Justice Brett Busby
The Texas Supreme Court has reversed an Austin Court of Appeals decision throwing out a declaratory judgment action challenging the applicability of a rule requiring a possessor of radioactive material to obtain a license where a lienholder foreclosed on real property on which the previous owner abandoned the waste.
Kensington Title-Nevada, LLC v. Texas Department of State Health Services (No. 23-0644; March 28, 2025) arose from a dispute over abandoned radioactive material. In 2018 Kensington, a Nevada-based real estate company, acquired real property in Denton after foreclosing on a lien. The prior owners operated a facility for the production of medical radioisotopes but had ceased production in 2009. For the ensuing nine years they unsuccessfully attempted to get the business up and running again, resulting in DSHS denying their application for a radioactive material license. The department ordered them to begin decommissioning and disposing of the material. This did not occur, and just prior to foreclosing on the lien, Kensington informed the department and requested it to take possession of the material. When the department (predictably) declined, Kensington proposed a decommissioning plan under which a department-licensed contractor would remove the material, which the department approved. But the department denied Kensington access to the site. Meanwhile, Kensington became embroiled in a delinquent property tax suit commenced by the City of Denton, Denton County, and Denton ISD against the prior owners. At that point, the contractor left the job. In 2020 the department notified Kensington of a violation of department rules requiring a possessor of radioactive material to have a license. It sought an $8,000 administrative penalty.
This left Kensington in the position of having to clean up waste that didn’t belong to it, losing the property if the taxing entitues foreclosed their tax liens, or paying the penalty. Faced with this welcome to Texas situation, Kensington first amended its pleading in the tax suit to add a cause of action against the department, seeking declaratory relief. It alleged that the licensing rule didn’t apply because Kensington didn’t own the material and wasn’t a licensee of the previous owners. As to the administrative violation, the ALJ determined that Kensington violated the licensing rule and recommended a $7,000 penalty, which the department accepted. Kensington sought judicial review. As to the declaratory judgment action, the department filed a plea to the jurisdiction on the ground that Kensington “improperly challenged the Department’s application of the rule rather than the applicability of the rule” [seriously?]. The trial court denied the plea, but the court of appeals reversed. Kensington sought review.
In an opinion by Justice Busby, SCOTX reversed and remanded for further proceedings. The department argued that Kensington lacked standing and that its challenge “falls outside the scope of the statute and is barred by sovereign immunity” because it “asks the Court to declare how the rule applies to its fact situation.” Taking up the standing issue, the Court determined that Kensington alleged an injury fact (the out-of-pocket loss associated with the penalty). It also sought relief that would redress the injury, that is, a declaration that the licensing rule doesn’t apply. Under § 2001.038, Government Code, a court has authority to “render a declaratory judgment without regard to whether the plainiff requested the state agency to rule on the validity or applicability of the rule in question.” Whether Kensington alleged a “proper rule-applicability challenge under the statute” goes to the merits, not to standing.
Turning to the sovereign immunity question, the Court found that § 2001.038’s waiver of sovereign immunity applied. The Court politely but firmly called #%&* on the State’s (and court of appeals’) argument about the scope of declaratory judgment authority as limited to the application of the rule. “We conclude this distinction is not well-grounded in the statutory text,” Justice Busby wrote, “which uses the terms interchangeably. Specifically, the statute provides that an ‘applicability’ challenged concerns whether the rule’s actual or ‘threatened application’ would harm the plaintiff in one or more of the specified ways.” Put another way, the Court rejected the department’s position that the statute only authorizes a challenge to “whether a rule applies to it, but not if the plaintiff challenges how that rule applies to it—that is, the plaintiff disputes what the correct outcome should be when the rule is applied to it” (citations omitted). Noting that of the 21 other states with a statute like § 2001.038, only Arkansas as explicitly adopted this position. While not necessary to the decision, the Court nevertheless cast substantial doubt on whether any conditions existed under which the State’s “Arkansas” position might hold water.
The Court thus held that Kensington properly alleged an applicability claim under the statute. It “asked the trial court to declare whether the licensing rule, which applies to (among others) those who possess radioactive personal property, can be applied to a non-licensee who merely owns real property on which radioactive material was abandoned.” The statute plainly allows a challenge of this sort. The court of appeals got it wrong, among other reasons, for “improperly collaps[ing] the threshold question whether Kensington alleged a proper rule-applicability challenge into the separate merits question of how that challenge should be resolved, using the latter to answer the former.” Taking a parting shot, the Court noted that the Legislature authorized the 15th Court of Appeals (which now has exclusive jurisdiction over these types of cases) “to direct the trial court to conduct any necessary evidentiary hearings in connection with the challenge.”
It strikes us that this whole thing could have been avoided by the exercise of some common sense on the part of the State. If the department really wanted Kensington to clean up the waste, why didn’t it let them into the property to see that it was done? Why did it allow the contractor to stop halfway through the job? Instead, the it pursued a lienholder who had properly foreclosed on real property (not the waste) and forced it spend five years in administrative proceedings and litigation that isn’t even over yet. And all for a $7,000 penalty. And we ask why people don’t trust the government? We applaud SCOTX for seeing through this abuse of power and putting it back in the hands of the court that should have decided it in the first place.
