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

I. Introduction

In Kensington Title-Nevada, LLC v. Texas Department of State Health Services, the Supreme Court of Texas clarifies when a party may use Texas Government Code § 2001.038—the Administrative Procedure Act’s (APA) rule‑challenge provision—to obtain a judicial declaration about whether an administrative rule applies to it. The Court also explains how standing and sovereign immunity operate in this context, and rejects efforts to force such disputes into agency contested‑case proceedings before judicial review.

The dispute arises at the intersection of environmental regulation, property rights, and administrative law. Kensington, a Nevada real‑estate company, bought land in Denton, Texas on which another company’s radioactive equipment and materials had been abandoned. The Department of State Health Services (“Department”) sought to penalize Kensington under a licensing rule prohibiting possession of radioactive material without a license. Kensington countered by suing under § 2001.038 for a declaration that the rule does not apply to it as a non‑licensee landowner.

The key issues before the Supreme Court were:

• Whether Kensington had standing to seek a declaratory judgment under § 2001.038; and
• Whether Kensington’s suit fit within the waiver of sovereign immunity in § 2001.038 as a proper “rule‑applicability” challenge, rather than an impermissible challenge to the agency’s specific application of the rule in an enforcement proceeding.

The Court holds that Kensington has standing and that it pleaded a proper § 2001.038 “applicability” challenge because it seeks a declaration about whether the rule applies to it at all, not merely whether the agency correctly applied the rule in one enforcement case. The Court reverses the court of appeals’ dismissal for lack of jurisdiction and remands for the trial court to decide the merits.

II. Factual and Procedural Background

A. The Property and the Radioactive Materials

Kensington acquired real property in Denton, Texas in December 2018 by foreclosing on a lien. The prior owners of the real property were NuView Life Sciences, Inc. and NuView Molecular Pharmaceuticals, Inc. On the land sat radioactive business personal property owned by US Radiopharmaceuticals, Inc. (USR), including a linear accelerator and a cyclotron used to produce medical radioisotopes.

The medical radioisotope operation had ceased in 2009. Due to financial difficulties and unpaid property taxes, NuView and USR could not resume operations. In 2018, the Department denied USR’s application for a radioactive material license and ordered USR to decommission and properly dispose of the radioactive material.

B. Kensington’s Attempts to Resolve the Situation

Before foreclosing, Kensington:

• Warned the Department of its intent to foreclose and the likelihood that USR would abandon the radioactive material; and
• Asked the Department to take possession of the material and complete decommissioning, which the Department refused.

Kensington then proposed its own decommissioning plan:

• Kensington would pay a Department‑licensed contractor to remove and decommission the radioactive material.
• The Department approved the plan and licensed the contractor.
• The contractor obtained a key to access the material and began cleanup. Kensington did not have a key and the Department refused to grant it access.

C. Tax Litigation and the Conflicting Governmental Demands

Separately, the City of Denton, Denton County, and Denton Independent School District sued USR over unpaid taxes on the radioactive personal property. In April 2019, they added Kensington as a party.

In July 2019, the court in that tax suit rendered judgment against USR and authorized the taxing entities to request an order to sell USR’s business personal property. They did not enforce their liens through sale. Instead, according to Kensington, they threatened to sue Kensington for theft if its contractor continued to remove USR’s property.

Faced with that threat, Kensington’s contractor stopped the decommissioning before completion. This left Kensington in a bind:

1. Continue decommissioning another company’s radioactive property and risk liability to the taxing entities; or
2. Stop decommissioning and risk enforcement by the Department under the radioactive material licensing rule.

In practice, the property was unusable to Kensington so long as the radioactive material remained; it could not reasonably lease or redevelop the land.

D. The Department’s Enforcement Action

In October 2020, the Department issued Kensington a “Notice of Violation” alleging a violation of 25 Tex. Admin. Code § 289.252(a)(2). That rule provides that, unless exempted,

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

to conduct an approved activity.

The Department sought an $8,000 administrative penalty, asserting that Kensington:

• “took possession” of radioactive material,
• failed to complete decommissioning in a timely manner, and
• did not hold a radioactive material license.

E. The Administrative Contested Case

The notice of violation was referred for a contested‑case hearing before the State Office of Administrative Hearings (SOAH) in February 2021. The Administrative Law Judge (ALJ) found that Kensington “possessed” the radioactive material without a license, reasoning that it:

• “exercised dominion” and “actual control” by hiring contractors to prepare and execute a decommissioning plan approved by the Department and carried out by a licensed contractor; and
• “controll[ed] access” by hiring a caretaker to secure the property and arranging and leading a tour of the property.

Notably, the Department presented no evidence that unlicensed persons actually accessed the radioactive materials. The ALJ recommended a reduced $7,000 penalty, the Department adopted the findings and conclusions in a final order, and Kensington sought judicial review. That enforcement review proceeding was later abated.

F. Kensington’s § 2001.038 Suit

In January 2021, after receiving the notice of violation, Kensington amended its pleadings in the pending Denton County tax case to add a cause of action against the Department under Texas Government Code § 2001.038(a). That provision allows a declaratory judgment action to determine the “validity or applicability” of an agency rule 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.”

Kensington alleged that:

• It had never been a Department licensee;
• It did not own or possess the radioactive material; and therefore
• The licensing rule did not apply to it.

On the Department’s motion, this APA claim was severed and transferred to Travis County.

The Department then filed a plea to the jurisdiction, arguing that—even if § 2001.038 generally waives immunity—Kensington’s claim fell outside the waiver because it challenged the Department’s application of the rule in an individual case, not the rule’s applicability. In response, Kensington amended to seek declarations including:

• That the Department may not force owners of real property to accept liability for radioactive materials abandoned on their property or treat such owners as possessors of the radioactive materials; and that the Department’s rules “do not apply” to such owners, including Kensington.
• That the Department may not create “accidental licensees” by asserting that its rules apply to non‑licensee property owners in this way, and that the Department exceeds its statutory authority in trying to force Kensington to decommission the materials.

The trial court denied the Department’s plea to the jurisdiction.

G. The Court of Appeals’ Dismissal

The Austin‑based Third Court of Appeals reversed. It held that:

• To bring a § 2001.038 “applicability” challenge, a party must challenge whether a rule is capable of being applied to a factual situation, not how it should be applied to that situation.
• Because Kensington acknowledged that the licensing rule can apply to non‑licensees (such as USR or other entities), and argued only that it personally did not own or possess the material, Kensington was contesting the application of the rule to itself, not its applicability.
• On that view, the suit fell outside the immunity waiver in § 2001.038 and had to be dismissed for lack of subject‑matter jurisdiction.

The Supreme Court granted Kensington’s petition for review and reversed.

III. Summary of the Supreme Court’s Opinion

Justice Busby, writing for a unanimous Court, holds:

1. Kensington has constitutional standing. The threatened administrative penalty is a classic injury‑in‑fact, traceable to the Department’s enforcement of the rule, and redressable by a declaratory judgment that the rule does not apply to Kensington.
2. Section 2001.038 waives sovereign immunity for Kensington’s suit. The statute allows “applicability” challenges, and that term—read with the statutory text—encompasses at least suits challenging whether a rule applies to the plaintiff, not just whether it can be applied to some factual situation in the abstract.
3. The court of appeals misread § 2001.038 in two ways.
   • First, it wrongly suggested that a plaintiff must show the rule is entirely irrelevant to anyone in the factual scenario, rather than focusing on interference with the plaintiff’s own legal rights.
   • Second, it impermissibly collapsed the jurisdictional inquiry (does the pleading fall within § 2001.038’s scope?) into the merits (does the rule in fact apply to Kensington?), effectively assuming the answer to the disputed “possession” question.
4. Primary‑jurisdiction and exhaustion principles cannot override § 2001.038. The statute explicitly authorizes courts to render declaratory judgments on rule validity or applicability “without regard to whether the plaintiff requested the state agency to rule” on those questions, and the Legislature has expressly contemplated judicial fact‑finding in such cases.

The Court therefore reverses the dismissal for want of jurisdiction and remands to the trial court to adjudicate the merits of whether the licensing rule truly applies to Kensington’s conduct and circumstances.

IV. Detailed Analysis

A. The Statutory Framework: Texas APA § 2001.038

Section 2001.038(a) of the Texas Government Code provides:

“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.”

Key features:

• It authorizes challenges to both the validity and the applicability of rules.
• It creates a statutory waiver of sovereign immunity by expressly allowing such suits and requiring the agency to be made a party (§ 2001.038(c)).
• It clarifies that courts may grant declaratory relief “without regard to whether the plaintiff requested the state agency to rule on the validity or applicability of the rule” (§ 2001.038(d)).

The Court notes that this language is taken almost verbatim from § 7 of the 1961 Model State Administrative Procedure Act, and that all fifty states have some mechanism for challenging rules.

The interpretive question here is: What counts as an “applicability” challenge within the meaning of § 2001.038(a)?

B. Standing: Injury, Traceability, and Redressability

1. General Texas Standing Principles

The Court reiterates that subject‑matter jurisdiction requires:

• Standing;
• A live controversy; and
• Justiciability. (State Bar of Tex. v. Gomez, 891 S.W.2d 243, 245 (Tex. 1994); Tex. Ass’n of Bus. v. Tex. Air Control Bd., 852 S.W.2d 440, 443–46 (Tex. 1993)).

Constitutional standing requires:

• Injury‑in‑fact: plaintiff is personally injured;
• Traceability: injury is fairly traceable to the defendant’s conduct; and
• Redressability: injury is likely to be redressed by the requested relief. (Heckman v. Williamson County, 369 S.W.3d 137, 155 (Tex. 2012)).

2. Injury‑in‑Fact and Traceability

Kensington alleged that:

• It had never held a Department license or taken possession of radioactive material; yet
• The Department sought an $8,000 administrative penalty for violating the licensing rule.

The Court emphasizes that a threatened monetary sanction is a classic, concrete injury. Quoting Mosaic Baybrook One, L.P. v. Simien, 674 S.W.3d 234 (Tex. 2023), which in turn relied on Collins v. Yellen, 594 U.S. 220 (2021), the Court notes that an “out‑of‑pocket loss” is a “prototypical form of injury in fact.”

The injury plainly “flows from” the Department’s enforcement of the licensing rule, satisfying traceability.

3. Redressability and the “Merits vs. Jurisdiction” Divide

The Department argued that Kensington lacked standing because the requested declarations would not “negate the grounds” the ALJ found to support a violation—namely, the ALJ’s factual findings about Kensington’s control over the radioactive material.

The Court rejects this narrow view of redressability:

• Under § 2001.038, redressability is satisfied if a declaration that the rule does not apply to the plaintiff would alleviate or prevent the threatened legal injury (here, the penalty).
• It is not necessary, at the jurisdictional stage, to examine whether the declaration—if granted—would counter every factual finding the agency might rely on in some other proceeding.
• Whether Kensington actually states a valid rule‑applicability claim goes to the merits, not standing. The Court cites Pike v. Texas EMC Management, LLC, 610 S.W.3d 763, 774 (Tex. 2020) for the principle that many issues labeled as “standing” actually concern the merits and do not implicate subject‑matter jurisdiction.

Accordingly, the Court holds that Kensington sufficiently alleged redressability by seeking a declaration that the rule does not apply to it, which—if granted—would remove the basis for the Department’s penalty.

C. Sovereign Immunity and the Scope of § 2001.038’s Waiver

1. Baseline Doctrines

The Court reiterates that sovereign immunity generally bars suits against the State and its agencies absent a clear legislative waiver (Tex. Dep’t of Transp. v. Sefzik, 355 S.W.3d 618, 620–21 (Tex. 2011)). Section 2001.038 is such a waiver. It:

• Expressly authorizes declaratory judgment actions to determine the validity or applicability of a rule;
• Requires that the agency be made a party (§ 2001.038(c)); and
• Has been recognized by the Court as a specific statutory waiver (City of El Paso v. Heinrich, 284 S.W.3d 366, 373 n.6 (Tex. 2009); Wichita Falls State Hosp. v. Taylor, 106 S.W.3d 692, 697–98 (Tex. 2003)).

The decisive question, therefore, is whether Kensington’s claim falls within the class of suits authorized by § 2001.038(a)—i.e., whether it is a challenge to the “validity or applicability” of a rule.

2. “Applicability” vs. “Application”: The Court of Appeals’ Line of Cases

The court of appeals and some of its prior cases (e.g., LMV‑AL Ventures, LLC v. Texas Dep’t of Aging & Disability Services, 520 S.W.3d 113 (Tex. App.—Austin 2017, pet. denied); 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)) had attempted to distinguish rule “applicability” from rule “application.” Broadly:

• An “applicability” challenge was said to address whether a rule could apply in some abstract sense to a given factual situation;
• An “application” challenge was said to address whether the agency correctly applied the rule to a party’s particular facts (e.g., did the agency misinterpret the rule when denying a specific license request?).

In LMV‑AL Ventures, for example, a memory‑care facility challenged the Department of Aging and Disability Services’ conclusion that certain rooms were too small for double occupancy under minimum‑dimension rules. The court of appeals held that the facility was merely challenging the Department’s application of the rule, not its applicability, and thus § 2001.038 did not apply.

In Kensington, the Third Court extended that line, insisting that Kensington’s suit was not about whether the licensing rule could apply to “possession of radioactive personal property by an entity that lacks a proper license” but about whether the rule had been applied correctly to Kensington’s particular facts.

3. The Supreme Court’s Reading of “Applicability”

The Court carefully parses the statutory text and finds the sharp “applicability vs. application” dichotomy is not grounded in the statute itself:

• Section 2001.038(a) permits a declaratory judgment if “the rule or its threatened application” threatens to interfere with a legal right or privilege of the plaintiff.
• This wording suggests that “applicability” is inherently about how the rule’s application or threatened application would affect the plaintiff.
• In other words, the statute uses “applicability” and “application/threatened application” in a functionally overlapping way.

The Court also notes comparative law:

• Twenty‑one other states have similar APA provisions permitting challenges to rule validity and applicability.
• Only Arkansas has explicitly embraced a rigid applicability/application distinction, as in Arkansas Dep’t of Finance & Admin. v. Naturalis Health, LLC, 549 S.W.3d 901 (Ark. 2018), where the Arkansas Supreme Court held that a challenge to the agency’s “improper, unfair, and arbitrary” application of rules in a specific case did not qualify as an applicability challenge.

Importantly, the Texas Supreme Court declines to adopt Arkansas’s strict approach, and does not fully embrace the Third Court’s view either.

4. The Court’s Minimum Holding: Challenges to Whether the Rule Applies to the Plaintiff

The Court does not attempt a comprehensive definition of all possible “applicability” suits. Instead, it adopts a minimum floor:

• At a minimum, § 2001.038(a) authorizes suits that seek a declaration of whether a rule applies to the plaintiff.
• It recognizes that some proper applicability challenges may also incidentally address how the rule would apply or affect outcomes—but does not decide how far those may go.

The Court expressly leaves open the broader question of the full extent to which § 2001.038(a) might cover declarations about “how” a rule applies; it resolves only what is necessary here.

D. Why Kensington’s Pleadings Fit Within § 2001.038

1. Kensington’s Theory: No Rule “Applicability” to Non‑Licensee Landowners in This Circumstance

Kensington’s core allegation is that the Department’s licensing rule—25 Tex. Admin. Code § 289.252(a)(2), which applies to those who “possess” radioactive material—does not apply to a landowner that:

• Does not hold a radioactive material license;
• Does not own the radioactive material; and
• Has radioactive materials abandoned on its land by a third party.

Kensington’s requested declarations explicitly ask the court to decide:

• Whether the Department may treat landowners in this posture as “possessors” or “accidental licensees”; and
• Whether the Department’s rules “apply at all to non‑licensees” in such circumstances.

That is, Kensington is not merely saying “the Department misapplied the rule to me this time.” It is asserting that, correctly interpreted, the rule does not reach its situation at all—that the rule does not (or cannot lawfully) cover non‑licensee landowners whose property happens to host abandoned radioactive materials owned by others.

Under the Court’s “minimum” reading of § 2001.038, this is exactly the kind of “whether the rule applies to the plaintiff” challenge that falls squarely within the statute’s scope.

2. The Court of Appeals’ Misstep: Ignoring the Plaintiff‑Focused Text

The Third Court held that an applicability challenge is limited to whether the rule is “relevant to a factual situation in some way” and noted that Kensington itself contended the rule was applicable to some other entity (e.g., USR or the contractor).

The Supreme Court rejects this reading as inconsistent with the text, which focuses on threats to:

“a legal right or privilege of the plaintiff.” (Tex. Gov’t Code § 2001.038(a), emphasis added)

Nothing in § 2001.038 requires:

• That the rule be wholly irrelevant to anyone in the factual scenario; or
• That the rule cannot apply to any person in the situation at all.

Instead, the question is whether the rule’s application or threatened application to this plaintiff interferes with its legal rights. Kensington’s core contention—that the rule simply does not apply to it as a non‑licensee landowner—is therefore a textbook applicability claim.

3. Collapsing Jurisdiction into the Merits

The Court of Appeals’ analysis also blurred the line between jurisdiction and merits. It reasoned that the rule “applies to the factual situation” of “possession of radioactive personal property by an entity that lacks a proper license,” and therefore Kensington had not pleaded a proper applicability challenge.

But whether Kensington is in fact an “entity that possesses radioactive personal property”—the key factual and legal premise—is the very point in dispute. The Court criticizes this approach as:

• Assuming the answer to the contested question (does Kensington “possess” the material within the meaning of the rule?); and
• Using that assumed answer to deny jurisdiction, rather than treating it as a merits question to be resolved after jurisdiction is found.

Under § 2001.038, a trial court has jurisdiction to decide whether, on the facts, the rule applies to Kensington, including whether Kensington meets the regulatory definition (or proper construction) of “possess.” That is a substantive merits inquiry, not a gatekeeping question of jurisdiction.

E. Exhaustion, Primary Jurisdiction, and Parallel Contested‑Case Proceedings

The Department (and the court of appeals) also argued that the question of who “possessed” the radioactive material should be resolved in the administrative contested‑case process, invoking notions of:

• Primary jurisdiction (where courts defer to agency expertise when specialized questions are presented); and
• Exhaustion of administrative remedies (requiring parties to complete agency review before going to court).

The Supreme Court rejects this argument as inconsistent with the APA’s text. Section 2001.038(d) expressly provides:

“The 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.”

This language:

• Explicitly contemplates pre‑enforcement or parallel judicial challenges to rule validity or applicability, without requiring resort to the agency first; and
• Displaces general exhaustion or primary‑jurisdiction doctrines in this specific statutory context.

The Legislature has also recently reinforced the judiciary’s fact‑finding role in such cases by adding subsection (f), which allows the Fifteenth Court of Appeals (vested with future § 2001.038 appeals) to direct trial courts to conduct evidentiary hearings on these challenges.

The fact that Kensington already litigated “possession” in the SOAH contested case does not bar a distinct § 2001.038 suit to determine whether the rule applies to it at all. Nor does that administrative record deprive the trial court of authority to make its own factual findings in the rule‑applicability case.

F. Relationship to Prior Precedent and Other Jurisdictions

1. Texas Precedent: LMV‑AL Ventures and Its Progeny

The Court does not explicitly overrule LMV‑AL Ventures or related Third Court cases, but it significantly narrows and corrects how those cases should be understood:

• LMV‑AL Ventures held that a dispute over whether a facility’s rooms met minimum square‑footage requirements for double occupancy was not an “applicability” challenge but an “application” dispute. That ruling is left in place, but Kensington suggests that the correct dividing line is narrower and more text‑based than the Third Court had articulated.
• Kensington clarifies that, at minimum, § 2001.038 applies whenever a plaintiff contends that a rule, properly construed, does not apply to it at all. Thus, the mere presence of specific facts or an enforcement action does not automatically convert a dispute into a forbidden “application” challenge.

The opinion also notes that, going forward, appeals of § 2001.038 cases will be heard by the Fifteenth Court of Appeals and that court is not bound by the Third Court’s interpretations. This expressly disclaims any notion that the Third Court’s past approach defines § 2001.038 for the future.

2. Other States’ Model‑APA Jurisprudence

By situating § 2001.038 within the Model State APA, the Court signals that:

• Texas belongs to a national family of jurisdictions that provide judicial review of administrative rules; and
• It is choosing a more text‑centered, plaintiff‑focused reading than the rigid approach adopted by Arkansas in Naturalis Health.

While Arkansas enforced a strong applicability/application separation, limiting judicial review of specific enforcement applications, Texas reads “applicability” to encompass situations where the rule’s threatened application to a particular plaintiff allegedly exceeds the rule’s reach or statutory authority.

V. Simplifying the Key Legal Concepts

1. Standing

Standing is about who is allowed to bring a lawsuit. In this context:

• A party must show a concrete injury (e.g., a threatened fine), caused by the government’s conduct (here, enforcing the rule), that can likely be remedied by the court (through a declaration that the rule does not apply).

The important nuance from Kensington: courts should not conflate standing with whether the plaintiff will eventually win. So long as the plaintiff plausibly alleges that the declaration sought would alleviate the threatened harm, standing is satisfied.

2. Declaratory Judgment Under § 2001.038

A declaratory judgment is a court order saying what the law is and how it applies to a particular situation, without necessarily awarding damages yet. Under § 2001.038, plaintiffs can ask:

• “Is this rule valid?” or
• “Does this rule apply to me (or to my situation)?”

This allows regulated parties to resolve legal uncertainty about a rule before—or independent of—an enforcement proceeding.

3. Sovereign Immunity and Its Waiver

Sovereign immunity protects the government from being sued without its consent. A statute like § 2001.038 is a legislative waiver: it says, “In this type of case, the State agrees to be sued.”

However, courts must ensure that a plaintiff’s claim fits the statute’s terms. If the claim does not qualify as a “validity or applicability” challenge, immunity is not waived and the court lacks jurisdiction.

4. “Validity” vs. “Applicability” vs. “Application”

• Validity: Is the rule itself lawful? For example, did the agency exceed its statutory authority, violate constitutional provisions, or fail to follow required rulemaking procedures?
• Applicability: Does the rule, by its terms and proper interpretation, cover this plaintiff or this category of persons/situations?
• Application: Assuming the rule applies, did the agency correctly apply it in this particular case and interpret facts correctly?

Kensington makes clear that:

• “Applicability” under § 2001.038 does include disputes over whether, properly construed, the rule applies to the plaintiff at all; and
• Courts must not label such disputes “mere application” issues as a way to avoid jurisdiction.

5. Primary Jurisdiction and Exhaustion (and Why They Are Limited Here)

Primary jurisdiction is a doctrine under which courts defer to agencies to answer specialized questions first. Exhaustion of administrative remedies requires parties to complete an agency’s process before going to court.

Section 2001.038(d) specifically says courts may rule on rule validity or applicability “without regard to whether” the plaintiff has asked the agency to decide those questions. Thus, in this particular statutory context:

• Courts do not need to wait for the agency to finish its contested‑case proceedings; and
• Agencies cannot insist that all “who possessed what” questions be reserved exclusively for ALJs.

6. “Accidental Licensee” and “Possession”

Kensington argues that the Department is effectively creating “accidental licensees”: treating property owners as if they held radioactive material licenses (and thus as regulated licensees) simply because an unlicensed third party abandoned radioactive equipment on their land.

The concept of “possession” is central. The ALJ defined it broadly as exercising “dominion” or “actual control” over the material (through care, security, oversight of contractors, etc.). Kensington contests that construction, claiming:

• It never voluntarily “possessed” the material in a way that should trigger licensing obligations; and
• The Department’s rule, correctly interpreted, does not treat such involuntary, incidental involvement as “possession.”

Whether the Department’s interpretation is correct is a merits question for remand, but the Supreme Court confirms that courts, not just agencies, may resolve those interpretive disputes in § 2001.038 actions.

VI. Impact and Practical Implications

A. For Regulated Parties and Property Owners

1. Broader Access to Pre‑Enforcement Judicial Review.
   Parties potentially subject to agency rules—particularly non‑licensee property owners—can use § 2001.038 to challenge whether a rule applies to them at all, even when:
   • An enforcement proceeding is pending or contemplated; and
   • The dispute involves detailed facts (such as the degree of control over property).
2. Conflict Resolution Among Multiple Governmental Demands.
   Kensington’s predicament—caught between tax authorities and a health‑regulation agency—illustrates how different arms of government can impose conflicting obligations. The decision confirms that entities in such cross‑pressure scenarios may go directly to court to clarify the scope of an agency’s rule and avoid being forced into untenable choices.
3. Strategic Considerations.
   Regulated parties should consider:
   • Filing § 2001.038 suits where they genuinely believe a rule was never meant to cover them or their activities;
   • Framing their claims clearly as “whether this rule applies to me at all,” rather than merely attacking an agency’s discretionary decision; and
   • Coordinating any § 2001.038 action with contested‑case strategies, recognizing that one does not preclude the other.

B. For Agencies

1. More Front‑End Judicial Scrutiny of Rule Scope.
   Agencies should anticipate more suits challenging whether their rules reach particular categories of actors (e.g., landowners, contractors, upstream or downstream entities) and should:
   • Be prepared to defend their rules’ text and statutory basis in court; and
   • Recognize that agency interpretations can be tested in declaratory‑judgment actions, not just in enforcement appeals.
2. Constraint on Aggressive Enforcement Theories.
   Efforts to extend rule coverage through expansive interpretations that sweep in actors at the periphery of regulated activities (like non‑licensee landowners) are now more vulnerable to direct judicial challenge under § 2001.038.

C. For the Courts (Especially the Fifteenth Court of Appeals)

The Legislature has directed that future § 2001.038 appeals go to the Fifteenth Court of Appeals. This case:

• Provides that court with a Supreme Court‑endorsed framework focusing on whether the plaintiff is challenging if the rule applies, rather than how it was applied in one instance;
• Signals that trial courts may resolve factual disputes central to rule‑applicability questions; and
• Emphasizes that immunity and standing should not be used as back‑door merits determinations.

D. Doctrinal Impact in Administrative Law

More broadly, Kensington:

• Strengthens the distinction between jurisdiction and merits. Building on Pike, the Court warns against transforming substantive disagreements about how a rule should be interpreted into jurisdictional defects.
• Ensures that statutory waivers of immunity are given full effect. Courts may not invoke judge‑made doctrines like primary jurisdiction or exhaustion to narrow a legislature’s explicit authorization of judicial review, as in § 2001.038(d) and (f).
• Positions Texas among states allowing meaningful APA‑based rule review. By resisting Arkansas’s strict applicability/application split, Texas affirms a more flexible and textually grounded approach to rule challenges.

VII. Conclusion

Kensington Title‑Nevada, LLC v. Texas Department of State Health Services is a significant clarification of Texas administrative law. It establishes that:

• A plaintiff facing a threatened administrative penalty has standing to seek a § 2001.038 declaratory judgment that an agency rule does not apply to it.
• Section 2001.038’s waiver of sovereign immunity encompasses, at minimum, suits that ask whether a rule applies to the plaintiff at all, even when detailed factual questions (such as “possession”) are disputed.
• Courts must not use standing or immunity doctrines to short‑circuit substantive disputes about a rule’s scope, nor require exhaustion of agency remedies where the statute authorizes direct judicial review.

Practically, the decision empowers property owners and other regulated actors to challenge over‑broad or novel interpretations of agency rules before or alongside enforcement actions. Doctrinally, it refines the meaning of “applicability” in § 2001.038, anchors jurisdictional analysis in statutory text, and underscores the judiciary’s role in ensuring that agency rules are confined to their lawful scope.

The case now returns to the trial court, which must decide the merits: whether, under the radioactive‑material licensing rule and its enabling statutes, a non‑licensee landowner like Kensington can be deemed to “possess” abandoned radioactive equipment in a way that triggers licensing and decommissioning obligations. Whatever that outcome, the Supreme Court’s jurisdictional and interpretive guidance will shape Texas rule‑challenge litigation for years to come.