In December 2018, Kensington Title-Nevada, LLC, a Nevada-based real estate company, acquired real property in Denton, Texas, by foreclosing on a lien; on the property was radioactive personal property, including a linear accelerator and cyclotron, owned by US Radiopharmaceuticals, Inc. (USR), whose license application the Department of State Health Services had denied earlier in 2018 while ordering it to begin decommissioning.¹ Kensington warned the Department of its plans and asked it to accept possession of the material, which the Department declined; Kensington then proposed a decommissioning plan that the Department approved, and a Department-licensed contractor began cleanup.² Taxing entities holding judgment liens on USR's personal property threatened to sue Kensington for theft if the contractor continued, and the contractor stopped before completing the work.³ In October 2020 the Department sent Kensington a notice of violation of 25 Texas Administrative Code section 289.252(a)(2), the licensing rule barring possession of radioactive material without a license, seeking an $8,000 penalty.⁴

Kensington added an Administrative Procedure Act claim to the pending tax suit seeking a declaration that the licensing rule does not apply to it, relying on Government Code section 2001.038(a); the claim was severed and transferred to Travis County.¹ In the parallel contested case, the administrative law judge found that Kensington "possessed" the material without a license and recommended a $7,000 penalty, the Department adopted that order, and Kensington's petition for judicial review has been abated.² The trial court denied the Department's plea to the jurisdiction, but the Third Court of Appeals reversed, holding that Kensington had not pleaded a proper rule-applicability challenge because a party must challenge whether a rule is capable of being applied to a factual situation and not how it should be applied.³ Kensington petitioned for review on October 20, 2023, and the Department responded on February 7, 2024; the Court requested merits briefing on March 8, 2024, granted review on September 27, 2024, heard argument on December 5, 2024, and decided the case on March 28, 2025.⁴

Petition for review from the Third Court of Appeals in an interlocutory appeal from the denial of a plea to the jurisdiction; argued December 5, 2024, and decided March 28, 2025.⁵

Kensington presents whether it properly pleaded a rule-applicability challenge under section 2001.038(a) to survive the Department's plea to the jurisdiction, when it sought to invalidate a Department rule interpretation making a non-licensee responsible for cleanup of radioactive material abandoned on its property.¹ The Department presents whether the district court had subject-matter jurisdiction, including whether Kensington's injury is redressable, and whether the proposed declaration asks the court to declare how the rule applies to Kensington's particular facts.² The Court decided when a plaintiff has standing to seek a declaration of a rule's applicability and what applicability declarations fall within the statute's waiver of immunity.³

Subject-matter jurisdiction requires that the party have standing, that there be a live controversy, and that the case be justiciable, and constitutional standing requires a personal injury fairly traceable to the defendant and likely to be redressed by the relief requested; sovereign immunity bars suit absent a waiver.¹

Whether Kensington has standing and pleaded a proper rule-applicability challenge.

Petitioner (Kensington): The Legislature created a statutory waiver of immunity that lets a party challenge the validity or applicability of a rule when the rule or its threatened application interferes with a legal right; the only requirements are that the plaintiff challenge an actual rule and allege interference with a legal right, and the court of appeals misconstrued its pleadings.¹ Kensington contends that it neither owns nor possesses the material, so the licensing rule does not apply to a landowner on whose property it was abandoned.²

Respondent (the Department): Kensington lacks standing because its injury is not redressable, since its proposed declaration would not negate the finding in the contested case that it possessed the material through dominion and control, and its challenge to how the rule applies to its own facts falls outside the statute and is barred by sovereign immunity.³

Kensington argued that it properly pleaded a rule-applicability challenge over which the trial court had jurisdiction, because it challenged the Department's attempt to force a non-licensee to clean up radioactive material abandoned on its property.¹ The Department responded that Kensington challenges the rule's application and not its applicability, so the claim is not authorized by section 2001.038(a) and sovereign immunity bars it.²

• Ownership questions. Asked whether Kensington must say it does not own or possess the material, the Department's counsel said Third Court cases treat ownership questions as outside section 2001.038. (Oral Argument, 0:31:21)
• Two governments. Asked what Kensington is supposed to do between two governments, the Department's counsel said the concern is valid but this is only an applicability challenge, a very limited vehicle. (Oral Argument, 0:29:46)
• Reach the merits. Asked whether the Court could hold that Kensington did not possess the material, Kensington's counsel said the appeal is about jurisdiction, so the Court can only reverse and remand. (Oral Argument, 0:12:37)
• Any landlord. Asked what makes this case different, Kensington's counsel said the question is whether the rules apply to it, as with any landlord whose property gets abandoned radioactive material. (Oral Argument, 0:09:48)
• Stuck with the cost. Asked what happens if relief is denied, Kensington's counsel said one government entity says do this and another says you cannot, and the material was abandoned on its property. (Oral Argument, 0:05:28)
• Partial waiver. Asked whether the statute might waive immunity for only part of the declaratory relief, the Department's counsel said that is not available in this case. (Oral Argument, 0:21:57)

• Ron Beal of Waco, Texas filed an amicus curiae brief on December 13, 2023, at the petition stage, and amicus curiae letters on February 8, 2024, December 30, 2024, and February 5, 2025.

Holding

Kensington has standing because a declaration that the licensing rule does not apply to it would redress the Department's threat to fine it, and it pleaded a proper rule-applicability challenge within the waiver of sovereign immunity in section 2001.038(a) because it seeks a declaration of whether the rule applies to it at all; the merits are for the trial court on remand.¹

Reasoning

Standing. Kensington alleged that the Department seeks an $8,000 penalty although Kensington never took possession of the material, a threatened out-of-pocket loss that is a prototypical injury in fact, and a declaration that the licensing rule does not apply to it would redress that threat.² The Court did not need to decide whether the declaration would negate each detail of the administrative law judge's later findings, because section 2001.038(d) allows a declaratory judgment without regard to whether the plaintiff asked the agency to rule, and whether Kensington pleaded a proper applicability challenge goes to the merits and not to jurisdiction.³

Waiver of immunity. Section 2001.038 waives sovereign immunity by providing for a declaratory judgment action on the validity or applicability of a rule and requiring that the agency be a party, so the plea turns on whether Kensington's action is within the statute's scope.⁴ The Court found the court of appeals' distinction between a rule's "applicability" and its "application" not well grounded in the statutory text, which uses the terms interchangeably, and noted that the statute tracks the 1961 Model State Administrative Procedure Act and that only Arkansas among other similar states has adopted the distinction.⁵ It did not adopt the "whether versus how" understanding but agreed that, at minimum, applicability challenges include suits seeking a declaration of whether a rule applies to the plaintiff, and it expressed no view on declarations about how a rule applies.⁶ Kensington asked whether the licensing rule can be applied to a non-licensee who simply owns real property on which radioactive material was abandoned, which is one of the core scenarios the statute covers.⁷

The court of appeals' errors. The court of appeals wrongly required that the rule be irrelevant to anyone in the factual situation, ignoring that the statute speaks of interference with "a legal right or privilege of the plaintiff," and it collapsed the threshold question of whether Kensington pleaded a proper challenge into the merits by assuming the rule applies.⁸ Whether Kensington, the only unlicensed entity involved, possessed the material is the disputed applicability question the trial court may decide.⁹ The Department's arguments from primary jurisdiction and exhaustion fail because the statute authorizes a declaratory judgment without regard to whether the plaintiff asked the agency to rule, and subsection (f), added in 2023, confirms the court's authority to resolve related fact disputes.¹⁰

Disposition

The Court reversed the court of appeals' judgment dismissing the suit for lack of subject-matter jurisdiction and remanded the case to the trial court for further proceedings.¹¹

Vote Breakdown

Majority Opinion by Justice Busby

Joined by Blacklock, C.J., and Bland, Boyd, Devine, Huddle, Lehrmann, Sullivan, and Young, JJ.