The Texas Court of Appeals has upheld the dismissal of a lawsuit filed by Nariocan Enterprises LLC, doing business as Cantu's Pharmacy, against the Texas Health and Human Services Commission (HHSC). The ruling, issued on June 4, 2026, affects the pharmacy’s ability to challenge the state's investigation into its Medicaid claims for COVID-19 test kits. The court's decision reinforces the principle of sovereign immunity, which protects state agencies from certain lawsuits.
Nariocan Enterprises, a pharmacy operating in Texas, found itself under investigation by the HHSC's Office of Inspector General. The investigation focused on claims that Nariocan submitted for payment under the Texas Medicaid program for at-home COVID-19 test kits. Following the investigation's initiation, Nariocan sought declaratory relief, claiming that the Commission violated its due process rights by failing to provide proper notice of changes to Medicaid regulations. This lawsuit was filed as a response to a letter from the Commission outlining the investigation.
The dispute escalated when the Commission filed a plea to the jurisdiction, arguing that Nariocan's claims were barred by sovereign immunity, that the pharmacy had not exhausted its administrative remedies, and that the claims were not ripe for judicial review. The trial court agreed with the Commission, dismissing Nariocan's claims with prejudice, meaning the pharmacy could not refile the same claims in the future. Nariocan's subsequent appeal led to the recent ruling by the Texas Court of Appeals.
In its ruling, the Texas Court of Appeals affirmed the trial court's decision, stating, "The trial court did not err in granting the Commission’s plea to the jurisdiction." The court emphasized that sovereign immunity protects state agencies unless there is a clear waiver by the Legislature. The judges noted that Nariocan failed to demonstrate that its claims were valid under the law.
The court also examined Nariocan's due process claim, which alleged that the Commission deprived it of its right to notice regarding applicable regulations. The judges found that Nariocan did not identify any specific rule or regulation for which the Commission failed to provide notice. As a result, the court concluded that Nariocan had no constitutionally protected right to special notice of changes to Medicaid regulations.
Additionally, the court addressed Nariocan's claim under the Uniform Declaratory Judgments Act (UDJA). The judges determined that Nariocan's request for a declaratory judgment was also barred by sovereign immunity because the pharmacy did not properly challenge a specific rule or regulation. The court stated, "There is no general right to sue a state agency for a declaration of rights," reinforcing the limitations imposed by sovereign immunity.
The ruling has significant implications for Nariocan and other entities engaging with state agencies. It highlights the challenges that businesses face when attempting to contest administrative actions taken by state bodies. The court's decision serves as a reminder that entities must navigate the complexities of sovereign immunity and ensure that their claims are appropriately grounded in law.
Moving forward, this decision may deter similar lawsuits against state agencies, as it underscores the importance of exhausting administrative remedies before seeking judicial intervention. Entities like Nariocan will need to be vigilant in understanding the regulations governing their operations and the legal avenues available to them in the face of administrative actions.
As for Nariocan, the court's ruling effectively ends its current legal battle against the HHSC regarding the Medicaid claims. While the pharmacy could potentially seek further legal recourse, the court's affirmation of the dismissal with prejudice limits its options for re-filing similar claims in the future. Details regarding any possible appeal were not available in the court filing.