Kensington Title-Nevada, LLC v. Texas Department of State Health Services:
Clarifying Rule‑Applicability Challenges and Standing Under Texas APA § 2001.038

Introduction

In Kensington Title-Nevada, LLC v. Texas Department of State Health Services, No. 23-0644 (Tex. Apr. 17, 2025), the Supreme Court of Texas significantly clarifies:

what it means to bring a “rule‑applicability” challenge under section 2001.038(a) of the Texas Administrative Procedure Act (“APA”);
when a plaintiff has standing to bring such a challenge; and
how that statute interacts with sovereign immunity and ongoing agency enforcement proceedings.

The dispute arises from an unusual and uncomfortable fact pattern at the intersection of administrative law, property law, and radiation control: a landowner inherited radioactive personal property abandoned on its land and found itself trapped between conflicting governmental demands.

Kensington Title-Nevada, LLC (“Kensington”), a Nevada-based real estate company, acquired real property in Denton, Texas through foreclosure. On that land sat highly regulated radioactive equipment (including a cyclotron and linear accelerator) owned by a third party, US Radiopharmaceuticals, Inc. (“USR”). The Texas Department of State Health Services (“DSHS” or “the Department”) had already denied USR’s radioactive material license and ordered decommissioning and disposal of the material.

When Kensington attempted to facilitate decommissioning via a licensed contractor, taxing authorities threatened it with theft claims because they held tax liens on USR’s personal property. Kensington’s contractor halted work. DSHS then issued Kensington a Notice of Violation and sought an administrative penalty for allegedly possessing radioactive material without a license under 25 Tex. Admin. Code § 289.252(a)(2).

To escape this “no‑win” scenario, Kensington invoked Texas Government Code § 2001.038(a), seeking a declaratory judgment that DSHS’s radioactive-materials licensing rule does not apply to a non‑licensee landowner whose property merely hosts abandoned radioactive equipment. The core questions before the Supreme Court were:

Does Kensington have standing to bring a pre‑enforcement (or parallel) declaratory-judgment action under § 2001.038(a)?
Is Kensington’s challenge a proper “rule‑applicability” challenge within the scope of § 2001.038’s waiver of sovereign immunity, or is it merely an improper attack on how the rule was applied to it in a particular enforcement proceeding?

The Court answered both questions in Kensington’s favor, reversed the Third Court of Appeals’ dismissal for lack of jurisdiction, and remanded for the trial court to decide—on the merits—whether the radioactive‑materials rule applies to Kensington at all.

Summary of the Opinion

Holdings

Standing: Kensington has constitutional standing to bring a § 2001.038(a) challenge. The threatened $8,000 administrative penalty is a concrete injury in fact; it is fairly traceable to DSHS’s threatened application of the licensing rule; and a declaration that the rule does not apply to Kensington would redress that harm.
Scope of § 2001.038(a): Kensington’s suit is a proper “rule‑applicability” challenge within the statute’s waiver of sovereign immunity because it asks whether the DSHS licensing rule applies at all to a non‑licensee landowner whose property contains abandoned radioactive personal property. Section 2001.038 is not limited to situations where a rule is irrelevant to everyone involved in the factual scenario.
Applicability vs. application: The Court criticizes the lower courts’ rigid distinction between “applicability” (jurisdictionally proper) and “application” (jurisdictionally improper) as not grounded in the statutory text, which itself links “applicability” to the rule’s “application” or “threatened application.” At a minimum, however, the statute clearly covers suits asking whether a rule applies to the plaintiff. Kensington’s suit falls within that core.
No exhaustion/primary jurisdiction bar: Section 2001.038(d) expressly allows a court to decide rule-validity and rule-applicability challenges “without regard to whether the plaintiff requested the state agency to rule” on those questions. Thus, factual disputes underlying applicability—such as whether Kensington “possessed” the radioactive material—can be decided in the § 2001.038 action notwithstanding parallel contested-case proceedings.

Disposition

The Court reverses the Third Court of Appeals’ judgment dismissing for lack of subject-matter jurisdiction.
The case is remanded to the trial court to resolve, on the merits, Kensington’s claim that the licensing rule does not apply to it.

Factual and Procedural Background

The radioactive property and conflicting governmental pressures

Kensington acquired Denton real property via foreclosure on a lien previously granted by NuView entities. On that land sat radioactive medical-production equipment owned by USR. Business operations had ceased in 2009 due to financial and tax issues.

DSHS denied USR’s license application and ordered decommissioning and disposal. Anticipating that USR might abandon the radioactive equipment on the land, Kensington:

notified DSHS of the impending foreclosure;
asked DSHS to take possession of the radioactive material (DSHS declined); and
proposed a decommissioning plan under which a Department-licensed contractor, paid by Kensington, would remove the material.

DSHS approved the plan and licensed the contractor, who obtained a key to access the radioactive material. Kensington itself did not have a key and DSHS declined to grant it access.

At the same time, the City of Denton, Denton County, and the Denton ISD were suing USR for unpaid taxes on the radioactive personal property. Kensington was later added as a party. After obtaining judgment and the right to request a sale of USR’s business personal property, the taxing entities allegedly threatened to sue Kensington for theft if its contractor continued removing USR’s property. The contractor then stopped decommissioning before completion.

The Notice of Violation and penalty

In October 2020, DSHS issued Kensington a “Notice of Violation” for violating 25 Tex. Admin. Code § 289.252(a)(2), which states:

“Unless otherwise exempted, no person shall manufacture, produce, receive, possess, use, transfer, own, or acquire radioactive material except as authorized by … a specific license.”

DSHS sought an $8,000 administrative penalty, alleging that Kensington:

possessed radioactive material without a license;
failed to complete decommissioning in a timely manner; and
lacked a required license for the radioactive material.

Kensington’s options, practically speaking, were:

continue decommissioning (risking theft litigation from taxing authorities); or
stop decommissioning (incurring penalties from DSHS under the licensing rule).

The APA declaratory-judgment claim

In January 2021, in the pending Denton County tax suit, Kensington amended its pleadings to add a claim against DSHS under Texas Government Code § 2001.038(a), seeking a declaration that the radioactive-licensing rule:

does not apply to owners of real property who are not licensees and who do not own or possess radioactive material abandoned on their land; and
cannot be used to make such landowners “accidental licensees” obligated to decommission abandoned radioactive equipment.

On DSHS’s motion, this § 2001.038 action was severed and transferred to Travis County.

Parallel contested case and ALJ findings

Separately, the Notice of Violation went to a contested case hearing at the State Office of Administrative Hearings (SOAH). The Administrative Law Judge (ALJ) found that Kensington “possessed” the radioactive material, reasoning that it:

“exercised dominion” and “actual control” by hiring a DSHS-licensed contractor to prepare and implement a decommissioning plan; and
“controlled access” by hiring a caretaker to ensure security and arranging and leading a tour of the property.

No evidence showed that anyone without a DSHS license accessed the radioactive material. The ALJ recommended a $7,000 (not $8,000) penalty, which DSHS imposed by adopting the ALJ’s findings. Kensington sought judicial review; that review was abated while the § 2001.038 suit proceeded.

Plea to the jurisdiction and court of appeals’ decision

In the § 2001.038 case, DSHS filed a plea to the jurisdiction, arguing:

Kensington lacked standing; and
Even if it had standing, Kensington’s suit was an improper attempt to challenge the application of the rule in its enforcement matter rather than the rule’s applicability, so sovereign immunity was not waived.

Kensington responded by clarifying that it sought a declaration that DSHS’s rules “do not apply” to landowners in its position—non‑licensees whose land contains abandoned radioactive material owned by others—and that DSHS could not create “accidental licensees” in this way.

The trial court denied DSHS’s plea to the jurisdiction. The Third Court of Appeals reversed, holding:

A § 2001.038(a) applicability challenge must go to whether a rule is capable of being applied “in some way” to the underlying factual situation, not how it should be applied; and
Because Kensington acknowledged that the rule could apply to someone (e.g., USR, the owner of the radioactive material), it had not alleged a proper “rule‑applicability” challenge; it merely disputed DSHS’s application of the rule to Kensington’s own facts.

The court therefore concluded that sovereign immunity was not waived and dismissed for lack of subject-matter jurisdiction. The Supreme Court granted Kensington’s petition for review and reversed.

Analysis

I. Statutory and Doctrinal Framework

A. The text of Texas Government Code § 2001.038

Section 2001.038(a) states:

“The validity or applicability of a rule … may be determined in an action for declaratory judgment if it is alleged that the rule or its threatened application interferes with or impairs, or threatens to interfere with or impair, a legal right or privilege of the plaintiff.”

Subsection (c) requires that “[t]he state agency must be made a party,” and subsection (d) explicitly provides:

“A court may render a declaratory judgment without regard to whether the plaintiff requested the state agency to rule on the validity or applicability of the rule in question.”

In 2023, the Legislature added subsection (f), empowering the Fifteenth Court of Appeals to direct trial courts to conduct evidentiary hearings in § 2001.038 cases—confirming that factual development is contemplated within such suits.

The statute is modeled almost verbatim on § 7 of the 1961 Model State Administrative Procedure Act, and similar provisions exist in all 50 states, with 21 states adopting language very close to Texas’s formulation.

B. Validity vs. applicability

Validity challenges typically assert that a rule is unconstitutional, exceeds statutory authority, was improperly promulgated, or otherwise is invalid on its face.
Applicability challenges ask whether a concededly valid rule covers the plaintiff at all given who the plaintiff is and what it is doing (or plans to do).

Kensington brings an applicability challenge: it does not assert that DSHS’s radioactive-material licensing rule is invalid in general; it asserts that the rule does not apply to it as a non‑licensee landowner whose property contains abandoned radioactive personal property owned by another.

II. Standing Under § 2001.038 After Kensington

A. General standing principles

The Court reiterates the familiar three-part test from Heckman v. Williamson County, 369 S.W.3d 137, 155 (Tex. 2012): a plaintiff must show:

an injury in fact that is concrete and particularized;
injury fairly traceable to the defendant’s challenged conduct; and
injury that is likely to be redressed by a favorable court decision.

The Court also cites State Bar of Tex. v. Gomez, 891 S.W.2d 243 (Tex. 1994) and Tex. Ass’n of Bus. v. Tex. Air Control Bd., 852 S.W.2d 440 (Tex. 1993), emphasizing that standing is an essential component of subject-matter jurisdiction.

B. Injury in fact: the threatened penalty

Kensington alleged that:

DSHS had issued a Notice of Violation;
DSHS sought an $8,000 administrative penalty against it; and
Kensington had never been a licensee or possessed radioactive material.

The Court characterizes the threatened $8,000 loss as a “prototypical form of injury in fact,” citing Mosaic Baybrook One, L.P. v. Simien, 674 S.W.3d 234, 251 (Tex. 2023), which in turn relied on Collins v. Yellen, 594 U.S. 220 (2021).

C. Traceability

The source of Kensington’s injury is DSHS’s threatened enforcement of the licensing rule against it. That is sufficient for traceability: the injury flows from the agency’s reading and threatened application of the rule.

D. Redressability and the role of merits questions

DSHS argued that no declaration could redress Kensington’s injury because the ALJ had already found that Kensington “possessed” the radioactive material and thus fell within the rule’s scope. According to DSHS, Kensington’s requested relief would not “negate” the ALJ’s findings.

The Supreme Court rejects this narrow view of redressability:

The core injury—the threatened penalty—would be directly redressed if the court declares that the rule does not apply to Kensington.
For standing, Kensington need not prove that its legal theory will ultimately prevail; it need only allege an injury and seek relief that, if granted, would remedy that injury.
Whether Kensington has articulated a proper “applicability” challenge under § 2001.038 is a merits question, not a jurisdictional one, citing Pike v. Tex. EMC Mgmt., LLC, 610 S.W.3d 763, 774 (Tex. 2020) for the principle that standing should not be conflated with the merits.

Accordingly, Kensington satisfies the constitutional standing requirements, and the district court had subject-matter jurisdiction to hear its § 2001.038 claim.

III. Scope of Sovereign Immunity Waiver and “Rule‑Applicability” Claims

A. Sovereign immunity and § 2001.038

Sovereign immunity generally bars suits against the State and its agencies absent a clear legislative waiver. The Court cites Texas Dep’t of Transp. v. Sefzik, 355 S.W.3d 618 (Tex. 2011), City of El Paso v. Heinrich, 284 S.W.3d 366 (Tex. 2009), and Wichita Falls State Hosp. v. Taylor, 106 S.W.3d 692 (Tex. 2003) on this principle.

Section 2001.038 constitutes such a waiver by:

expressly authorizing declaratory-judgment actions to determine a rule’s validity or applicability; and
requiring that the relevant state agency be made a party.

The key question, then, is whether Kensington’s pleadings fall within this waiver—i.e., whether it truly seeks a determination of “applicability” as the statute uses that term.

B. The “applicability vs. application” distinction in prior caselaw

The Third Court of Appeals and others had drawn a sharp distinction:

Applicability challenges were said to ask: “Does this rule apply (at all) to this factual situation or this set of actors?”
Application challenges were characterized as asking: “Did the agency correctly apply the rule to me in this specific enforcement or licensing decision?”

Under this view, section 2001.038(a) permits only the former (“applicability”) and bars the latter (“application”) from using that special immunity waiver.

A key example is LMV‑AL Ventures, LLC v. Tex. Dep’t of Aging & Disability Servs., 520 S.W.3d 113 (Tex. App.—Austin 2017, pet. denied). There, a memory-care facility challenged how the Department interpreted a rule about minimum room dimensions for double occupancy, effectively arguing that its rooms should have been licensed. The court of appeals held that this was only an “application” challenge (to the agency’s decision in a particular case), not a challenge to whether the rule applied to the facility in the first place.

In Kensington’s own case, the Third Court followed this line, insisting that § 2001.038 only reaches questions of whether a rule is relevant “in some way” to the factual situation—not whether the agency has properly applied the rule to that situation or to that particular plaintiff.

C. The Supreme Court’s textual critique

The Supreme Court finds this rigid dichotomy “not well grounded in the statutory text.” Specifically:

Section 2001.038(a) authorizes a suit to determine the “validity or applicability” of a rule if it is alleged that “the rule or its threatened application” interferes with or impairs the plaintiff’s legal rights.
Thus, the statute itself links “applicability” to “application” and “threatened application,” undermining a sharp linguistic distinction between the two.

The Court notes:

The Texas statute is taken almost verbatim from the 1961 Model State Administrative Procedure Act; 21 other states have similar language.
Only Arkansas has explicitly embraced the “applicability vs. application” distinction when interpreting its analogous provision, in Ark. Dep’t of Fin. & Admin. v. Naturalis Health, LLC, 549 S.W.3d 901 (Ark. 2018).

In Naturalis Health, the Arkansas Supreme Court held that a plaintiff could not use the APA’s applicability provision to complain that the agency’s application of rules was “improper, unfair, and arbitrary,” because that challenged only the agency’s application, not the rules’ applicability.

Texas’s Supreme Court stops short of fully rejecting the whether/how analytical framework but refuses to anchor it in the text as a rigid jurisdictional line. Instead, the Court:

emphasizes the statute’s own language tying “applicability” to “application”; and
adopts a more pragmatic and plaintiff-centered view of what counts as a rule‑applicability claim.

D. The “core” of § 2001.038(a): When the plaintiff says “the rule doesn’t reach me at all”

The Court identifies at least a clear core of claims that are undoubtedly within § 2001.038(a)’s scope:

“[A]t minimum, applicability challenges under Section 2001.038(a) include suits seeking a declaration of whether a rule applies to the plaintiff.”

In such cases, a plaintiff alleges:

“I am not within the class of persons the rule governs”; or
“My activities are outside the rule’s coverage, even assuming the rule is valid and properly interpreted.”

Critically, the Court recognizes that some proper applicability claims will necessarily produce guidance on how a rule applies, or what outcome it should produce, when applied to the plaintiff. But the possibility of overlap or partial outcome-determination does not strip such claims of their “applicability” character or their immunity waiver.

Beyond affirming that “whether it applies” suits are covered, the Court deliberately leaves open how far § 2001.038(a) reaches into “how it applies” questions, signaling that future litigation (likely now in the Fifteenth Court of Appeals) will further develop those boundaries.

E. Application to Kensington’s pleadings

Kensington’s petition sought declarations that:

DSHS may not treat owners of real property as “possessors” of abandoned radioactive materials they do not own; and
DSHS’s radioactive-material rules “do not apply to such owners of real property,” i.e., non‑licensee landowners whose property contains abandoned radioactive equipment.

In substance, Kensington asked the court to decide:

Whether the DSHS licensing rule, which applies to those who “possess” radioactive material, can be applied to a non‑licensee who simply owns real property on which radioactive material was abandoned.

The Supreme Court treats this as a “core” § 2001.038(a) case:

Kensington challenges whether the rule applies to it at all.
It does not merely say “DSHS mis-measured the facts” or “DSHS miscalculated a penalty”; it says “this rule does not reach landowners in my position as a matter of law.”

Thus, the Court concludes:

“Kensington thus pled a proper rule-applicability challenge within the scope of the statute’s immunity waiver.”

F. Critique of the Third Court’s approach

The Supreme Court finds two central errors in the Third Court of Appeals’ reasoning.

1. Requiring the rule to be irrelevant to everyone in the scenario

The Third Court effectively required Kensington to allege that the rule does not apply to anyone in its factual scenario (i.e., to any party involved in the situation), not just to Kensington. Because Kensington acknowledged that the rule could apply to USR, the licensed owner of the radioactive material, the court concluded there was no “rule‑applicability” challenge.

The Supreme Court rejects this:

The statute focuses on interference with the “legal right or privilege of the plaintiff,” not with the factual scenario as a whole.
Section 2001.038(a) does not require a plaintiff to assert that the rule is irrelevant to all actors; it suffices that the rule’s (threatened) application to this plaintiff impairs its legal rights.

2. Collapsing jurisdiction into the merits and assuming away the dispute

The Third Court also declared that “the Rule applies to the factual situation” because the case involves “possession of radioactive personal property by an entity that lacks a proper license.” But that formulation assumed the key contested question—whether Kensington is, in fact, a possessor of the radioactive material—rather than treating it as a merits question for the trial court.

The Supreme Court explains:

Whether Kensington “possessed” the material is part of the substantive applicability analysis, not a jurisdictional predicate.
Using a conclusion on the merits (that Kensington possessed the material) to decide jurisdiction (whether § 2001.038 applies) improperly “collapses” those distinct inquiries.

IV. Relationship to Administrative Exhaustion and Primary Jurisdiction

DSHS argued—and the Third Court accepted—that questions such as “who possessed the radioactive material” are factual and should be decided first in an agency contested case, subject to later judicial review. This position invokes doctrines of primary jurisdiction and exhaustion of administrative remedies.

The Supreme Court flatly rejects that reasoning in this context, pointing again to § 2001.038(d):

“A court may render a declaratory judgment without regard to whether the plaintiff requested the state agency to rule on the validity or applicability of the rule in question.”

Key implications:

The Legislature has explicitly authorized plaintiffs to file rule-validity and rule-applicability suits without first seeking an agency ruling or exhausting administrative processes.
Primary jurisdiction concerns—deference to agency expertise, allowing agencies to develop facts first—cannot override this explicit legislative directive in the rule-challenge context.
Parallel proceedings are permissible: an APA declaratory suit and a contested case may proceed on separate tracks (as they did here), even if they involve overlapping factual questions.
Subsection (f) confirms that trial courts may (and sometimes must) conduct evidentiary hearings to resolve factual disputes bearing on rule applicability.

Thus, the existence of an ALJ finding that Kensington “possessed” the radioactive material does not strip the district court of authority to re‑examine possession in the § 2001.038 case.

V. Treatment of Factual Questions, Especially “Possession”

The Court underscores that factual determinations are not foreign to § 2001.038 actions. To decide whether a rule applies to a plaintiff, a court may need to resolve:

what the plaintiff did or did not do;
what the plaintiff does or does not own or control; and
how the statutory/regulatory terms should be applied to those facts.

In this case, the contested factual question is whether Kensington “possessed” the radioactive equipment when:

it owned the land but not the personal property;
US Radiopharmaceuticals owned the equipment;
DSHS’s licensed contractor—not Kensington—had the key and direct access to the material; and
Kensington’s activities consisted largely of hiring a contractor, hiring a caretaker for general property security, and leading a tour of the site.

The ALJ answered that question one way; the trial court in the § 2001.038 action is now free to consider it afresh as part of determining whether the rule applies to Kensington at all.

The Supreme Court does not decide whether Kensington possessed the material or how “possession” should be interpreted under the rule. It only decides that Kensington is entitled to have a court answer that question in a § 2001.038 proceeding.

VI. Precedents and Authorities Cited and Their Influence

A. Standing and jurisdiction cases

State Bar of Tex. v. Gomez, 891 S.W.2d 243 (Tex. 1994)
Cited for the general proposition that subject-matter jurisdiction requires standing, a live controversy, and justiciability.
Tex. Ass’n of Bus. v. Tex. Air Control Bd., 852 S.W.2d 440 (Tex. 1993)
Reinforces that standing is a component of subject-matter jurisdiction that courts must consider.
Heckman v. Williamson County, 369 S.W.3d 137 (Tex. 2012)
Supplies the modern Texas test for standing—injury in fact, traceability, and redressability—applied directly to Kensington’s allegations.
Mosaic Baybrook One, L.P. v. Simien, 674 S.W.3d 234 (Tex. 2023)
Provides a recent statement that threatened out-of-pocket losses are classic injuries-in-fact; the Court analogizes Kensington’s threatened $8,000 penalty.
Pike v. Tex. EMC Mgmt., LLC, 610 S.W.3d 763 (Tex. 2020)
Emphasized that courts should not conflate merits questions with standing; the Supreme Court uses Pike to separate the jurisdictional question (is there a claim under § 2001.038?) from the merits (does the rule apply to Kensington?).

B. Sovereign immunity and declaratory-judgment cases

Texas Dep’t of Transp. v. Sefzik, 355 S.W.3d 618 (Tex. 2011)
Cited for the baseline rule that sovereign immunity bars suits against the State absent legislative waiver.
City of El Paso v. Heinrich, 284 S.W.3d 366 (Tex. 2009)
Discusses the ultra vires exception to sovereign immunity and references § 2001.038 as an express statutory waiver in the rule-challenge context.
Wichita Falls State Hosp. v. Taylor, 106 S.W.3d 692 (Tex. 2003)
Emphasizes that waivers of immunity must be clear and express; § 2001.038 is such a waiver for rule validity/applicability suits.

C. Texas intermediate appellate cases on § 2001.038

LMV‑AL Ventures, LLC v. Tex. Dep’t of Aging & Disability Servs., 520 S.W.3d 113 (Tex. App.—Austin 2017, pet. denied)
The Third Court held that a facility’s challenge to how a dimension rule was applied to its rooms was not a proper applicability challenge. The Supreme Court does not overrule LMV‑AL but narrows its force by emphasizing that at least when a plaintiff says “the rule does not apply to me,” § 2001.038 is available—even if the rule may apply to others.
Texas Alcoholic Beverage Comm’n v. D. Houston, Inc., No. 03‑13‑00327‑CV, 2017 WL 2333272 (Tex. App.—Austin May 25, 2017, pet. denied)
Another case recognizing a distinction between rule “applicability” and “application,” cited as part of the Third Court’s broader line of authority. Kensington casts doubt on the rigidity of that distinction.

D. Out-of-state authority and the Model State APA

1961 Model State Administrative Procedure Act § 7
The textual model for § 2001.038. The Court uses this to show that Texas is part of a national pattern that includes both rule-validity and rule-applicability judicial review.
Ark. Dep’t of Fin. & Admin. v. Naturalis Health, LLC, 549 S.W.3d 901 (Ark. 2018)
Arkansas interpreted its analogous statute by sharply distinguishing between “applicability” (proper) and “application” (improper). The Texas Supreme Court notes Arkansas as the only other jurisdiction to have taken that route, implicitly signaling that Texas is not following Arkansas down that path.

E. Fifteenth Court of Appeals

The Court notes that future appeals in § 2001.038 cases will go to the new Fifteenth Court of Appeals, which is not bound by Third Court precedent like LMV‑AL. This explicitly invites further development of § 2001.038 jurisprudence in a statewide, rather than Travis‑County-centric, forum.

VII. Practical and Doctrinal Impact

A. For regulated parties and landowners

Kensington substantially clarifies and strengthens the ability of regulated parties—and even peripheral actors like landowners in Kensington’s position—to:

bring pre‑enforcement or parallel suits under § 2001.038(a);
obtain judicial rulings on whether a given rule applies to them at all; and
do so without first exhausting agency remedies or inviting agency “gatekeeping” on applicability questions.

Practically, if an agency threatens enforcement under a rule and a party reasonably contends: “I am not within the class of persons covered by that rule,” the party may:

file a § 2001.038 action in district court naming the agency as defendant; and
develop the factual record needed to decide applicability, even while a contested case proceeds in parallel.

For landowners in particular, the case is significant in scenarios involving:

abandoned hazardous materials or equipment;
complex chains of title to personal property vs. real property; or
agency attempts to push regulatory burdens onto whoever has the deepest pockets or greatest economic incentive to remedy a problem, regardless of ownership or regulatory status.

Although the Supreme Court leaves the “possession” merits question open, its willingness to entertain Kensington’s theory signals judicial receptivity to the idea that mere land ownership plus some facilitative acts (like hiring a decommissioning contractor) do not automatically convert a property owner into a “possessor” under a licensing scheme.

B. For state agencies

Agencies must now operate with the understanding that:

They cannot rely on sovereign immunity to block suits where a plaintiff says, in substance, “your rule does not apply to me at all.”
They may face parallel litigation: a contested case at SOAH and a § 2001.038 action in district court arising from the same underlying regulatory dispute.
Agency factual findings (e.g., ALJ determinations) are not dispositive of rule-applicability questions in a § 2001.038 case.

This may encourage agencies to:

be more explicit in rule text about the classes of persons and activities covered;
document and justify their interpretations of critical terms (like “possession”) that determine who falls within the rule’s scope; and
carefully consider the risk that efforts to expand the reach of rules (e.g., to non‑licensee landowners) will be challenged judicially under § 2001.038.

C. For courts and future § 2001.038 jurisprudence

Kensington:

repudiates an overly formal “applicability vs. application” jurisdictional barrier not rooted in the text;
solidifies the core availability of § 2001.038 to plaintiffs asking whether a rule applies to them; and
clarifies that factual issues related to applicability may be resolved in the § 2001.038 action.

Open questions left for future cases include:

How far does § 2001.038 extend into “how the rule applies” territory once it is conceded that the rule does apply?
To what extent may plaintiffs challenge not just coverage (e.g., “am I a possessor?”) but also the agency’s interpretive choices once coverage is established?
How will the Fifteenth Court of Appeals shape a uniform statewide body of law on rule challenges, given its new jurisdiction over such appeals?

Complex Concepts Simplified

1. “Validity” vs. “applicability” of a rule

Validity: Whether the rule is lawful—e.g., does it violate the Constitution, exceed statutory authority, or suffer from procedural defects in adoption?
Applicability: Whether the rule covers the plaintiff or the plaintiff’s conduct at all, assuming the rule is valid.

2. Sovereign immunity and waiver

“Sovereign immunity” generally prevents suing the State or its agencies for money or injunctive/declaratory relief unless the Legislature clearly says otherwise. Section 2001.038 is such a statute: it expressly authorizes suits against agencies to challenge rule validity or applicability.

3. Standing (injury, traceability, redressability)

Injury in fact: A concrete, real-world harm or credible threat of harm (like a threatened fine).
Traceability: The harm must be caused by the defendant’s conduct (here, DSHS’s threatened enforcement of a rule).
Redressability: The court must be able to fix or alleviate the harm (e.g., by declaring that the rule does not apply, eliminating the basis for the penalty).

4. “Applicability” vs. “application” (as used by lower courts)

Applicability: Whether the rule covers the type of person or activity at issue at all.
Application: How the rule is applied to particular facts in a specific enforcement context (e.g., whether a violation occurred, how a penalty is calculated).

Kensington holds that a plaintiff’s claim squarely contesting whether the rule covers it at all is within § 2001.038, even if the rule may apply to someone else in the story.

5. Contested case vs. § 2001.038 declaratory suit

Contested case: An administrative trial-like proceeding at SOAH where an ALJ hears evidence and issues a proposal for decision (e.g., about a penalty or license revocation).
§ 2001.038 declaratory suit: A civil action in district court directly challenging the validity or applicability of a rule itself.

They can proceed concurrently; exhaustion of the contested case is not a prerequisite to the declaratory suit.

Conclusion

Kensington Title‑Nevada, LLC v. Texas Department of State Health Services is a foundational decision on Texas APA § 2001.038. It does not decide whether Kensington in fact possessed the radioactive material or whether DSHS’s licensing rule ultimately applies to it. Instead, it addresses the gateway issues:

Who may invoke § 2001.038(a)?
What kinds of claims fall within its sovereign-immunity waiver?
Must parties first exhaust administrative remedies before obtaining a judicial decision on whether a rule applies to them?

The Court’s answers are clear:

A regulated actor threatened with enforcement under a rule has standing to seek a declaratory judgment that the rule does not apply to it.
A suit that asks whether a rule applies to the plaintiff at all is a proper “rule‑applicability” challenge within § 2001.038(a), even if the rule may apply to others involved in the same factual situation.
Section 2001.038(d) authorizes such challenges without prior resort to agency processes, and trial courts may resolve any necessary factual disputes in that context.

By rejecting an unduly narrow “applicability vs. application” jurisdictional test and reinforcing the statute’s text, Kensington ensures that Texas courts remain accessible forums for resolving whether administrative rules reach a given person or activity. For regulated entities, property owners, and agencies alike, it reshapes the strategic landscape of administrative rule challenges in Texas.

Kensington Title-Nevada, LLC v. Texas Department of State Health Services: Clarifying Rule‑Applicability Challenges and Standing Under Texas APA § 2001.038