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FTC Assists Funeral Service in Texas Litigation

FTC Assists Funeral Service in Texas Litigation

Posted July 12, 2005

The FTC has weighed in on a class action lawsuit in Texas to assist funeral service. On July 7, 2005, the FTC issued an advisory opinion explaining that a trial judge in Texas, who had previously ruled against funeral homes, was incorrect in his interpretation of the Funeral Rule. Hopefully, this advisory opinion will help funeral homes end the lawsuit before it spreads to other parts of the country.

The lawsuit started several years ago when a consumer sued SCI Texas Funeral Services, alleging that an SCI funeral home failed to disclose that the casket, vault and other funeral merchandise it sold to the consumer were marked-up cash advances. SCI argued that the merchandise it sold did not constitute “cash advances” under the Funeral Rule. The trial court disagreed and found SCI had violated the Funeral Rule by failing to identify the merchandise as marked-up cash advances. Moreover, since under Texas law a consumer can sue a funeral home if it violates the Funeral Rule, the judge scheduled a trial on the damages to be awarded to the consumer.

As often happens in cases like these, the lawsuit quickly transformed into a class action lawsuit on behalf of all Texas funeral consumers who had utilized SCI funeral homes. In addition, similar suits began to arise in California against SCI and other publicly-traded funeral companies. Trial attorneys who specialize in class action suits saw a potential windfall based upon the decision of the Texas trial judge.

After several requests, including a request from NFDA, the FTC issued an Advisory Opinion finding that the trial judge had misinterpreted the Funeral Rule. According to the FTC, items that a funeral home buys from a wholesaler and resells to a consumer, like caskets and vaults, are not “cash advances.” Rather, a cash advance is a good or service that the funeral home obtains from a third party as an accommodation for the consumer and which is specifically listed on the funeral contract as a cash advance. Therefore, the trial court was incorrect when it ruled that all items a funeral home obtains from wholesalers and resells to consumers constitute cash advance items.

SCI has filed an appeal of the Texas trial court ruling and will be able to use the FTC Advisory Opinion to seek a reversal. Meanwhile, the class action suit is suspended until the appellate court can rule on SCI's appeal. SCI's attorneys are hopeful that the appellate court will rule by the end of the year and bring this matter to a satisfactory resolution.