How would First Amendment commercial-speech rules affect the North Carolina Board of Mortuary Science if it applied its license statute to funeral-service advertising?

Plain-English summary

The Board of Mortuary Science's counsel asked how N.C.G.S. § 90-210.25(e)(1)f and the Board's interpretations of it would fare under First Amendment cases. The statute identifies giving certificates of credit or paying or offering commissions to secure business as grounds for license suspension or revocation. The AG said the answer depends on what the Board is restricting. The opinion expressly says it did not know exactly how the Board had interpreted or applied the provision in past cases.

If the provision is used to prohibit fees or discounts paid to third parties for referring clients to licensees, the AG regarded it as a conduct restriction. The commercial-speech cases therefore did not apply to that use. The opinion said it knew of no constitutional barrier when such a prohibition is authorized by statute and applied reasonably.

If the Board instead applies the provision to prohibit advertising otherwise lawful discounts or credits, the issue is commercial speech. The AG described the Central Hudson test: unless speech concerns illegal activity or is false or misleading, the State needs a substantial legitimate interest, a restriction that directly and materially advances that interest, and a narrowly drawn rule. The opinion noted that courts had rejected many professional-advertising restrictions and that a challenged advertising ban would place a heavy evidentiary burden on the Board.

The AG suggested reviewing the statute, Board rules, and past applications. It advised the Board to adopt supporting rules or seek a legislative amendment if needed, and to adjust its interpretation and rules if a First Amendment challenge would be difficult to defend. It did not rule that any particular Board application was valid or invalid.

Currency note

This opinion was issued in 2000. Check current statutes, Board rules, and commercial-speech decisions before relying on its analysis for an advertisement today.

What this means for you

If you are a funeral-service licensee: The opinion distinguishes a payment to a third party for a client referral from advertising an otherwise lawful discount or credit. It does not approve every advertisement or resolve any specific licensing dispute.

If you administer the Board's rules: The opinion recommends examining the statute, rules, and past applications to determine whether an interpretation that restricts advertising can be supported under First Amendment standards.

Common questions

Did the AG say referral-fee restrictions violate commercial-speech rights?
No. The opinion treats paying third parties for referrals as conduct and says the commercial-speech cases do not govern a prohibition on those payments.

Did the AG uphold a Board ban on advertising funeral discounts?
No. It did not identify the Board's actual past applications. It said a ban on advertising otherwise lawful discounts or promotions could be lawful only if it met the stated First Amendment standards.

What would the Board have to show if an advertising ban were challenged?
The opinion describes a substantial state interest, direct and material advancement of that interest, and a narrowly drawn restriction. It says the Board would likely need substantial evidence to carry its burden in court.

Does the Fourth Circuit case decide the funeral-advertising question?
No. The opinion cites Ficker v. Curran in a footnote as an example concerning Maryland's thirty-day ban on targeted attorney mail. It does not say Ficker decides a challenge to this funeral-service statute.

Citations

• N.C.G.S. § 90-210.25(e)(1)f: the license provision quoted and analyzed in the opinion.
• Central Hudson Gas & Electric Corp. v. Public Service Comm'n of New York, 447 U.S. 557 (1980): commercial-speech standard described in the opinion.
• 44 Liquormart, Inc. v. Rhode Island, 517 U.S. 484 (1996): ban on liquor-price advertising discussed in the opinion.
• Edenfield v. Fane, 507 U.S. 761 (1993): cited in the discussion of commercial-speech burdens.
• Ficker v. Curran, 119 F.3d 1150 (1997): Fourth Circuit targeted-mail decision cited in the footnote.

Source

• Landing page: https://ncdoj.gov/opinions/funeral-service/

Original opinion text

Re: Advisory opinion: Validity of N.C.G.S. § 90-210.25(e)(1)f and Board's interpretation

Dear Mr. Weisel:

You have inquired about the validity of N.C.G.S. § 90-210.25(e)(1)f, which is part of Article 13A, Chapter 90 of the General Statutes of North Carolina, governing the practice of funeral service. Specifically, that section specifies that "[t]he direct or indirect giving of certificates of credit or the payment or offer of payment of a commission by the licensee, his agents, assistants or employees for the purpose of securing business" is grounds for revocation or suspension of a license by the Board of Mortuary Science. You indicated in your letter that the Board has interpreted and applied this provision to various situations over the years in the course of its duties. Your letter expressed concern about how the provision, and the Board's interpretations and applications of that provision, would fare under current first amendment case law such as 44 Liquormart, Inc. v. Rhode Island, 517 U.S. 484 (1996) and Edenfield v. Fane, 507 U.S. 761 (1993).

First, to the extent N.C.G.S. § 90-210.25(e)(1)f is applied to prohibit fees or discounts paid to third parties for referring clients to licensees, the first amendment cases such as Liquormart do not apply. Prohibitions on licensees paying such referral fees are addressed to conduct, not to speech. These types of provisions are commonly found in various types of licensing laws and professional ethical codes, and we are not aware of any constitutional barrier to their application when authorized by statute and applied in a reasonable manner.

On the other hand, to the extent N.C.G.S. § 90-210.25(e)(1)f is applied to prohibit advertising of otherwise lawful discounts or credits through promotional materials, newspaper advertisements, or other means, then the issue would appear to be one concerning the validity of the State's regulation of commercial speech under the First Amendment. As you mentioned, the Liquormart case struck down a complete ban on advertising liquor prices. There, the Court noted, "[w]hen a State regulates commercial messages to protect consumers from misleading, deceptive, or aggressive sales practices, or requires the disclosure of beneficial consumer information," the purpose of its regulation "is consistent with the reasons for according constitutional protection to commercial speech and therefore justifies less than strict review." 517 U.S. at 501.

Liquormart, however, is merely one of a number of commercial speech first amendment cases the Court has decided over the last twenty-four years, since Virginia State Bd. of Pharmacy v. Virginia Citizens Consumer Council, 425 U.S. 748 (1976). In that case, the Court struck down a Virginia statute making a pharmacist guilty of professional misconduct if he published or advertised fees, prices, or discounts for prescription drugs. The Court expressed concern not only for the right of the pharmacist to communicate, but also for the right of the consumer to receive the communication, which in this case would be helpful information about fees. Similarly, in Bates v. State Bar of Arizona, 433 U.S. 350 (1977), the Supreme Court invalidated Arizona restrictions on lawyer advertising, in significant part because of concern about the consumer's right to receive helpful information. In recent years, the Court has emphasized that a State which wants to ban or restrict commercial speech has a heavy burden of demonstrating the constitutional validity of the restriction. Bolger v. Youngs Drug Products Corp., 463 U.S. 60, 71, n.20 (1983); Edenfield, 507 U.S. at 770-71 Unless the speech involves illegal activity or is itself false or misleading, the State can succeed in defending its speech restriction by showing that it has a substantial legitimate interest underlying its regulation, that the restriction on the speech directly and materially advances that interest and that the regulation is "narrowly drawn." See Central Hudson Gas & Electric Corp. v. Public Service Comm'n of New York, 447 U.S. 557, 564-65 (1980); see also Florida Bar v. Went For It, Inc., 515 U.S. 618, 624 (1995). Applying the Central Hudson test, the Supreme Court has not readily accepted states' justifications for banning or restricting commercial speech, rejecting various restrictions on professional advertising in cases such as Zauderer v. Office of Disciplinary Counsel of the Supreme Court of Ohio, 471 U.S. 626 (1985) (ban on advertisements providing advice regarding specific legal problems and on use of illustrations in advertisements); Peel v. Attorney Registration & Disciplinary Comm'n of Illinois, 496 U.S. 91 (1990) (ban on advertisements stating lawyer certifications, with narrow exceptions, as applied to lawyer certified as civil trial specialist by National Board of Trial Advocacy); Shapero v. Kentucky Bar Ass'n, 486 U.S. 466 (1988) (ban on attorneys' targeted direct mail solicitation relating to specific events, applied to letter concerning foreclosure proceedings); Ibanez v. Florida Dep't of Bus. & Professional Regulation, Bd. of Accountancy, 512 U.S. 136 (1994) (restrictions on listing qualifications applied to ban listing of certified public accountant credentials by an attorney); Edenfield, 507 U.S. 761 (ban on in-person solicitation by accountants). Among the few exceptions are Ohralik v. Ohio State Bar Ass'n, 436 U.S. 447 (1978) (ban on in-person solicitation of accident victims by attorneys) and Florida Bar v. Went For It, 515 U.S. 618, in which the Court upheld a thirty-day restriction on targeted direct mail solicitation by attorneys to accident victims and persons who had lost loved ones in accidents, distinguishing the case from Shapero.[1] Thus, except for attorneys soliciting accident victims, either in-person or by targeted mail during a very limited period of time, the Supreme Court has tended to conclude in most cases that the State's interest in protecting consumers from potentially misleading or overreaching advertising did not advance legitimate State interests in a manner sufficiently related to those interests or sufficiently restricted to them to outweigh the advertiser's right to communicate and the consumer's right to learn about the qualifications, services, and pricing practices of the advertising professional. Moreover, the State generally can convince a court of the harms from which it seeks to protect consumers only by producing evidence of those harms resulting from the banned or restricted types of advertising, such as a study that the Florida Bar relied on in Went For It.

In sum, to the extent that the Board of Mortuary Science interprets and applies N.C.G.S. § 90-210.25(e)(1)f to ban advertising of discounts or promotions, it can do so lawfully only under the standards set out above. If challenged in litigation, under current case law it would have to meet that heavy burden of convincing the court, presumably by producing substantial evidence, that the ban was narrowly drawn to further a legitimate interest.

We are not sure exactly how the Board has interpreted and applied N.C.G.S. § 90-210.25(e)(1)f in the past. Therefore, we suggest that the Board may want to review the statute itself, the rules of the Board interpreting the statute, and the past applications of both the statute and any relevant rules by the Board. If the Board lacks rules reflecting its interpretation of the statute, it will need to adopt appropriate rules to support its interpretation or, if the statute does not support that interpretation, seek legislative amendment. Further, if it appears that the Board may have difficulty supporting its interpretation in court in the event of a first amendment challenge, the Board may want to reconsider its interpretation and adjust its rules accordingly or, in the event the problem appears to be with the statute itself, seek statutory amendment.

We hope this advisory opinion provides assistance to you. Please let us know if there are further questions about this matter.

Signed by:

Ann Reed
Senior Deputy Attorney General

Charles J. Murray
Special Deputy Attorney General

Norma S. Harrell
Special Deputy Attorney General

[1] Significantly, lower courts have concluded that Florida Bar v. Went For It cannot be extrapolated to uphold other time-limited bans. For example, the United States Court of Appeals for the Fourth Circuit held that Maryland could not impose a thirty-day ban on targeted direct mail solicitation to persons involved in or suffering an accident or disaster or charged with crimes or traffic offenses, in part because those persons often needed legal services promptly. Ficker v. Curran, 119 F.3d 1150 (1997).