The case is today's Hartzell v. S.O. (majority opinion by Justice Lehrmann); the court concludes the power is implicit in the statutory scheme authorizing the Texas public university systems, though it also holds that the university must provide due process before revoking a degree. There's also a short concurrence by Justice Boyd, and a long dissent by Judge Blaylock. An excerpt from the dissent:
The only resource in Texas legal history bearing on the question presented is a 1969 Attorney General Opinion, with which I largely agree. The Attorney General Opinion concludes that a state university wishing to rescind a graduate's degree must do what any other regretful grantor of property must do to rescind the grant. It must ask a court to require the property's return. That is correct. A party seeking rescission of someone else's property is quite obviously not managing its own internal affairs. It is seeking to manage the affairs of the party resisting its claims, and for this it typically needs the judicial power of a court. Nor is it exercising a power that flows naturally from the power to confer the property in the first place. The power to bestow something of value on another normally does not entail the power to unilaterally take it back. This kind of "self-help" remedy is rarely found in the law. It is so rare that I would expect it to be stated clearly in the governing statutes if the Legislature indeed gave it to universities.
An excerpt from the majority's response:
