Paxton shoots down loophole for Buffett’s Texas dealerships

Texas Attorney General Ken Paxton is declining to come to the rescue of Warren Buffett’s automobile dealerships in the state.

In an opinion issued late Monday afternoon, Paxton essentially said that legal semantics are unlikely to be successful in helping Buffett’s Berkshire Hathaway conglomerate maneuver around a Texas law that appears to prohibit it from owning dealerships in Texas because it also owns an Indiana-based manufacturer of recreational vehicles.

State law prohibits a motor vehicle manufacturer from also owning dealerships, even if the vehicles aren’t of the same type. Buffett’s conglomerate owns a dealership unit — Berkshire Hathaway Automotive — and also owns Forest River Inc., a company that makes RVs.

One potential solution under consideration was to have Berkshire Hathaway come up with a way to “relinquish control” of Forest River while still wholly owning it.

Raymond Palacios Jr., board chairman of the Texas Department of Motor Vehicles — which enforces the dealer ownership law and has determined that Berkshire is in violation of it — requested an opinion from Paxton several weeks ago as to whether it’s possible for a company that wholly owns a motor vehicle manufacturer to “cease to be ‘affiliated with’ the motor vehicle manufacturer by relinquishing control of the manufacturer while maintaining ownership of it.”

If so, Berkshire Hathaway potentially could be in compliance with the state law while still owning its dealership unit and its RV maker.

But Paxton appeared to shoot down that possibility Monday.

“A court is unlikely 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 the law, Paxton wrote.

He noted that “the common understanding of ‘affiliated with’ includes both ownership and control.”

Jeff Rachor,
chief executive of Berkshire Hathaway Automotive, couldn’t be reached for comment Monday.

LEAVE A REPLY

Please enter your comment!
Please enter your name here

5 × five =