How many votes does a member of a Texas agricultural marketing cooperative get?

Plain-English summary

The Commissioner of the Texas Department of Agriculture asked the Attorney General how two voting provisions in the Agriculture Code fit together for agricultural cooperative marketing associations, the farmer-owned co-ops that pool and sell their members' crops. One provision, section 52.085, says each member gets one vote, with a narrow exception for citrus-related co-ops. The other, section 52.012, was copied from the federal Capper-Volstead Act and says a co-op must satisfy "one or both" of two requirements: limit each member to one vote, or keep dividends on stock at no more than eight percent a year. The worry was that section 52.012's "one vote or eight-percent dividends" phrasing might let an ordinary co-op give big stockholders more than one vote, so long as it held its dividends under eight percent.

The Attorney General said no. Section 52.085(a) sets a flat one-vote-per-member rule, and the only door out of it is the citrus exception in section 52.085(b). The office traced the one-vote limit back to 1921, before Texas borrowed the Capper-Volstead language in 1930, and reasoned that lifting that federal language into what is now section 52.012 was never meant to repeal the older one-vote rule. The office pointed out that the legislature itself confirmed this in 1979 when it had to pass a special amendment just to let citrus co-ops give members extra votes: if the one-vote limit were already optional, that amendment would not have been necessary. The bottom line: regular co-ops are one-member-one-vote, and a citrus co-op that uses the section 52.085(b) exception to grant more than one vote has to cap its dividends at eight percent under section 52.012(a)(2).

Currency note

This opinion was issued in 1993. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here. The Agriculture Code provisions discussed here (chapter 52, including sections 52.012 and 52.085) may have been amended since 1993; confirm the current statutes before relying on anything described here.

What the opinion meant for those who asked

For the Texas Department of Agriculture: The opinion read sections 52.012 and 52.085 as compatible rather than as offering co-ops a choice that would swallow the one-vote rule. It gave the department a single construction: one vote per member for ordinary co-ops, with the citrus exception the only departure.

For ordinary (non-citrus) cooperative marketing associations: The opinion held that each member was entitled to one vote under section 52.085(a). A co-op could not give a member more than one vote based on how much stock or membership capital the member held, even if the co-op kept its dividends at or below eight percent.

For citrus-related cooperative marketing associations: The opinion held that these co-ops could provide for a member association or group to have more than one vote under section 52.085(b), but if they did, they had to comply with the eight-percent dividend ceiling in section 52.012(a)(2).

Background and statutory framework

Section 52.012(a) of the Agriculture Code requires a marketing association to be operated for the mutual benefit of its members and to conform to "one or both" of two requirements: that no member have more than one vote based on stock or membership-capital ownership, or that the association not pay dividends in excess of eight percent a year. Section 52.085(a) provides that, except as allowed by subsection (b), a member of a marketing association is entitled to one vote. Section 52.085(b) carves out an exception: a co-op may give a member association or group more than one vote if it is organized primarily around citrus production or the processing and marketing of citrus products, has its principal office in a county with at least 500 acres planted in citrus, and includes cooperative associations or groups among its members.

The office explained that section 52.085(a) descended from now-repealed article 5750, V.T.C.S., and that the 1981 codification of the agriculture statutes was meant to be nonsubstantive (Acts 1981, 67th Leg., ch. 388; Agric. Code § 1.001(a)). Because the revised wording differed from article 5750 in ways that could matter, the office applied the rule that the predecessor statute controls when a nonsubstantive revision conflicts with it, citing Johnson v. City of Fort Worth. The flat one-vote limit had been in the cooperative marketing statutes since the legislature first enacted them in 1921. In 1922 Congress passed the Capper-Volstead Act (sections 291 and 292 of title 7 of the United States Code), which exempts agricultural marketing associations from federal antitrust law and conditions that exemption on a one-vote-per-member rule or an eight-percent dividend cap, plus a limit on dealing in nonmembers' products. Texas amended its law in 1930 to track Capper-Volstead, and that borrowed language became what is now section 52.012. The office concluded the legislature lifted the federal language without meaning to disturb the older one-vote rule.

The office found support in Etter Grain Co. v. United States, a federal tax case in which a cooperative was denied a farmers'-cooperative tax exemption under section 521 of the Internal Revenue Code because its bylaws gave some members more than one vote, in violation of article 5750 (now section 52.085(a)). That the court tested the co-op against the one-vote limit, without separately checking the Capper-Volstead-derived provision (now section 52.012(a)), the office read as confirming that the one-vote rule operated independently. The clinching point was the 1979 amendment (Acts 1979, 66th Leg., ch. 667) that added the citrus exception now in section 52.085(b): the legislature's need to amend the one-vote limit expressly, just to let citrus co-ops give extra votes, showed it had always understood that limit to be in force.

Common questions

How many votes does a member of a Texas agricultural marketing cooperative get?
One, under section 52.085(a), unless the co-op is citrus-related and uses the exception in section 52.085(b). The office read the one-vote rule as a flat limit for ordinary co-ops.

Could a co-op give larger stockholders extra votes if it kept dividends under eight percent?
No. The office rejected the idea that section 52.012's "one vote or eight-percent dividends" language let an ordinary co-op trade away the one-vote rule. Section 52.085(a) controlled, and it allowed only one vote per member.

What is special about citrus cooperatives here?
Section 52.085(b) lets a qualifying citrus-related co-op give a member association or group more than one vote. The legislature added that exception in 1979. A citrus co-op that uses it then has to keep dividends at eight percent or less under section 52.012(a)(2).

What is the Capper-Volstead Act and why did it come up?
It is a 1922 federal law that shields agricultural marketing associations from antitrust liability if they follow a one-vote-per-member rule or an eight-percent dividend cap. Texas copied that language into state law in 1930, and the office held the copy did not override the separate one-vote limit Texas had kept since 1921.

Citations

Statutory provisions discussed:

• Agric. Code § 52.012 (mutual-benefit operation; one vote or eight-percent dividend requirement; § 52.012(a)(2))
• Agric. Code § 52.085 (one vote per member, § 52.085(a); citrus exception, § 52.085(b))
• Agric. Code § 1.001(a) (1981 codification intended to be without substantive change)
• V.T.C.S. art. 5750 (repealed predecessor of section 52.085) and art. 5738 (predecessor of section 52.012)
• 7 U.S.C. §§ 291, 292 (Capper-Volstead Act)
• Internal Revenue Code § 521 (farmers' cooperative tax exemption)

Cases discussed:

• Johnson v. City of Fort Worth, 774 S.W.2d 653 (Tex. 1989)
• Northern Cal. Supermarkets, Inc. v. Central Cal. Lettuce Producers Coop., 413 F. Supp. 984, 988-89 (N.D. Cal. 1976), aff'd, 580 F.2d 369 (9th Cir. 1978), cert. denied, 439 U.S. 1090 (1979)
• Etter Grain Co. v. United States, 331 F. Supp. 283 (N.D. Tex. 1971), aff'd, 462 F.2d 259 (5th Cir. 1972)

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/dan-morales/dm-0266
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1993/dm0266.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain — the linked PDF is authoritative.

Office of the Attorney General
State of Texas

DAN MORALES
ATTORNEY GENERAL

October 25, 1993

Honorable Rick Perry
Commissioner
Texas Department of Agriculture
P.O. Box 12847
Austin, Texas 78711

Opinion No. DM-266

Re: Construction of the provisions of sections 52.012 and 52.085 of the Agriculture Code regarding agricultural cooperative marketing association member voting rights (RQ-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 shall 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 § 52.012.

(a) Except as provided 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 if the 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;

(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 § 52.085.

We note first 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 codification of article 5750 in 1981 to be nonsubstantive. See Acts 1981, 67th Leg., ch. 388, at 1015 (codifying act); Agric. Code § 1.001(a) (codification 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 "[e]xcept as provided by Subsection (b) . . . a member of a marketing association is entitled to one vote," the counterpart language in the predecessor provision, article 5750, read "[n]o member or stockholder shall be entitled to more than one vote [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, repealed 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 conflict 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. Supermarkets, Inc. v. Central Cal. Lettuce Producers Coop., 413 F. Supp. 984, 988-89 (N.D. Cal. 1976), aff'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:

First. 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.

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, § 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 codified 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 intending to change the one-vote limitation that had been present in the cooperative marketing provisions since 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) of the Agriculture Code.

The decision of the United States District Court for the Northern District of Texas in Etter Grain Company v. United States, 331 F. Supp. 283 (N.D. Tex. 1971), aff'd, 462 F.2d 259 (5th Cir. 1972), implicitly supports our interpretation of sections 52.012(a) and 52.085(a) of the Agriculture Code. See Etter Grain Co., 331 F. Supp. 283. The plaintiff in Etter Grain Co. claimed that the United States owed it a refund of income taxes because the plaintiff was a cooperative exempt from taxation under section 521 of the Internal Revenue Code, which grants an exemption to farmers' cooperatives. Id. at 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 Agriculture Code) because the plaintiff's 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 plaintiff's status as a cooperative marketing association in terms of the one-vote limitation found in article 5750 without considering whether the plaintiff complied with article 5738 (codified as section 52.012(a) of the Agriculture Code) is, we think, instructive.

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 affirms 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 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 Agriculture 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)(2) of the Agriculture Code.

DAN MORALES
Attorney General of Texas

WILL PRYOR
First Assistant Attorney General

MARY KELLER
Deputy Attorney General for Litigation

RENEA HICKS
State Solicitor

MADELEINE B. JOHNSON
Chair, Opinion Committee

Prepared by Kymberly K. Ohrogge and William M. Walker
Assistant Attorneys General