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Court Broadens Grounds for Stay of License
Revocation Pending Appeal
Licensee burden reduced from "likely to
prevail" to "some degree of merit"
An Arizona Court of Appeals ruling in a
liquor license case offers good news – and
greater access to due process – for
contractors facing license revocation at the
hands of the Registrar of Contractors. The
court’s ruling in
P&P Mehta LLC v. Jones
remedies a long-standing problem for
Arizona businesses that face losing their
licenses issued by state or local
governments.
The problem: While a licensee could
appeal in Superior Court a revocation order
by the licensing agency, the court would
grant a stay of the revocation only if the
licensee could demonstrate that it was
“likely to prevail” in court. A licensee who
failed to meet that difficult standard would
lose its license – and essentially be out of
business – until the court ordered
reinstatement.
That situation has been particularly
untenable for contractors, whose licenses
can be pulled by the Registrar of
Contractors in as few as 20 days, and for
whom disputes can be especially complicated
and meeting the “likely to prevail” standard
highly unlikely in a brief hearing.
“Near-impossible.” Fortunately, in
its Mehta ruling, the Court of
Appeals found that requiring a licensee “to
demonstrate at the inception of the review
process a significant probability of success
asks the near-impossible. Except in the most
egregious instances of agency error, this
effort will fail.”
Instead, the Court ruled that issuing a stay
should be based on the licensee’s showing of
“good cause” and “some degree of merit.” The
Court also ruled that a licensee need not
demonstrate that it would suffer
“irreparable harm” if the revocation is not
stayed.
New standards. In defining the new
standards for staying a license revocation,
the Court cited Oregon’s two-pronged test
for substantive merit:
-
a “colorable claim of error” – i.e., an
assertion by the licensee that “is
seemingly valid, genuine, or plausible,
under the circumstances of the case” – and
-
a showing by the licensee that revoking
its license would pose greater harm to the
licensee than the staying of the
revocation would pose to the licensing
agency.
For contractors, the Mehta ruling
means that, upon satisfying the test for
substantive merit, they can continue to
operate under their existing license until
they have their day in court.
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