### TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN

NO. 03
- 21
- 00370
- CV

Texas Department of State Health Services , Appellant

v. Kensington Title
- Nevada, LLC , Appel lee

FR OM THE 126TH DISTRICT COURT OF TRAVIS COUNTY NO. D
- 1
- GN
- 21
- 001457 , THE HONORABLE MADELEINE CONNOR , JUDGE PRESIDING

M E M O R A N D U M O P I N I O N

The Department of State Health Services ( DSHS) issued K ensington
Title

- Nevada, LLC (Kensing ton ) a N otice of V iolation for possession of radioactive waste without a license

. See 2 5 T ex. Admin . Code § 289.252(a)(2) ( Department o f State Health Service , Te xas Radiation Control Act)

. In re sponse, K ensington brought a declaratory judgment
claim against DSH S u nde r the Administrative Pr o c edures Act ( A PA ) , seeking a declaration that
the r ule does not apply to it because it does not “ possess ” the radi oactive waste o n its property. See Tex. Gov’ t. Code § 2001.038(a). DSH S filed a plea to the jurisdiction, claim ing that
K ensington ’s suit was not a proper rule

- ap plicability challenge and the ref ore DSHS retained its sovereign immunity from suit. T he tr ial court denied DSHS’s plea to the jurisdicti on. We

reverse the t rial cou rt ’ s order and render judgment dismissing Kensington ’ s claims for lack of subject

- matter jurisdiction

.2 BACKGROU ND
T he su bj ect of this appeal is a plot of real property in Denton County (the
P roperty) that Kensington has owned since 2018

. On October 21, 2 0 20, DSHS sent Kensingt on a Not ice of Violat ion, alleging that “ on or be fore December 14, 2 018, Kensington took
poss essio n of radioactive p ersonal property located on [ the Property ]

. ” The Noti ce of Violation also alleged that decommissioning of the site had not been completed i n a time ly manner an d that Kensington did not have a license for the radioactive material. D SHS c laimed that these actions violated S ection 289.252(a)(2) of t he Texas Administrative Code. See 25 Tex. Admin. Code § 289.252(a)(2) ( t he Rule ). The Rule states in relevant part that “ unles s ot herwise exempted, no person shall manufacture, produc e, re c eive , possess, use, transfer, own, or acquire radioactive
materia l except as authorized b y [a s pecific or general license]. ” Id. The N otice of Violation
informed Ke nsington it could either ( 1) admit the allegations and pay an $ 8,000 fine; ( 2) attend

a n info r mal conference ; or ( 3 ) request a formal hearing to c ontest the allegations.

K ensington responde d by amending its answer in an o ngoing law suit in Denton County that had been brought in 2 008 by D enton Co unty taxing authoriti es for ta xes due on both
t he P r o perty and the radioactive p ersonal property. In its amended answer, Kensington admitted
it ha d o w ned the P r operty where the radioactive personal propert y is located since
December 2018 , when it foreclosed on the real estate because the previous own e rs, U

. S. Rad iopharm aceuticals Corp oration ( USR) stopped making payments

. It also admitted that the radioactiv e p ers onal property has existed on the P roperty since 2009. Kensington alleged
that US R own s the radioactive personal p roperty , that Denton Coun t y taxi ng authorities h ave tax liens on it , and that the property was under lo ck and key held by Chase Environ ment al Group , a Tennessee

- based company Kensi ngton hired to clean the site

. Kensington claimed that th e3

De nt on County ta xing auth o rities have tak e n no a ction to act on their li ens and that USR should remove the radioactive per so nal property from the Property. Kensin gt on asserted that it ha s never been a licensee of USR , nor has it ever owned or taken possession of the radi oactive
perso nal property , and t herefore that the Rule did not apply to Kensington

. Kensington also
ad ded a cause of action against DSHS u nder S ec tion 2001.038(a ) of the APA

. See Tex. Gov’t. Code § 2001.038(a ). DS HS filed a motion to sever the APA claim and tr ansfer it to Tra vi s Count y and a plea to the jurisdiction, argu ing that Kensington challenged DSHS’s application of the Rule, rather than th e Rule ’ s applicability, and that S ection 20 01.038(a) only wa ives DSHS’s sovereign immunity for the latter kin d of claim

. The Denton C o unty c ourt granted DSHS ’ s motion and severed the APA claim and transferred it to Travis C ounty

.

Kensington filed its fir st amended petition , this tim e seeking de claratory relief in
addi tion to it s original r eque sts for relief un der the APA : 1
Kensingto n requests the Court enter a declaratory judgment pursuant to section 2001.038(a) that DSHS may not attempt to forc e owners of real property to accept liability for r adioa ctive materials a bando ned on their real property or assert t hat owners are possessors of radioac tive materials when such materials are so abandoned. Thus, DSHS ’ s rules regarding radioactive materials do not apply to such owners of real proper ty, whi ch incl udes Kensington. Furth er, DSHS may not create “ accidental licensees ” to force owner s of real p roperty to decommission radioactive materials abandoned on their property. Further, DSHS exceeds its st atutory authority w hen asserting that its rul es apply to Ke nsington and atte mpts to force Kensington to decommission such equipment. This re q uested dec laration does not seek to resolve the question of how to apply DSHS rules against [Kensington] but seeks an adju dication regar ding whether DSHS rules ap pl y at all to nonlicensees such as [ Kensington].

In response, DSHS re - urged the arguments in its plea to the jurisdiction, arguing t hat Kensington
act ual ly sought a declaratio n as to whether the R u le applie d to it , not whether the Rule applied at

1 Kensin gton also s ought othe r forms of relief t hat are not the subject of this appeal.4

all. B ecause Kensington did not bring a p roper ru le

- applicability challen ge , DSHS asserted , DSHS ret a ined its im munity from suit. The trial court de nied DSHS ’ s plea to the juri s diction , and D SHS timely appealed

.

The case requires us to answer a single question: whether K ensington ’ s request for declaratory relief under S ection 2001.038(a) seeks to det e rmine how o r whether t he Rule applies to Kensington , as opposed to whether the R ule applies in the factual scenar i o at all

. I f Kensington challenges the former , Kensington has not raised a proper rule

- applicability challenge and DSHS retains its s overeig n immunity f rom suit. We hold that K ensington seeks to
ch allenge how the Rule applie s to it and the trial court ther efor e err ed in denying DSHS ’ s plea to the jurisdicti on.

DISCUSSION

Sovereign immunity generall y bars suits agai nst the State or its subd i visions,
absen t a clear and unambiguous waiver of immunity

. Texas Dep ’ t of Transp

. v . Sefzi k , 355 S.W.3d 618, 62 0

– 21 (T ex. 2 011)

. Whether sovereign immunity has been waived implicates subject

- matter jurisdiction. Texas Dep ’ t of Parks & Wildlife v. Mirand a , 133 S.W.3d 217, 226 (Tex. 2004). When a government de fendant challenges a trial cour t ’ s subjec t

- matter jur isdiction based on sovereign immunity, the plaintif f ’ s burden to affirmatively demonstrate jurisdictio n includes the burden of establishing a waiver of immunity. Town of Shady Shores v. Swanso n , 590 S.W .3d 544, 550 (Tex. 2019)

. Because subjec t

- matter jur isdiction is a question of law, we review a trial cour t ’ s ruling on a plea to the jurisdiction de nov o . Id

.

The APA waives governmental immunity for a suit challenging “ [t]he validity or applicability o f a rule ” when t he rule or its threatened application will int erfere with, impai r, or5

th reaten to interfere with or impair a legal right or privilege. ” See Te x . Gov ’ t Code § 2001.038(a); see also LMV

- AL Vent ures , LLC v. Tex as Dep ’ t of Aging & Disability Serv s. , 520 S.W. 3d 113, 122 (Tex. App

— Austin 2017, pet . denied)

. S ection 2001.038(a) waives sovereign immunity for a declaratory judgment acti on to determ in e the applicability of a rule.
See Tex. Gov ’ t Code § 2001.038(a)

. Section 2001.038 is a waiver of immunity and, therefore, is strictly construed in fav or of ret ained immunity. See LMV

- AL Ventures, 520 S.W.3d at 124 (“We have repeat edly affirmed that any purported statutory waiver of sovereign immunity should be strictly constru ed in fav or of retention of immunity

. ” ) (quoting Prairie View A & M Univ.

v. Chatha , 381 S.W.3d 500, 513 (Tex. 2012) )

. The parties do not dispute the validity of the
R ule. Rather , Kensington brings only a rule

- applicability challenge.

In the context of a rule

- applicability chall enge, the applicability of a rule i s different than a d etermination of how the rule applies to a set of f acts. See LVM

-

AL Ventu res , 520 S.W. 3d at 122

– 25

. A rule

- applicability challenge is limited to determi n in g whether a rule is capable of being applied to or is relevant to a factu al situation. T ex as A lcoho lic Beverage
Comm ’ n v. D. Houston, Inc. , No. 03

- 13

- 00327

- CV , 2017 WL 2333272, at *2 (Tex. A p p . — Aus t i n May 25, 2017 , pet. d enied ) (mem

. op.) ( citing LMV

- AL Ventures , 520 S.W. 3d at 122

– 25).
S ection 2001.038(a) does not, however, confer ju r isdiction for a court to determ ine whether an
agency has comp lied with a rule or how the rule should b e applie d. Se e LMV

- AL Ventures , 520 S.W. 3d at 124

– 25 ; Alphonso Crutch Life Support C tr. v. Williams , No. 03

- 13

- 00789

- C V , 2015 WL 79 50713 , at * 10 (Tex. A p p.

— Austin Nov. 30, 2015 , pe t. d enied ) (mem

. op.) (c iting Friends of Canyon Lake, Inc. v. Gu adalupe

– Blanco River A uth

. , 96 S.W.3d 5 19 , 529 ( Tex. App.

— Austin 2002 , pet. denied) )

.6 As DSHS notes, the correct standar d for a rule

- ap plicability challenge is whether
the rule in question may be applied t o a speci fic factual situation

. In thi s case, t he question posed
is no t w h e ther the Rule applies to Kensington specifically, meaning whether Kensi ngton may be
held liable for violating the Rule, but whether the Rule is inappropriate or irrelevant to the

s ituation entirely

. See Tex as Alcoholi c Beverage Comm issio n , 2017 WL 23 332 7 2 at *2 ( “ [A] rule ‘ applicability ’ challenge authorized by Section 200 1.038 is limited to determining whether a rule is capabl e of being applied to or is relevant to a factual situation, as distin guished from a challenge to the rule ’ s application (i.e. , ‘ h o w the rule should be applied ’ to particular facts or ‘ the specific ou tcome after a rule ’ s application. ’ ) ” (quoting LMV

- AL Ventures , 520 S. W. 3d at 12 4 ))

. Kensington “ seeks an adjudicat io n regardi ng whether DS HS rules apply at all to nonlicensees
such as P l aintiff , ” attempting to frame its claim as a rul e - applicability challenge. However,
DSHS ’ s Notice of Violation cited Kensington for “ possession of radioactive personal proper ty ”
located on the P roperty , and i n its brief, Kensington concedes that ra di oac t i ve property exi sts on the property , argu ing at great length that it n either owns nor possesses the radioa ctive materials
and that one or more of the other entities

— USR, Chase, or the Den ton Ta xin g Authorities

— should be considered the ac tual possessor ( s) t o whom the Rule applies

. But w hether Kensington
may be viewe d as possess ing the radioactive pers onal property is irrelevant for these purposes
because the only permissible judicial inquiry is whethe r th e Rul e applies to the factual
scenario

— the posses sio n of radioactive personal property by an entity that lacks a proper license

.

Kensington itself argu es that the Rule applies to the possession of the materials by

some enti ty other than K ensington

. See Tex a s Alcoholi c Beverage Comm ’ n , 2017 WL 2333272
at *2 ( “ [ T he business entity] seeks a decl aration not as to the ‘ applicability ’ of Rule 35.31(b)(1), (2) and (3)

— the rule would plainly be applicable or relevant to [ the business entity ’ s ] situation in7

some way

—

but as to the r ule ’ s app lication to the particu l ar f acts [the business entity] a ssu mes (the conduct made the ba sis for the enforcement action was committed by independent contractors, independent businesses, or employees acting outside the course and scope) ” ). Our analy si s must the refore en d here: i t woul d be imp r ope r for this Cou rt to wade into the merits o f Kensington ’ s arguments to answer the question of who possesses the radio active pers onal propert y ; such a question should be resolved in the con text of a n administrative contest ed

- case h earing

. See id

. The a g enc y should have the first chance to exercise its discretion and apply its expertise in this arena . See McKart v. United States , 39 5 U.S. 185, 193

– 94 (1969) (explaining
that “ [t] he agency, like a trial court, is created f or the pu rpose of applyi ng a sta t ute in the first
ins tance

. . . [a] ccordingly, it is normally desirable to let the ag ency develop the necessary factual background upon which decisions should be based. ”) ; see als o Kenneth Culp Davis, Administrativ e Law Doc trines of Exhaustion of Remedies , Ri peness for Review , and Primary Jurisdiction: 1, 28 Tex. L. Rev. 168, 169 (1949) (“Premature judicial intervention may defeat the basic legislative intent that full use should be made of the agency ’ s specialized understan ding with in the particul ar field

. ”)

.

Kensington be lieves that the Rule applies to som eone else and does not apply to
Kensi ngton because it is a “non

- licensee, non

- owner . ” Despite Ke nsington ’ s belief , the Rule applies to the factual situat ion

— radi oactiv e persona l proper t y owne d or pos s ess ed by a

non - licen seholder , and theref or e Kensi ngton has not p resented a proper rule

- applicability challenge required to waive DSHS ’ s sovereign immunity

.8 CONCLUSION
K ensington has not ple a d a true rule

- applicability challeng e that would waive
D SH S ’ s sovere ign immunity , and therefore the trial court lacked subject

- matter jurisdiction over Kensington ’ s suit and erred in den ying DSHS ’ s plea to the jurisdiction

. We reverse the tr ial
court ’ s order denying the plea to the ju risdic t ion and render judg men t dismiss ing Ken singt on ’ s claims for lack of subject

- matter jurisdiction.

__________________________________________ E dward Smith , Justice
Before Justices Baker, Smith, and Theofanis
Reve rsed and R endered Filed: July 7, 2023