When Does an Expired License Become a Constitutional Problem?
Companies in licensed industries often treat their operating license as a form of property, and in many respects it is. But there is an important difference between an agency taking your license away and a license expiring on its own because a renewal step was missed. A recent decision from the Michigan Court of Claims in United Services Center, LLC v. Department of Insurance and Financial Services shows that when a license lapses by operation of law, the constitutional claims that depend on government action will usually fail, no matter how the loss is framed.
Why Does It Matter Whether the Agency Acted?
Several constitutional theories require state action as a threshold element. A procedural due process claim asks whether the government deprived a person of a protected interest without adequate notice and an opportunity to be heard. An unreasonable seizure claim under Article 1, Section 11 of the Michigan Constitution requires a meaningful interference with a possessory interest, and interference requires some affirmative act by the government. When the loss of a benefit results from the licensee’s own failure to complete a required step rather than from anything the agency did, there is no deprivation and no seizure to challenge. The claim collapses at the threshold because the predicate government action never occurred.
What Happened in the Case?
A licensed money-transfer business lost its license when its annual renewal did not go through, allegedly because of a technical issue with the state licensing portal. The agency had sent three notices that the renewal was incomplete, along with instructions for fixing the problem, but the company never responded. After the license expired, the company sued, characterizing the non-renewal as a constructive revocation and raising procedural due process, unreasonable seizure, and equal protection claims. The court denied a preliminary injunction and granted summary disposition to the agency.
How Did the Court Resolve the Claims?
Every claim failed for the same reason: the agency took no action to revoke the license. By statute, the license expired on its own when the company did not complete its renewal, so there was no deprivation, no government interference, and no revocation for any of the constitutional theories to attach to. The court added that the company received all the process it was due, because it had been told three times that the renewal was incomplete and how to fix it and never responded.
Lessons for Businesses Holding Regulated Licenses:
The practical takeaways extend to any business that depends on a renewable government license. First, understand the difference between a revocation and a lapse. A revocation is an affirmative action by an agency triggering procedural protections and a right to be heard. A lapse for failure to complete a renewal step is not an agency action at all, and it will rarely create a constitutional claim. Second, treat renewal as a process you must confirm is complete, not just initiate. Paying one fee while leaving another outstanding or submitting an application improperly can be enough to let a license expire by operation of law. Third, do not ignore deficiency notices when an agency tells you that a renewal is incomplete, because that is likely the opportunity to be heard that due process requires.