### DAN MORALES

ATSORSEY GENERAL 

# QBffice

oftly !Zlttornep &ate of ;PCexae
October 25,1993 

# Qkneral

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

(a) A marketing association shag be operated for the mutual benefit of its members, as producers, and shall conform to one or both ofthe 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 inthe association; or (2) the association may not pay dividends on stock or membership capital inexcess ofeight percent ayear. Agric. Code 552.012.

(a) Except as provide-d by Subsection (b) of this section, a member ofamarketing association isentitled 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 forthe vote: (1) is organized primarily for the production, cultivation, and care ofcitrus groves or for processing and marketing citrus products;

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(2) has its principal office in a county that has at least 500 acres ofland planted incitrus groves; and (3) includes as members one or more associations or groups organized on acooperative basis. Agric. Code 452.085.
Wenote Srstthat the provisions ofsubsection (a)ofsection 52.085, quoted above, derive from now-repealed article 5750, V.T.C.S. The legislature intended the coditication of article 5750 in 1981to benonsubstantive. SeeActs 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 ofthe 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 ofa marketing association is entitled to one vote,” the counterpart language in the predecessor provision, article 5750, read “[n]o member or &&ho&r shallbeentitled tomorethan one wte [except for member groups or member associations of certain marketing associations related to the citrus industry].” In accordance with the legislative intent, wewill construe section 52.085(a) consistently with its predecessor provision, repeated article 5750. SeeJohnsonv. City ofFort Worth, 774 S.W.2d 653 (Tex. 1989) (stating that predecessor statute controls construction of nonsubstantive revision provisions inevent ofcot&t between two provisions).
The flat one-vote limitation, formerly inarticle 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. SeeNorthern 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 ofthe amount of stock or membership capital he may own therein, or, Second. That the association does not pay dividends on stock or membership capital inexcess of8per centum per annum. Andinanycaseto the following: Third. That the association shall not deal in the products of nonmembers to an amount greater invalue than such as are handled byitfor members.

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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, 39, 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 asAgriculture Code section 52.012, one of the two sections at issue here. In our opinion, when the legislature amended article 5738 in 1930,itlifted the language directly out ofthe Capper-Volstead Actwithout intendiig to change the one-vote limitation that had been present in the ,cooperative marketing provisions Smce1921. The legislature didnot intend bythe 1930amendment 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 lawin section 52.012(a) ofthe Agriculture Code.
The decision ofthe United States District Court for the Northern District ofTexas inEtter Grain Gnnpany v. UnitedStates, 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) ofthe Agricuhure Code. SeeEtter Grain Co., 331F. Supp. 283. The plaintiff inEtter 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. TheEtter Grain Co. court found, however, that the plaintiff did not comply with article 5750 (now section 52.085(a) ofthe 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 ofthe Internal Revenue Code. Id. at286. Thefact that the court analyzed the plaintiffs status as a cooperating marketing association intetms ofthe one-vote limitation found in article 5750 without considering whether the plaintiE complied with article 5738 (codiied as section 52.012(a) ofthe 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 assection 52.085(b). The legislature’sacknowledgment in 1979that itmust 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 onevote 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) ofthe Agriculture Code limits each member of a non-citrus-related cooperative marketing association to one vote. A citrus-relatedHonorableRickPerry - 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; ifsuch an association does so, however, itmust not pay dividends on stock ormembership capital inexcess ofeight percent ayear, inaccordance with section 52.012(a)(2) ofthe Agriculture Code.

SUMMARY
Section 52.085(a) ofthe 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; ifsuch 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) ofthe Agriculture Code.

DAN MORALES Attorney General ofTexas
WILL PRYOR Fii Assistant Attorney General
MARYKELLER Deputy Attorney General forLitigation
RBNBA HJCKS State Solicitor
MADELEINE B.JOHNSON Chair, Opinion Committee Prepared byKymberly K.Ohrogge andWdliamM.Walker Assistant Attorneys GeneraJ

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