's statutes protect consumers who purchase
death-care products and services, in part, by requiring
purveyors to hold a certain amount of sale proceeds in trust.
For example, a pre-death purchase of a casket requires a funeral
home to hold 100 percent of the proceeds in trust until the
person is deceased. Wis. Stat. § 445.125(1)(a)1. Cemeteries
are required to hold 15 percent of the proceeds from the sale of
burial plots in trust for perpetual care purposes. Wis. Stat.
§ 157.11(9g)(c). Cemetery pre-need sellers licensed under Wis.
Stat. § 440.92 must hold in trust 40 percent of the proceeds of
cemetery merchandise (such as monuments, markers, nameplates,
vases, and urns). Wis. Stat. §§ 440.92(3)(a), 157.061(3).
¶94 The State says it can justify the anti-combination
laws as a means of preventing cemeteries and funeral
establishments from circumventing these trust requirements. Its
cursory argument notes that if a cemetery and funeral home
combine, it might charge artificially higher prices for burial
plots and artificially lower prices for caskets. This would
allow the combination firm to keep a smaller amount of funds in
trust even as the company's revenue remains the same. The anti-
combination laws prevent companies with dissimilar trust
requirements from combining, the State says, as a safeguard
against such accounting abuses. Therefore, it concludes, there
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is a rational connection between the anti-combination laws'
purpose and the means by which the laws accomplish that purpose.
¶95 We allow a certain amount of creative license when the
State performs its post hoc rationalizations, but we need not
entertain sophistry. Not a word of the anti-combination laws
suggests, even obliquely, any connection at all to the trust
requirements of cemeteries and funeral homes. And the
legislature has affirmatively demonstrated it does not share the
State's concern regarding the differential in trust
requirements. Cemetery associations may obtain a license under
Wis. Stat. § 440.92 to serve as cemetery pre-need sellers. Upon
acquiring such a license, the cemetery must not only comply with
the 15 percent trust requirement related to burial plots, it
must also satisfy the 40 percent trust requirement related to
cemetery merchandise. The statutory text and framework indicate
that any effect the anti-combination laws might have on
compliance with the various trust requirements would be
accidental and fortuitous. Fortuity cannot stand in for a
rational connection between a law's purpose and means. In fact,
it is fair to say that fortuity is the negation of a rational
connection, inasmuch as logic cannot explain a chance event.
Fortifying the trust requirements imposed on cemeteries and
funeral establishments is no explanation for the anti-
combination laws.
*
¶96 The State has identified no rational connection
between the anti-combination laws and the objectives it says
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they are meant to achieve. But that does not mean the laws lack
any rational basis. We should not suppose that our legislature
acts randomly, and without purpose. The State was unable to
make the required logical connection because it was trying to
link the anti-combination laws to a purpose they do not have.
The solution to such an analytical impasse is not to develop
increasingly fantastic means of relating the laws to the
asserted purposes. If we want to discover the true rational
basis for the anti-combination laws, we should be looking for a
purpose that fits the laws like a jigsaw puzzle. Here, if we
look for a fitting purpose, rather than a convoluted
relationship, we instantly discover what these laws are about:
trade protectionism, plain and simple. As a functional matter,
there is a perfect fit between that purpose and the terms of the
anti-combination laws. They protect funeral directors from
facing the possibility that market forces might teach us that
integrated firms are more efficient than stand-alone operations.
That creates a boon to funeral directors, but a financial burden
on consumers who would otherwise have access to lower-cost
funeral arrangements. This basis is not enough to uphold the
anti-combination laws, however, because the purpose of the law
itself must be legitimate. Trade protectionism is not a
legitimate purpose. See, e.g., Craigmiles, 312 F.3d at 224
("Courts have repeatedly recognized that protecting a discrete
interest group from economic competition is not a legitimate
governmental purpose."). Therefore, because the anti-
combination laws are rationally related only to an illegitimate
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purpose, they violate the petitioners' right to the equal
treatment of the laws.
IV
¶97 Because there is no rational basis connecting the
anti-combination statutes to any legitimate government interest,
we conclude the statutes are unconstitutional. The rational
basis test applied by the court "means property is at the mercy
of the pillagers."18 Wisconsin's "constitutional guarantee of
liberty deserves more respect——a lot more."19 While generally
majoritarianism rules, it may not subordinate constitutional
rights to its preferences. And while the judiciary rightly
defers to legislative policy choices, the judiciary should never
defer to legislative trampling of individual liberty.
¶98 We respectfully dissent.
18
See Hettinga v. United States, 677 F.3d 471, 483 (D.C.
Cir. 2012) (Brown, J., concurring).
19
See id.
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