Texas Supreme Court Holds Parties May Seek Judicial Declaration That An Administrative Rule Does Not Apply To Them
Client Alert | March 31, 2025
Kensington Title-Nevada, LLC v. Tex. Dep’t of State Health Servs., No. 23-0644 – Decided March 28, 2025
On March 28, a unanimous Texas Supreme Court held that the Texas Administrative Procedure Act authorizes parties to challenge whether an agency rule applies to them.
The Texas Administrative Procedure Act “expressly allows parties who do not believe an administrative rule governs them to challenge its applicability in a judicial proceeding when that rule threatens to interfere with their rights.”
Chief Justice Busby, writing for the Court
Background:
A real estate company acquired property containing abandoned radioactive material. The company initially tried to clean up the material but stopped after municipal taxing entities obtained a lien on the material and threatened to sue the company for removing it. The Texas Department of State Health Services then began administrative proceedings against the company for possessing radioactive material without a license in violation of 25 Texas Administrative Code § 289.252(a)(2).
Faced with these conflicting government demands, the real estate company sought a declaration under Texas Government Code § 2001.038(a) that the Department’s licensing rule didn’t apply to it because it didn’t own or possess the abandoned radioactive material. In response, the Department filed a plea to the jurisdiction, arguing that the real estate company improperly challenged the application of the rule rather than its applicability. The trial court denied the plea, but the court of appeals reversed.
Issue:
Does Texas Government Code § 2001.038(a) authorize suits challenging whether parties are subject to an agency rule?
Court’s Holding:
Yes. The real estate company had constitutional standing to bring, and properly alleged, a rule-applicability challenge.
What It Means:
- The Court’s decision preserves a pathway for challenging the applicability of agency rules directly in court without exhausting administrative remedies.
- The Court held that parties have standing to request declaratory relief when an agency rule threatens to interfere with or impair their rights. Here, the Department sought to impose an administrative penalty against the real estate company for violating the licensing rule. And a declaration that the rule didn’t apply to the company would redress that financial threat.
- The Court rejected the Department’s proposed distinction between a rule’s applicability and its application. Instead, the Court explained that Section 2001.038(a) authorizes “suits seeking a declaration of whether a rule applies to the plaintiff” even if those suits would also “yield guidance on . . . the outcome of [the rule’s] application.” Op. at 12. The trial court had jurisdiction here because the real estate company was challenging whether the rule applied to it—that the answer to that inquiry might involve factual disputes in an ongoing agency proceeding was beside the point.
- Continuing to provide insight into the newly created Fifteenth Court of Appeals, the Court observed in a footnote that the Fifteenth Court would, in the future, hear these kinds of appeals under the Texas APA. It also underscored that the Fifteenth Court would “not [be] bound by precedent of the Third Court of Appeals.” Op. at 11 n.4.
The Court’s opinion is available here.
Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding developments at the Texas Supreme Court. Please feel free to contact the following practice group leaders:
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Allyson N. Ho +1 214.698.3233 aho@gibsondunn.com |
Julian W. Poon +1 213.229.7758 jpoon@gibsondunn.com |
| Brad G. Hubbard +1 214.698.3326 bhubbard@gibsondunn.com |
Related Practice: Texas General Litigation
| Trey Cox +1 214.698.3256 tcox@gibsondunn.com |
Collin Cox +1 346.718.6604 ccox@gibsondunn.com |
Gregg Costa +1 346.718.6649 gcosta@gibsondunn.com |
| Mike Raiff +1 214.698.3350 mraiff@gibsondunn.com |
Russ Falconer +1 214.698.3170 rfalconer@gibsondunn.com |
This alert was prepared by Texas of counsels Ben Wilson and Kathryn Cherry and associates Elizabeth Kiernan, Stephen Hammer, and Joseph Barakat.
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