Licensing by Administrative Agencies


Under the Federal Administrative Procedure Act, a “license” is defined as the whole or part of an agency permit, certificate, approval, registration, charter, membership, statutory exemption, or other form of permission[i].  Licensing also includes agency process respecting the grant, renewal, denial, revocation, suspension, annulment, withdrawal, limitation, amendment, modification, or condition of a license.

Generally, one who seeks a license from an administrative agency has the burden of proving eligibility to the satisfaction of the agency.  For instance, in Arkansas Health Planning & Dev. Agency v. Hot Spring County Memorial Hospital, 291 Ark. 186 (Ark. 1987), Appellant administrative agency sought review of a decision of the Hot Spring Circuit Court (Arkansas) that found its decision denying appellee hospital’s application for a Certificate of Need to establish and operate a home health agency was not supported by substantial evidence, was arbitrary and capricious, and constituted an abuse of discretion. The court ordered the administrative agency to issue the certificate.  The hospital filed an application for a Certificate of Need to establish and operate a home health agency. After a review of the application, the administrative agency denied the request. Pursuant to the agency’s rules, the hospital sought a review by an independent agency, which was granted, and then the independent agency remanded the matter back to the administrative agency for another adjudicatory hearing. An adjudicatory hearing was held, and the hospital presented additional evidence to support its position. Again, the administrative agency denied the application, and, again, the hospital requested a review by an independent agency. The decision of the administrative agency was sustained by the independent agency on the second review. The hospital next sought judicial review in circuit court. The circuit court found that the administrative agency decision was not supported by substantial evidence, was arbitrary and capricious, and constituted an abuse of discretion. It ordered the administrative agency to issue a Certificate of Need. On appeal, the court reversed the circuit court decision because it found that there was substantial evidence to support the agency decision.

Moreover, the authority to amend or modify a license is a corollary of an agency’s power to grant that license[ii].

Licenses and permits are privileges, to which no vested property rights attach.  Thus, a governmental entity has broad discretion to request information to evaluate an application for government privileges, and a denial of that privilege is not arbitrary if the government’s information request is refused.  Also, Congress has the power to condition issuance of licenses on compliance with agency procedures, and a commission with the power to approve or disapprove a license also has the power to grant the license on some condition[iii].

In the absence of any infringement on a constitutionally protected right or liberty, a licensing authority need only show that a requirement it imposes on license applicants is rationally related to an applicant’s fitness for the occupation.  Prompt notice must be given by an agency of its denial in whole or in part of the written application, petition, or request of an interested person made in connection with an agency proceeding.  Except in affirming a prior denial or if the denial is self-explanatory, the notice must be accompanied by a brief statement of the grounds for denial.

However, because the licensing authority of an agency is limited to that delegated by the legislature, an agency may deny a license only on a ground that comes within the statute establishing the bases for denial.  Conduct that falls within the statutory grounds for denial of a license may provide the basis for a denial without offending jurisdictional principles, regardless of where it occurs, and the same is true of postlicensure disciplinary proceedings, even though conduct occurred prior to licensure[iv].

[i] 5 USCS prec § 551

[ii] De Haro v. United States, 72 U.S. 599 (U.S. 1867)

[iii] Liggett Drug Co. v. Board of License Comm’rs, 296 Mass. 41 (Mass. 1936)

[iv] Hughes v. Board of Architectural Examiners, 17 Cal. 4th 763 (Cal. 1998)