                          QBfficeof tly !ZlttornepQkneral
                                       &ate of ;PCexae
DAN MORALES
 ATSORSEY
      GENERAL                           October 25,1993



     Honorable Rick Perry                        Qpiion No. DM-266
     Commissioner
     Texas Department of Agriculture             Re: Construction of the provisions of
     P.O. Box 12847                              sections 52.012 and 52.085 of the
     Austin, Texas 78711                         Agriculture Code regarding agricultursl
                                                 cooperative marketing association member
                                                 voting rights (BQ-321)

     Dear Commissioner Perry:

             You ask for our opinion as to the interaction of two provisions of chapter 52 of
     the Agriculture Code, relating to agricultural cooperative marketing association member
     voting rights. The provisions about which you inquire are found in sections 52.012(a) and
     52.085(a) and (b), and provide respectively:

                   (a) A marketing association shag be operated for the mutual
               benefit of its members, as producers, and shall conform to one or
               both of the following requirements:

                       (1) a member of the association may not have more than
                   one vote based on the member’s ownership of stock or
                   membership capital in the association; or

                      (2) the association may not pay dividends on stock or
                   membership capital in excess of eight percent a year.

     Agric. Code 5 52.012.

                  (a) Except as provide-d by Subsection (b) of this section, a
               member of a marketing association is entitled to one vote.

                    (b) A marketing association may provide in its articles of
               incorporation or bylaws for a member association or group to have
               more than one vote ifthe association providing for the vote:

                       (1) is organized primarily for the production, cultivation,
                   and care of citrus groves or for processing and marketing citrus
                   products;



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Honorable Rick Perry - Page 2             (DM-266)




                    (2) has its principal office in a county that has at least 500
               acres of land planted in citrus groves; and

                   (3) includes as members one or more associations            or
               groups organized on a cooperative basis.

Agric. Code 4 52.085.

         We note Srst that the provisions of subsection (a) of section 52.085, quoted above,
derive from now-repealed article 5750, V.T.C.S. The legislature intended the coditication
of article 5750 in 1981 to be nonsubstantive. See Acts 1981,67th Leg., ch. 388, at 1015
(codiig     act); Agric. Code 5 1.001(a) (codiication intended to be without substantive
change). The wording of section 52.085(a), however, differs from that of the predecessor
provision in at least two respects such that the provision’s import could be substantively
altered in particular applications. While subsection (a) reads “[elxcept as provided by
Subsection (b) . o member of a marketing association is entitled to one vote,” the
counterpart language in the predecessor provision, article 5750, read “[n]o member or
&&ho&r shall be entitled to more than one wte [except for member groups or member
associations of certain marketing associations related to the citrus industry].” In
accordance with the legislative intent, we will construe section 52.085(a) consistently with
its predecessor provision, repeated article 5750. See Johnson v. City of Fort Worth, 774
S.W.2d 653 (Tex. 1989) (stating that predecessor statute controls construction of
nonsubstantive revision provisions in event of cot&t between two provisions).

         The flat one-vote limitation, formerly in article 5750 and now in section 52.085(a),
has appeared in the state cooperative marketing provisions since the legislature originally
enacted them in 1921. Acts 1921, 37th Leg., ch. 22, at 45. In 1922 the United States
Congress adopted the Capper-Volstead Act, found at title 7 of the United States Code,
sections 291 and 292, which exempts agricultural marketing associations from federal
anti-trust laws. See Northern Cal. Supennarkts, Inc. v. Central Cal. Lettuce Producers
Coop., 413 F. Supp 984, 988-89 (ND. Cal. 1976), @‘d, 580 F.2d 369 (9th Cir. 1978).
cert. denied, 439 U.S. 1090 (1979). Section 291 of title 7 of the United States Code
requires agricultural marketing associations to conform to the following:

           Pi.   That no member of the association is allowed more than one
           vote because of the amount of stock or membership capital he may
           own therein, or,

           Second. That the association does not pay dividends on stock or
           membership capital in excess of 8 per centum per annum.

           And in any case to the following:

           Third. That the association shall not deal in the products of
           nonmembers to an amount greater in value than such as are handled
           by it for members.


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Honorable Rick Perry - Page 3             (DM-266)




        In 1930 the Texas Legislature amended the state’s cooperative marketing
provisions to conform to the Capper-Volstead Act by permitting cooperative marketing
corporations to market nonmembers’ products. Acts 1930, 41st Leg., 4th C.S., ch. 12,
3 9, at 16. The amendment incorporated verbatim the above-quoted provisions of the
Capper-Volstead Act, provisions that though somewhat altered in the subsequent
nonsubstantive codification, now are coditied as Agriculture Code section 52.012, one of
the two sections at issue here. In our opinion, when the legislature amended article 5738
in 1930, it lifted the language directly out of the Capper-Volstead Act without intendiig to
change the one-vote limitation that had been present in the ,cooperative marketing
provisions Smce 1921. The legislature did not intend by the 1930 amendment to authorize
a cooperative marketing association to provide any member of its association with more
than one vote. We note that, by complying with Texas’ one-vote limitation, presently
articulated in section 52.085(a) of the Agriculture Code, a cooperative marketing
association also complies with the Capper-Volstead requirements, presently articulated in
the state law in section 52.012(a) ofthe Agriculture Code.

         The decision of the United States District Court for the Northern District of Texas
in Etter Grain Gnnpany v. United States, 331 F. Supp. 283 (N.D. Tex. 1971) qfd, 462
F.2d 259 (5th Cu. 1972), implicitly supports our interpretation of sections 52.012(a) and
52.085(a) of the Agricuhure Code. See Etter Grain Co., 33 1 F. Supp. 283. The plaintiff
in Etter Grain Co. claimed that the United States owed it a retimd of income taxes
because the plaintitf was a cooperative exempt from taxation under section 521 of the
Internal Revenue Code, which grants an exemption to farmers’ cooperatives. Id. a! 284-
85. The Etter Grain Co. court found, however, that the plaintiff did not comply with
article 5750 (now section 52.085(a) of the Agricuhure Code) because the plaintiffs bylaws
granted some members more than one vote. Id. at 285. Consequently, the court
concluded that the plaintiff was not a farmers’ cooperative entitled to exemption from
taxation under section 521 of the Internal Revenue Code. Id. at 286. The fact that the
court analyzed the plaintiffs status as a cooperating marketing association in tetms of the
one-vote limitation found in article 5750 without considering whether the plaintiE
complied with article 5738 (codiied as section 52.012(a) of the Agriculture Code) is, we
think, instNctive.

         More significantly, in 1979 the legislature amended article 5750 by adding an
exception to the one-vote limitation for cooperative marketing associations related to the
citrus industry. See Acts 1979,66th Leg., ch. 667, $1, at 1551. The legislature codified
this exception as section 52.085(b). The legislature’s acknowledgment in 1979 that it must
amend the one-vote limitation in article 5750, V.T.C.S., expressly to authorize citrus
industry-related cooperative marketing associations to offer each member more than one
vote afIinns our conclusion that the legislature never intended to modify or repeal the one-
vote limitation by incorporating the Capper-Volstead provisions into state law; the
legislature believed, instead, that the one-vote limitation remained viable.

        In summary, section 52.085(a) of the Agriculture Code limits each member of a
non-citrus-related cooperative marketing association to one vote.      A citrus-related
HonorableRickPerry     - Page 4           (DM-266)




cooperative marketing association may, pursuant to section 52.085(b), provide for a
member association to have more than one vote; if such an association does so, however,
it must not pay dividends on stock or membership capital in excess of eight percent a year,
in accordance with section 52.012(a)(2) of the Agriculture Code.


                                  SUMMARY

                Section 52.085(a) of the Agricuhure Code limits each member
          of a non-citrus-related cooperative marketing association to one
          vote.     A citrus-related cooperative marketing association may,
          pursuant to section 52.085(b), provide for a member association to
          have more than one vote; if such an association does so, however, it
          must not pay dividends on stock or membership capital in excess of
          eight percent a year, in accordance with section 52.012(a)(Z) of the
          Agriculture Code.




                                                     DAN      MORALES
                                                     Attorney General of Texas

WILL PRYOR
Fii Assistant Attorney General

MARYKELLER
Deputy Attorney General for Litigation

RBNBA HJCKS
State Solicitor

MADELEINE B. JOHNSON
Chair, Opinion Committee

Prepared by Kymberly K. Ohrogge and Wdliam M. Walker
Assistant Attorneys GeneraJ




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