Court Opinion

ID: 4191316
Source: CourtListenerOpinion
Date Created: 2017-07-31 22:15:27.161249+00
Date Added: 2024-06-11T14:39:54.309089
License: Public Domain

KEN PAXTON
                                         ATTORNEY GENERAL OF TEXAS

                                                July 31, 2017

Mr. Raymond Palacios, Jr.                                Opinion No. KP-0156
Chairman, Department of Motor Vehicles
  . Board                                                Re: Whether wholly owning a motor vehicle
4000 Jackson A venue                                     manufacturer results in affiliation with that
Austin, Texas 78731                                      manufacturer for purposes of subsection
                                                         2301.476(a)(2) of the Occupations Code
                                                         (RQ-0170-KP)

Dear Mr. Palacios:

         You ask whether a company that wholly owns a motor vehicle manufacturer but
relinquishes control of the manufacturer is "affiliated with" the manufacturer for purposes of
section 2301.476 of the Occupations Code. 1 Generally, a motor vehicle "manufacturer ... may
not directly or indirectly: (1) own an interest in a ... dealer or dealership; (2) operate or control a
... dealer or dealership; or (3) act in the capacity of a ... dealer." TEX. Occ. CODE§ 2301.476(c). 2
For purposes of this prohibition, a "manufacturer" includes "a person who: (A) is affiliated with a
manufacturer or representative; or (B) directly or indirectly through an intermediary, is controlled
by, or is under common control with, a manufacturer." Id. § 2301.476(a)(2).

        As background, you describe a scenario where a parent company owns and controls a
Texas-licensed motor vehicle manufacturer and a Texas-licensed automobile dealership. Request
Letter at 1. You explain that "[a]s the corporate relationship between these three entities stands
today," both the dealer and the parent company qualify as manufacturers under subsection
2301.476(a)(2). Id. If the parent company "relinquishes control" of the manufacturer while
maintaining ownership, you question w4ether such action would bring the parent company into
compliance with subsection 2301.476(c). Id. at 2.

       Subsection 2301.476(a) describes two characteristics that result in an entity qualifying as
a manufacturer, separated by "or." See TEX. Occ. CODE§ 2301.476(a). When construing statutes,
"[w]e limit our analysis to the words of the statute and apply the plain meaning ... unless a

        1
         See Letter from Mr. Raymond Palacios, Jr., Chairman, Tex. Dep't of Motor Vehicles Bd., to Honorable Ken
Paxton, Tex. Att'y Gen. at 1-2 (July 6, 2017), https://www.texasattomeygeneral.gov/opinion/requests-for-opinion-
rqs ("Request Letter").
        2
         For purposes of chapter 230 I, "dealer" means "a person who holds a general distinguishing number issued
by the board under Chapter 503, Transportation Code." TEX. Occ. CODE§ 2301.002(7). "Manufacturer" means "a
person who manufactures or assembles new motor vehicles." Id. § 2301.002(19).
Mr. Raymond Palacios, Jr. - Page 2                     (KP-0156)

different meaning is apparent from the context or the plain meaning leads to absurd . . . results."
Jaster v. Comet II Constr., Inc., 438 S.W.3d 556, 562 (Tex. 2014) (quotation marks omitted). The
plain meaning of the term "or" expresses a choice between two alternatives. See Spradlin v. Jim
Walter Homes, Inc., 34 S.W.3d 578, 581 (Tex. 2000) (explaining that the Legislature's use of the
disjunctive term "or" generally "signifies a separation between two distinct ideas"). Thus, when
we give the term "or" its plain, grammatical meaning as a disjunctive expressing a choice between
two possibilities, subsection 2301.476(a) results in two avenues by which an entity may itself
qualify as a manufacturer: either by affiliation with a manufacturer; or under control by, or under
common control with, a manufacturer. See TEX. Occ. CODE§ 2301.476(a).

         Under the facts you describe, the manufacturer does not control the parent company, nor is
the parent company under common control with the manufacturer. Thus, the parent company will
not qualify as a manufacturer under subsection 2301.476(a)(2)(B) based on the facts you describe.
See id. § 2301.476(a)(2)(B). However, subsection (A) provides a distinct way to qualify as a
manufacturer apart from subsection (B). An entity will still qualify as a manufacturer if it remains
affiliated with the manufacturer. Id. § 2301.476(a)(2)(A). We must therefore determine the
meaning of the phrase "affiliated with" to analyze whether the parent company you describe
qualifies as a manufacturer for purposes of section 2301.476.

         The Legislature did not define "affiliated" for purposes of chapter 2301 of the Occupations
Code, and we find no cases construing the meaning of the term in the context of section 2301.476.
While definitions of "affiliate" exist throughout the statutes, those definitions differ significantly
depending on the context. Compare TEX. UTIL. CODE § 1 l .003(2)(C) (defining affiliates of electric
utilities to include, among others, "a corporation that has at least five percent of its voting securities
owned or controlled, directly or indirectly, by a public utility"), and TEX. TAX CODE§ 171.0001(1)
(defining "affiliated group" for purposes of the franchise tax as "a group of one or more entities in
which a controlling interest is owned by a common owner or owners, either corporate or
noncorporate, or by one or more of the member entities"), with TEX. Occ. CODE § 1201.003(2)
(defining "affiliate" for purposes of the Manufactured Housing Standards Act as "a person who is
under common control"), and TEX. C1v. PRAC. & REM. CODE§ 74.00l(a)(l) (defining "affiliate"
for purposes of the Medical Liability Act as "a person who, directly or indirectly, through one or
more intermediaries, controls, is controlled by, or is under common control with a specified person,
including any direct or indirect parent or subsidiary"). Given the Legislature's divergent
definitions of "affiliate" in various contexts, we cannot rely on a statutory definition of affiliate
inapplicable to chapter 2301 to determine the term's meaning in that context. 3 See Colorado Cty.
v. Staff, 510 S.W.3d 435, 453 (Tex. 2017) (noting the difference "between consulting other

         3 Multiple briefs submitted in response to this request suggest that the Legislature generally understands
"affiliate" in terms of control alone. See e.g., Letter from Michael C. Terrell, TaftLaw, to Honorable Ken Paxton,
Tex. Att'y Gen. at 2-3 (July 27, 2017) (on file with the Op. Comm.); Letter from Bill Cobb, Cobb & Counsel, to
Honorable Ken Paxton, Tex. Att'y Gen. at 3--4 (July 27, 2017) (on file with the Op. Comm.). However, it is not
possible to divine a general legislative understanding of the term from the differing statutory definitions of the term
in different contexts. Of course, the Legislature may define "affiliated with" for purposes of this section ifit intends
a specific meaning different from the common understanding of the term.
Mr. Raymond Palacios, Jr. - Page 3                    (KP-0156)

statutory definitions to determine common meaning and engrafting a special definition from one
statute to circumscribe the plain meaning of a term used in another" and declining to do the latter).

         Instead, we look to the common meaning of the term "affiliate." See In re Ford Motor Co.,
442 S.W.3d 265, 271 (Tex. 2014) (explaining that "undefined terms in a statute are typically given
their ordinary meaning"), The common understanding of the term "affiliate" is a "corporation that
is related to another corporation by shareholdings or other means of control; a subsidiary, parent,
or sibling corporation." BLACK'S LAW DICTIONARY 63 (8th ed. 2004) (emphasis added); see also
Tex. Rice Land Partners, Ltd v. Denbury Green Pipeline-Tex., L.L.C., 381 S.W.3d 465, 467 (Tex.
2012) (Wainwright, J., concurring) (using the same definition to discuss the meaning of "affiliate"
in determining whether an entity established a common carrier pipeline). Thus, the common
understanding of the term "affiliate" includes concepts of both ownership and control.

        A contextual reading of subsection 2301.476(a)(2) supports using the common
understanding of the term affiliate. Subsection 2301.476(a)(2) establishes two distinct methods to
qualify as a manufacturer, either through affiliation or control. TEX. Occ. CODE§ 2301.476(a)(2).
Limiting the meaning of the term "affiliated" to the concept of control would render subsection
(A) meaningless. Courts avoid adopting an interpretation that renders any portion of a statute
meaningless. City of Dallas v. TC! West End, Inc., 463 S.W.3d 53, 55 (Tex. 2015). Accordingly,
the use of the term "affiliated" suggests that the Legislature meant something beyond mere control.

        Your question in essence asks whether a company's relinquishing control of a
manufacturer will suffice to avoid an affiliation with the manufacturer even if the company
continues to own the manufacturer. 4 Because the common understanding of "affiliated with"
includes both ownership and control, a court is likely to conclude that a company that relinquishes
control of a manufacturer but maintains full ownership of that manufacturer remains affiliated with
the manufacturer for purposes of subsection 2301.476(a)(2)(A). 5

         4
          Whether a company in fact relinquished total control of a manufacturer while maintaining full ownership is
a question that would involve factual inquiries into the nature of the continued ownership. See TEX. INS. CODE
§ 823.005 (defining "control" as "the power to direct ... the management and policies of a person .... The power
may be possessed directly or indirectly by any means, ·including through the ownership of voting securities"). Any
such factual determination is beyond the scope of an attorney general opinion.
         5
           1n the facts you describe, the parent company plans to "wholly own" the motor vehicle manufacturer after
relinquishing control ofit. Request Letter at 2. We limit our opinion to these facts and do not address to what extent
nominal or minority ownership would suffice to result in an affiliation with the manufacturer.
Mr. Raymond Palacios, Jr. - Page 4         (KP-0156)

                                     SUMMARY

                      For purposes of section 2301.476 of the Occupations Code,
              a manufacturer includes an entity affiliated with a manufacturer.
              The common understanding of the term affiliate includes concepts
              of both ownership and control. Thus, a court is likely to conclude
              that a company that relinquishes control of a manufacturer but
              maintains full ownership of that manufacturer remains affiliated
              with the manufacturer for purposes of section 2301.476.

                                           Very truly yours,

                                           KEN PAXTON
                                           Attorney General of Texas

JEFFREY C. MATEER
First Assistant Attorney General

BRANTLEY STARR
Deputy First Assistant Attorney General

VIRGINIA K. HOELSCHER
Chair, Opinion Committee