Ryan Law Wins Appeal Challenging Retroactive Comptroller Rule

September 17, 2018

Badger Tavern, L.P v. Hegar

On September 11, 2018 the Texas Court of Appeals, Third District, at Austin ruled that Appellant, Badger Tavern, brought a proper Administrative Procedures Act (APA) rule challenge.

In 2017, the Comptroller of Public Accounts (Comptroller) announced in the Texas Register that it would retroactively apply one of its recently amended rules. Badger Tavern filed suit in district court challenging the Comptroller’s retroactivity announcement as a rule under the APA—arguing that the Comptroller lacked statutory authority to make retroactive law. The district court dismissed Badger Tavern’s challenge, holding that it lacked jurisdiction to hear the merits of the rule challenge.

Badger Tavern, represented by Doug Sigel, Roman Alexander, and Richard Moore, appealed the district court’s ruling to the Austin Court of Appeals. The two primary issues on appeal were:

  • (1) Whether the Comptroller’s retroactivity announcement in the Texas Register was a “rule” for the purpose of the APA.
  • (2) Whether the district court had jurisdiction to hear the merits of the APA rule challenge.

The Court of Appeals sided with Badger Tavern on both issues. As to issue one, the Court held that that the Comptroller’s announcement of retroactivity in the Texas Register was a “rule” under the APA. This is an important holding because it establishes new precedent that the Comptroller’s statements in the Texas Register could be challengeable rules for the purposes of the APA.

As to the second issue, the Court held that the district court erred in dismissing the claim. Badger Tavern brought a proper rule challenge because it argued that the Comptroller’s retroactivity announcement was inconsistent with the Comptroller’s statutory authority to promulgate rules. The Court reiterated that claims against a Comptroller rule as inconsistent with statutory language are permissible “validity” challenges under the APA.