The State of Texas Has Filed Its Final Brief in the THBC Rules Appeal
The Fifteenth Court now must decide whether DSHS adopted a testing method or rewrote the law the Legislature passed.
The State of Texas filed its reply brief on September 17 in the appeal over the Department of State Health Services’ new consumable-hemp rules, completing the written argument in Texas Department of State Health Services v. Texas Hemp Business Council, Cause No. 15-26-00099-CV, now pending before the Fifteenth Court of Appeals. The State opened on June 25. The Texas Hemp Business Council, Hemp Industry & Farmers of America and the business plaintiffs answered on August 14. Unless the justices call for supplemental briefing, the September 17 reply is the last word either side gets on paper. The court’s docket lists the case as ready to be set, which means the record and the briefs are complete and the case may be submitted for decision whenever the court chooses. Both sides have asked for oral argument, but the court is under no obligation to grant it, and a panel that considers the briefs sufficient may simply decide the case on them.
While the industry waits, DSHS may enforce the rules the industry says were illegally adopted. The 455th District Court granted a temporary injunction on May 1, and the State appealed at once, invoking the protection Texas law gives governmental appellants against enforcement of adverse orders while an appeal is pending. The plaintiffs asked the Fifteenth Court to keep the district court’s injunction alive under Texas Rule of Appellate Procedure 29.3, and on May 7 the appellate court temporarily reinstated it while considering the request. On June 5 the court denied the motion and lifted that temporary protection, over the disagreement of Justice Scott Field, who would have granted relief. The plaintiffs sought rehearing, which the court denied on June 26. The May 1 injunction remains the order under review, but it presently protects no one. The plaintiffs have not lost the appeal; they must simply litigate it while living under the rules they are litigating against.
Anyone who has watched a regulatory fight in Texas knows how that arrangement tends to end. A business can win after a full appellate process and discover that the victory arrived after its inventory, its customers and its operating capital had gone elsewhere. An agency suffers no comparable attrition. It draws its budget from the Legislature, not from sales, and it can afford to be patient in a way that a retailer with a lease and a payroll cannot. The State does not need to prevail quickly in the Fifteenth Court. It needs only for the court to take its time.
What the State is asking for, and what it would cost the plaintiffs
The State asks the Fifteenth Court to reverse the district court’s refusal to dismiss the plaintiffs’ ultra vires claims, to dismiss those claims for lack of jurisdiction and to vacate the temporary injunction. It separately argues that the district court exceeded its authority by extending the injunction to the entire Texas consumable-hemp industry in a case that was never certified as a class action. This is an interlocutory appeal, not a trial on every claim, and the court is reviewing the injunction and the jurisdictional challenge rather than deciding whether the rules are valid. Depending on the result, portions of the case will likely return to the district court for further proceedings.
An interlocutory ruling can nonetheless decide whether the lawsuit remains worth having. Dismissal of the ultra vires claims would strip the plaintiffs of their principal vehicle for arguing that DSHS officials acted beyond their statutory authority. Vacating the injunction would leave the rules in force while the surviving claims grind forward. Confining any future relief to the named plaintiffs could leave most of the industry exposed even if those plaintiffs eventually win. The State’s reply develops each of those routes, and its best arguments concern the form and scope of the relief the district court granted. Its explanation of where the agency found the authority to count THCA as delta-9 remains, after three briefs, the weakest part of its case.
A testing method that moves the legal line
Texas law defines hemp by its concentration of delta-9 tetrahydrocannabinol. DSHS adopted a total-THC calculation under which a laboratory adds the delta-9 already present in a product to the amount of delta-9 that could result from converting its THCA. The State calls this a testing methodology, and the case may turn on whether the court accepts that description or sees the calculation for what it does to the statutory limit.
The chemistry is not in dispute. THCA converts into delta-9 THC through decarboxylation, and federal agricultural regulations require that hemp crops be tested in a manner that accounts for the potential conversion. DSHS argues that Chapter 443 requires its consumable-hemp rules to remain consistent with federal hemp law and with the Texas Department of Agriculture’s federally approved hemp plan, and that this consistency requirement authorizes the same calculation for finished products on a retail shelf. The difficulty is that the relevant statutes address different stages of the market. Agricultural testing determines whether a crop may be harvested and put into commerce. Finished-product testing determines whether something manufactured from lawful hemp may be sold to a consumer. Farmers, manufacturers and retailers do different work under different programs, and a rule can remain consistent with federal law without importing every agricultural requirement into the finished-product regime. Federal law has long allowed states to regulate hemp more strictly, but that permission answers only the preemption question. A Texas agency must still find its authority in Texas law.
The reply identifies no statutory provision that expressly directs DSHS to include THCA-derived potential delta-9 when calculating the concentration of a finished consumable product. It relies instead on the agency’s general rulemaking authority, the federal-consistency requirement, the scientific relationship between THCA and delta-9 and the public-safety reasons for controlling intoxicating products. Those considerations would support a bill establishing a total-THC standard, and the Legislature has had every opportunity to pass one. It considered broad restrictions on consumable hemp during the 2025 regular session, passed Senate Bill 3 and watched Governor Greg Abbott veto it. The Senate tried again in the special sessions without producing a law. DSHS then adopted a rule that accomplishes a substantial part of what the failed legislation would have done. That chronology does not by itself prove the rule invalid, but it sharpens the delegation question considerably. When the Legislature repeatedly considers a policy and declines to enact it, an agency ought to be able to point to clear statutory language before imposing substantially the same result by regulation.
The State cites Loper Bright Enterprises v. Raimondo for the proposition that a court may find an agency’s judgment informative when it rests on facts within the agency’s expertise. DSHS plainly has expertise in laboratory testing, and it may properly explain conversion rates, tolerances, analytical equipment and the conditions under which THCA becomes delta-9. But the court must still decide what the Legislature authorized the agency to measure for purposes of legal compliance, and expertise cannot supply statutory language that is not there. A test that estimates potential delta-9 tells a regulator something useful about how a product may behave when heated, but it does not measure the delta-9 present at the time of testing. It adds a second cannabinoid after applying a conversion factor, and that arithmetic determines which products remain legal and which become subject to seizure, penalties or exclusion from the Texas market. DSHS made a decision with legal consequences well beyond laboratory procedure, and the question is whether Chapter 443 entrusted that decision to DSHS. The reply answers largely with the merits of the agency’s preferred policy. It argues that farmers face strict testing and retailers should not be allowed to sell intoxicating products that would fail an agricultural total-THC calculation, and that testing would serve little purpose if DSHS could not use it to limit psychoactive substances in the food supply. That explains the agency’s objective well enough. It leaves the source of its authority where it was.
Borrowed authority from Sky Marketing, Congress and the Governor
The reply leans heavily on the Texas Supreme Court’s recent decision in Texas DSHS v. Sky Marketing Corp., which upheld the DSHS commissioner’s authority to include delta-8 THC in the state schedules of controlled substances. The Court examined the Texas Controlled Substances Act and concluded that the Legislature had delegated the relevant scheduling power to the commissioner. The present case arises under Chapter 443 and asks something different. DSHS is not placing a named substance on a schedule; it is applying a new calculation to determine whether consumable products meet a statutory delta-9 limit. The reply describes Sky Marketing as validating a controlled-substance determination concerning “all forms of detectable THC present in hemp,” but the decision announced no universal rule that every tetrahydrocannabinol detected in hemp may be treated as delta-9 for every regulatory purpose. It addressed scheduling power and the status of delta-8 under the Controlled Substances Act. The State must show a comparable delegation under the consumable-hemp statutes, and Sky Marketing may inform how the court reads the relationship between hemp law and the controlled-substances scheme, but it cannot furnish authority that Chapter 443 omitted.
The State also cites Barlow v. State, a memorandum opinion in a criminal appeal, for the argument that a total-delta-9 standard sufficient to support a conviction ought to be sufficient to regulate retailers. The rhetorical appeal is obvious. The legal value depends on the statute applied in Barlow, the evidence presented and the precise issue the court decided, and an evidentiary ruling in a criminal prosecution does not enlarge an agency’s rulemaking power any more than a conviction for speeding enlarges the Department of Transportation’s authority to set speed limits.
The reply opens, curiously, with the federal hemp restrictions scheduled to take effect later this year. Congress has adopted a broader definition affecting finished hemp products, and subsequent appropriations legislation adjusted the effective dates for portions of those amendments. The coming federal standard may reduce the long-term commercial importance of some products in this litigation, and it may bear on the scope of prospective relief. It does not establish that DSHS possessed authority under Texas law when it adopted the challenged rules. An agency acts under the law in force when it exercises delegated power, and a later act of Congress cannot retroactively authorize a Texas rule or cure a defect in the state rulemaking process. Federal law’s tolerance for stricter state regulation likewise tells us that Texas may adopt tighter standards through lawful means; it does not tell us which Texas institution may adopt them. The Legislature writes the law and the agencies carry out what the law assigns them, and the federal government has no opinion about how Austin divides that labor.
The same limit applies to the Governor. The State says Abbott’s executive order directed DSHS to use testing methods that account for the conversion of THCA into delta-9, and the order is certainly part of the rule’s history. But a governor may direct an agency to use the statutory authority it already has; he cannot manufacture new regulatory power by executive order. If Chapter 443 withheld authority to impose a total-THC standard on finished products, an instruction from the Governor could not confer it. The full history cuts against the State’s framing in any event. Abbott vetoed Senate Bill 3 and rejected the Legislature’s ban. His veto message called for regulation of a lawful consumable-hemp market, with age restrictions, testing, packaging, serving limits and enforcement against dangerous products. He did not direct DSHS to eliminate the market he had just preserved. The State quotes his description of a dangerously under-regulated marketplace, and that language supports stronger enforcement and a more serious regulatory system. It does not resolve whether DSHS stayed inside the statute while building one.
Where the State stands on firmer ground
The State’s procedural defense is more substantial. The Health and Human Services Commission, which adopts rules on the department’s behalf, received 1,421 comments during rulemaking, responded to many of them and revised the proposal before adoption. The final version reduced the proposed fees, removed certain advertising restrictions and changed some packaging provisions. The State can therefore show that the industry knew what the agencies proposed and participated extensively. The plaintiffs answer that HHSC still failed to satisfy requirements the Administrative Procedure Act imposes, including economic-impact analysis, consideration of less burdensome alternatives and a reasoned explanation supported by the administrative record, and they are right that participation by the regulated parties does not excuse an agency from work the statute assigns to the agency. The weight of any omission will nonetheless depend on prejudice. The State argues that the industry understood the consequences well enough to oppose the proposal in detail, and the plaintiffs will need to tie each procedural defect to information withheld from the public, an alternative the agency failed to evaluate, an unsupported cost assumption or some other deficiency that impaired meaningful participation.
The State also mounts a credible defense of the increased fees. It identifies costs for additional inspectors, travel, laboratory equipment, enforcement proceedings and coordination with DPS, TABC and the State Office of Administrative Hearings. The plaintiffs can contest the arithmetic and whether the fees reasonably correspond to the cost of regulation, but the State has produced evidence of a regulatory purpose, which is what the constitutional question asks for. Its comparison to the fees paid by compassionate-use dispensing organizations adds little. TCUP licenses confer different privileges under a separate statutory structure, and the constitutionality of a hemp fee depends on its relationship to the cost of regulating hemp businesses, not on what Texas charges its medical-marijuana licensees.
The penalty claims may prove difficult to resolve before an actual enforcement action. The governing statute permits substantial daily penalties and directs DSHS to weigh the seriousness of a violation, prior conduct, good faith, public-health risk and other matters justice requires. The plaintiffs’ stronger concern is whether penalties continue accumulating during administrative and judicial review, so that the right to contest an agency decision becomes too expensive to exercise. That is a real grievance, but it may be one a court prefers to address when a business is actually facing the meter.
The statewide injunction is where the plaintiffs are most exposed
The district court extended its injunction to all commercial participants in the Texas consumable-hemp industry in a case that was never certified as a class action, and the State argues that the court granted relief to thousands of non-parties and blocked enforcement across the state. Recent Texas and federal decisions have grown increasingly skeptical of injunctions that protect parties not before the court, and that skepticism gives the Fifteenth Court a way to rule for the State without endorsing the total-THC interpretation at all. A panel disinclined to wade into Chapter 443 could vacate or narrow the injunction on scope alone and send the merits back down.
The plaintiffs have a coherent response. A statewide rule that is invalid cannot sensibly be valid for one retailer and invalid for another, and a declaration about the rule’s validity will necessarily affect every regulated business, not merely the named plaintiffs. Supply chains connect manufacturers, distributors and retailers, and relief confined to a handful of companies would be difficult to administer in practice. Temporary relief raises a separate question, however. The appellate court may decide that protection during litigation should extend only as far as necessary to preserve the named plaintiffs’ rights, and such a ruling would leave most of the industry subject to the rules while the district court continues to consider whether the rules are valid. That outcome would carry severe consequences without settling the statutory question, and it would leave the eventual winner, whoever it is, with rather less of a market to protect.
The appeal is fully briefed and ready for the court’s consideration. No argument date appears on the docket and the court has not announced when it will submit the case. It may dismiss the ultra vires claims, uphold or vacate the injunction, limit relief to the named plaintiffs, remand for further proceedings or combine elements of those outcomes, and its decision will likely determine how much of the lawsuit survives and whether any interim protection returns. The losing side may seek rehearing and review in the Texas Supreme Court, and given the economic stakes, the relationship to Sky Marketing and the unsettled questions of administrative authority, further review would surprise no one who has followed this case.
The State’s reply gives the Fifteenth Court several procedural reasons to vacate or narrow the injunction, and some of them are good. Its central defense of the total-THC rule still depends on an expansive reading of general rulemaking authority. The Legislature set a delta-9 concentration limit; DSHS now counts THCA-derived potential delta-9 toward it. Whether Texas should regulate products by total THC is a legitimate policy question that the Legislature has debated and, so far, declined to answer. The legal question in this case is whether the Legislature had already authorized DSHS to answer it. After three appellate briefs and months of litigation, the State has yet to identify the language that says it did.
