Fifth Circuit: “naked transfers of wealth” are unconstitutional

October 24, 2012 | By TIMOTHY SANDEFUR

The Fifth Circuit Court of Appeals yesterday asked Louisiana state courts to decide whether state regulators have the authority to ban people from selling coffins unless they get a state funeral director’s license. The judges declined to strike down the restriction as unconstitutional because there’s some doubt that the regulators who issued the rule had the authority under the statute to do so, and courts will refrain from deciding constitutional questions if they can find some other way to resolve a lawsuit. That’s particularly true in federal courts, which will typically leave questions of that kind to state courts. But while the Fifth Circuit did not strike down the restriction as unconstitutional, it had some harsh words for that restriction, which reveals that the “rational basis” test that courts use when deciding whether economic regulations are constitutional doesn’t just let the government pick winners and losers:

[N]either precedent nor broader principles suggest that mere economic protection of a pet industry is a legitimate governmental purpose, but economic protection, that is favortism, may well be supported by a post hoc perceived rationale…without which it is aptly described as a naked transfer of wealth…. That Louisiana does not even require a casket for burial, does not impose requirements for their construction or design, does not require a casket to be sealed before burial, and does not require funeral directors to have any special expertise in caskets makes us doubt that a relationship exists between public health and safety and limiting intrastate sales of caskets to funeral establishments. [Cf. Merrifield v. Lockyer, 547 F.3d 978, 989 (9th Cir. 2008) (“[T]he singling out of a particular economic group, with no rational or logical reason for doing so, was strong evidence of an economic animus with no relation to public health, morals or safety.”)]

The great deference due state economic regulation does not demand judicial blindness to the history of a challenged rule or the context of its adoption nor does it require courts to accept nonsensical explanations for naked transfers of wealth. We insist that Louisiana’s rules not be irrational—the outer-most limits of due process and equal protection—as Justice Harlan put it, the inquiry is whether :[the] measure bears a rational relation to a constitutionally permissible objective.” Answering that question is well within Article III’s confines of judicial review.

In other words, the Constitution does not allow the government merely to hand out special favors to the politically influential at the expense of those who lack political influence. Instead, restrictions on freedom must have some genuine public purpose—not a private purpose. Although this is technically dicta, the Fifth Circuit here joins the Ninth and Sixth Circuits that have said that government may not use its occupational licensing powers simply to benefit established industries against economic competition.

Congratulations to our friends at the Institute for Justice for this excellent decision.