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Court rules no property interest in business license renewal

Updated: Jun 29, 2022

Many municipalities struggle with business license renewals for businesses that are not in compliance with all code provisions. Specifically, does the fact that a business had a license last year entitle them to a renewal? While Missouri state courts have not outlined a clear road map on this topic, a recent federal court decision applying Missouri law indicates there is no automatic right to a renewal.

In Bhakta v. City of Bridgeton, the United States District Court for the Eastern District of Missouri recently held that business owners have no vested right in the renewal of a business license. The hotel-owner plaintiff operated a hotel located in the city. The owner initially applied for and received a business license and license endorsement pursuant to Bridgeton Code of Ordinances in August 2009 that was renewed every year thereafter until March 2018 when the city denied the permit and endorsement. The city’s code regarding business license renewals required the applicant to demonstrate that it fulfilled the conditions required for approval of a license application. The section for issuance of a business license stated that upon application, a license shall issue if “no other grounds to deny such lodging establishment license exist under the law.” The hotel owner sued the city claiming they were denied due process because they had a vested property interest in the renewal of their business license, and therefore a hearing was required to be provided before the determination that the business license would not be renewed. Bridgeton’s code did require a hearing before revoking an active business license, but not for a renewal. The court disagreed, recognizing that Missouri law distinguishes between license revocation and the decision not to renew after the natural expiration of a license. The court explained that in order to establish a protected property interest, one must “identify an independent source of law . . . giving rise to such an interest.” The hotel-owner relied solely on State statutory requirements for hotel licensing when making its claims. Because that same statute contemplates local licensing requirements in addition to State licensing requirements, the court held that reliance on State statute alone was insufficient to establish a valid property interest. The hotel-owner was required to show that it had met all mandatory prerequisites for issuance, including that there were “no other grounds to deny such lodging establishment license.” The fact that the city had discretion to evaluate whether or not any other grounds for denial existed, did not invalidate the nonrenewal or raise to the level of a violation of due process.

Cities should review their business license ordinances to determine whether the language treats renewal as automatic or whether a business must re-apply for a license each year. Language that renders renewal automatic may provide sufficient authority to support a property interest in the business license.

Note that the case is not final and may be appealed. Also note that a Missouri state court may not be persuaded by a federal court decision. Please consult your City Attorney before taking any action.

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