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Friday, December 1, 2006

Column: Cyberspeak

The Hewlett-Packard leak scandal has uncovered many unpleasant truths. Surely the worst of them all is the fact that millions of people appear to be using the word pretext as a verb, as in: did H-P engage in pretexting?

We all know what a pretext is. It’s an excuse, a pretense, a sham; in short, it’s one of those things that make modern life possible. Pretexting, on the other hand, is a much more controversial affair: it is the act of using a pretext to get confidential information about other persons.

According to reports, H-P hired investigators who used pretexting to gather phone records of possible leakers. At present, there is no federal law that explicitly forbids pretexting for phone records; however, Congress is weighing several bills that would do just that.

Pretexting is an ugly word. It barely even looks like a word. Grammatically speaking, it is a gerund (a word ending in –ing), the root of which is the suspicious-looking verb “to pretext.”

Here’s the surprising part. The Oxford English Dictionary shows that pretext has been used as a verb since the late 18th Century. “Pretexting” is recorded as early as 1849; originally, it meant “pretending” or “feigning.” And even in its current usage, pretexting describes behavior as old as private detectives. So why the fuss all of a sudden?

Calling All CyberLawyers

The answer is that pretexting is one of those legal terms that has acquired a new sense of urgency, and cachet, in the Information Age. Back in the old days, investigators could merely snoop in back alleys and dumpsters. But now they engage in data mining – in cyberspace, no less. They’re hacking and phishing and using splogs. Whatever it means, it all sounds very alarming.

The use and abuse of electronic information is the subject of cyberlaw, a term that covers laws relating to computers, software, databases, networks and, especially, the Internet. The cyber part comes from cybernetics (from the Greek kybernetes, a steersman or pilot), which is the study of communication and control among animals and machines. Cyber has been a popular prefix in technical circles since 1982 when a science fiction writer coined the word cyberspace.

Today’s law dictionaries like to show that they are on top of this whole cyber thing. Just look under “C” and you’ll find definitions for cybertorts, cyberfraud and cyberattacks (intriguingly, these are torts, frauds, and attacks committed via computer). You’ll see cybercriminals in current dictionaries and, much to one’s relief, cybercops to hunt them down.

Cybersquatting is a novel form of cybertort. It involves the practice of registering an Internet domain name identical or similar to another person’s trademark. The idea is that the trademark owner will pay up to get the squatter to release the domain name. A person who perpetrates such a scam is known as a cybersquatter or, more picturesquely, a cyberpirate. Under the Anticybersquatting Consumer Protection Act of 1999, trademark owners can sue cyberpirates or, presumably, make them walk the plank.

Predators who use chat rooms and email to target their victims may be guilty of cyberstalking. Those who use computer systems and networks to undermine national security risk prosecution for cyberterrorism.

Some legal writers have proposed a formal system of international law to govern conduct on the Internet. They call it cyberalty, a combination of cyber and admiralty, the latter because cyberspace is analogous to the high seas in that it is used by people of all nations. And because it’s full of pirates.

Back to the Future

It all sounds futuristic – or does it? To many, terms like cyberlaw and its derivatives are already passé; reminiscent of sci-fi chestnuts like cyborg and cybernaut. A number of legal academics have suggested that Information Law is a better name for this branch of the law. Still others reject both cyberlaw and Information Law as sounding too stodgy. Instead, they advocate a revolutionary terminology that captures all the cutting-edge drama of the ‘Net. I refer to Latin.

Yes, Latin. According to some experts, the international legal principles covering electronic exchanges of information ought to be known as Lex Informatica. Lex is Latin for law, and Informatica is Latin for – well, actually, it isn’t Latin at all, but rather a pseudo-Latin word meaning “of or pertaining to information.” Lex Informatica takes its inspiration from Lex Mercatoria (the “Law Merchant”), an ancient body of laws that governed the activities of merchants who traveled from one kingdom to another during the Middle Ages.

The use of Latin does have one great advantage: since it is already a dead language, it can’t get any deader, as it were. Technology lingo, you see, rapidly grows obsolete and so do the corresponding legal terms. In 1960, for example, a Time magazine writer argued that government lawyers needed to get serious about “jet age problems.” In 1963, a California lawyer described certain legal terms as belonging to the “atomic age.” Cyberlaw will sound just as dated as those phrases soon enough.

In the meantime, various high tech legal problems are enriching our vocabulary every day. Perhaps the best-known affliction of the Internet era is spam, a term that is now defined by federal law. Under the 2003 CAN-SPAM Act, spam is any unsolicited email, the “primary purpose of which” is to promote a commercial venture. CAN-SPAM makes it a misdemeanor to send spam with falsified “header” information; say, emails pretending to come from a prominent Nigerian barrister.

Incidentally, the title of the federal spam law stands for “Controlling the Assault of Non-Solicited Pornography and Marketing,” making CAN-SPAM an acronym. Or, more precisely, a backronym: that is, somebody worked backwards to compose an acronym that would fit “CAN-SPAM.” This is fairly common practice in naming laws. The USA PATRIOT ACT, for example, is a backronym for “Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism.” It’s this kind of attention to detail that allows Congress to deal with jet age problems.

Throttling, another legal neologism, was the basis for a recent lawsuit against Netflix, a service that allows subscribers to order DVD’s online. Allegedly, Netflix rationed the supply of popular DVD’s by applying an undisclosed “fairness algorithm” that gave priority to new users and infrequent users. The fairness algorithm meant that regular Netflix customers sometimes faced delays of up to 6 days for popular titles, leading to widespread discontent – algorithm and blues, if you will.

A common problem for e-commerce merchants is click fraud, which is the illicit manipulation of keyword-based advertising. Click fraud can take many forms; one example would be a company employing people to click on a rival company’s search engine ads, thereby driving up the competitor’s advertising costs. But round-the-clock clicking is tedious work, so some click fraudsters, as well as many spammers, now do their deeds via botnets; that is, “robot networks.”

Danger, Will Robinson

The very mention of robots conjures up images of walking, talking, C-3PO-like creatures. Given advances in artificial intelligence and robotics, some scientists predict that we are not far from the day when robots will possess the kind of self-awareness and moral judgment that will make them more than mere machines.

Not surprisingly, legal scholars are already beginning to consider the possibility of robot rights. In 2004, the International Bar Association staged a mock trial in which a super intelligent computer sought to enjoin its “employer” from dismantling it.

In Japan, some companies pay union dues for robots on the factory floor. What if the robots assert their right to strike? Already computers can be programmed to compose poetry. Will they demand copyright protection for their works? And if a robot causes harm, can we hold it liable under a reasonable computer standard?

But that is a subject for an entirely different branch of law – Lex Robotica?

This column originally appeared in the December 2006 issue of New York Law Journal Magazine.

Friday, September 1, 2006

Column: Fare Thee Well

A flurry of recent articles announced new “federal welfare rules” that will go into effect October 1. These rules represent the first update to the massive overhaul of the US welfare system signed into law by President Clinton in 1996.

The new rules (which require welfare recipients to engage in certain work activity in order to receive benefits) have generated untold controversy on both sides of the aisle. Supporters say the welfare rolls will go down; opponents say poverty will go up. But one vital question has been strangely overlooked in the midst of all the political squabbles: why are the laws governing public assistance invariably referred to as welfare laws?

After all, the program affected by the new regulation is called TANF (Temporary Assistance for Needy Families) not “welfare.” There is no “federal welfare act” or “federal welfare program.”

An Ambiguous Clause

Welfare does appear twice in the Constitution: but in neither case does the word expressly refer to anti-poverty programs. The Preamble describes the purpose of the Constitution “to form a more perfect Union, to establish Justice [and to] promote the general Welfare.”

Article 1 of the Constitution authorizes Congress to pass laws to “provide for the . . . general Welfare of the United States; . . .” Unlike the Preamble, this is not a mere statement of aspiration, but a grant of power.

Almost as soon as the ink was dry on the Constitution, debate erupted over the meaning of the so-called Welfare Clause of Article 1. Alexander Hamilton argued that the Welfare Clause gave Congress an independent right to pass any sort of law that would tend to benefit the nation as a whole, as distinct from laws of purely local interest.

James Madison disagreed. To him, the Welfare Clause was not a distinct federal power. The proof? The fact that “general Welfare” is separated from the more specific powers of Article 1 by a mere semicolon. History does not record Hamilton’s rejoinder to this point, so we are left with the tantalizing possibility that these two Founders may have had furious knock-the-powder-out-of-your-wig arguments about the significance of a semicolon.

The Supreme Court finally settled the question in Helvering v. Davis, a 1937 lawsuit involving the granddaddy of all American welfare programs, the Social Security Act of 1935. The plaintiff had challenged the Act as an unlawful expansion of congressional power. The Court upheld the Social Security Act as an example of Congress’s authority to pass laws “to promote the general welfare.” Justice Cardozo pointedly remarked: “Nor is the concept of the general welfare static. . . What is critical or urgent changes with the times.”

Fare’s Fair

The fact that the Welfare Clause forms the legal basis for the federal welfare system appears to be a coincidence, linguistically speaking. To the Founding Fathers “welfare” did not refer to government programs, but rather conveyed a more general sense of well-being or prosperity. The word is recorded as early as the 14th Century, meaning to fare (i.e., to go, or to take one’s leave) well. It has the same roots as farewell, but just in reverse order.

Welfare began to take on its modern meaning of “a benefit provided to the needy” in the early 20th Century. At first, it applied to the paternalistic efforts of large companies, which sometimes hired “welfare officers” who arranged various services for employees. This sense is preserved in the statutory term Employee Welfare Benefit Plan – which is a type of plan protected under the 1974 Employee Retirement Income Security Act, or ERISA.

By the First World War, welfare was being applied to various services provided to the public at large, giving rise to such terms as welfare center (1917) and, later, welfare clinic (1937). When legislation in the US and UK established government-sponsored benefit programs, it was natural enough that such programs would be referred to as welfare. Before long, people were talking about a welfare state (1941), a term that was initially admiring, but later disparaging.

And yet, lawmakers have historically been reticent about using the term welfare when establishing relief programs. Even the 1996 overhaul – which is commonly referred to as the “Welfare Reform Act” – is actually called the Personal Responsibility and Work Opportunity Reconciliation Act. With a few exceptions (child welfare, for example), the word welfare is too vague for the law, which tends to speak of specific programs – the bureaucratic alphabet soup of TANF, AFDC, SSA, SSI, SCHIP, EA, CCDBG, CCDF, CETA, EOA, EITC, and QWERTY. Okay, not the last one.

As a legal term, welfare did achieve a degree of recognition in 1953 with the creation of the federal Department of Health, Education and Welfare (HEW). But this lasted only until 1979 when HEW was transformed into the Department of Health and Human Services. You will have noticed that the government dropped “welfare” from the new department’s name – but they helpfully added “human” to modify “services,” just in case, say, squirrels began to feel a sense of entitlement.

That’s Why the Lady is a Tramp, Your Honor

Before welfare became a quasi-legal term, laws relating to poverty were known, with a certain lack of euphemism, as Poor Laws. These were a patchwork of old English and American laws dating back to Elizabethan times.

The Poor Laws had two elements. One was the giving of “relief” to the poor. Relief consisted of either indoor relief, which required the recipient to enter a workhouse or similar institution; or outdoor relief, which simply meant giving cash or food to poor people.

The other, seemingly contradictory, component of the Poor Laws was the punishment of poor people. It wasn’t exactly a crime to be poor – unless you were deemed fit to work. The law assumed that any beggar who was capable of working must have chosen to beg. Such people were referred to as sturdy beggars, sturdy vagabonds, or simply as rogues. These were technical legal terms. A legal dictionary of 1607, for example, lists the offenses of being a “Roag [rogue] of the first degree” and “Roag of the second degree.” The punishment for repeat roguery was death.

Before you laugh this off as a relic of history, you might take a glance at the official website of the Massachusetts legislature. Apparently, it is still a crime in the Bay State to be a vagrant or a vagabond; the former being a beggar, the latter a person who steals or acts “in a suspicious manner.”
For those who don’t fit into either category, Massachusetts has a separate offense of being a tramp. The criminal code provides that “an act of begging or soliciting alms [charity] . . . shall be prima facie evidence that such person is a tramp.” To which, we might add, so is carrying one’s possessions in a bundle tied to the end of stick and wearing a rumpled porkpie hat.
The Massachusetts law probably would not survive a court challenge today. New York’s vagrancy law was held unconstitutional as long ago as 1974. Other state laws have suffered a similar fate. The leading case is Papachristou v. City of Jacksonville (1972) in which the Supreme Court struck down a Florida law that targeted not only rogues and vagabonds, but also habitual loafers (a term that, sadly, went undefined).

In giving the court’s opinion, Justice Douglas quotes Henry David Thoreau’s essay in praise of sauntering, which, according to Thoreau, comes from the French Sainte Terre (Holy Land) because medieval vagabonds would beg for alms under the pretense of going to the Holy Land. Presumably Douglas was trying to emphasize the harshness of the old Poor Laws – they even prohibited sauntering!

As a legal matter, of course, this was pure dictum. But the Supreme Court was looking to bury the Florida law. Which they did – to a fare-thee-well.

This column originally appeared in the September 2006 issue of New York Law Journal Magazine.

Thursday, June 29, 2006

Column: Death and This

Death and taxes are equally certain, but death is considerably less complicated.

Consider the tax season we’ve just survived. As if the usual jumble of forms, schedules, and receipts weren’t enough, thousands of taxpayers had to struggle with the government’s definition of a word that most people don’t even think of as a legal term: child.

Like Whitney Houston, the Internal Revenue Service no doubt believes that children are our future. But it has a hard time explaining exactly who those darn kids are.

Until recently, the IRS had at least five different tests for who counts as a “child.” The definition is crucial because various tax breaks are available only to adults with children. In 2004 Congress stepped in and created a streamlined definition of child, which took effect for the first time in the 2005 returns.

Under the new law, you might have more children than you realize. In addition to the usual suspects (sons, daughters, stepchildren), your “child” could be your brother, sister, half-brother, half-sister, stepbrother, stepsister, or a descendant of any one of them. It might have been easier for Congress to list who is not your child.

According to reports in the Wall Street Journal, the new definition has had some unintended consequences – adult “children” claiming their siblings as dependants, for example. One hopes this confusion has not prevented anyone from connecting with his or her inner deduction.

To be fair, children have had a muddled status in the law for many years. Historically, the common law considered you to be a child until you were 14. But then for other purposes the common law deemed every person under the age of 21 to be an infant (meaning the person had not reached the age of majority). Unless I’m missing something, from age 14 to 20, you are an infant at common law even though you are no longer a child.

And in case you’ve ever wondered why the plural is children rather than childs, it is a holdover from the Middle English period, when plurals could be expressed by adding –en to a word. In Chaucer’s day, one was just as likely to write housen as houses. Only a few of the “en” plurals have survived: brethren, oxen and, of course, children.

Tax law – even without the children – has greatly enriched our language, even if it occasionally impoverishes our citizens. The 1991 edition of Black’s Law Dictionary fairly gushes that taxes sometimes go by the name of “toll, tribute, tallage, gabel, impost, duty, custom, excise, subsidy, aid, [and] supply.”

Mind you, Mr. Black is being overly inclusive here. A tallage, for example, is a kind of tax that has not been collected since 1332. Why an American lawyer would need to carry this term around in his or her toolkit today is a mystery. Tallage is, however, an interesting word. It comes from the French tailler (to cut out part of the whole), deriving from the fact that debts were anciently recorded by cutting notches into rods. The word survives in English as tally, and its distant cousin, tailor.

Tax started out in Medieval England as a very specific type of revenue scheme. It was a royal tariff demanded from towns, not from individuals. Another term for this tariff was the Fifteenth, because taxation was fixed at 1/15 the assessed wealth of a town.

Money collected from individuals was called a subsidy. Whereas taxes on towns were a fixed amount, subsidies on individuals had to be specially calculated each time they were assessed. The 17th Century British jurist John Cowell noted that subsidies are difficult to calculate “because the estate of every several man is so ticklish and uncertain” – neatly summing up the need for an accounting profession.

The word tax comes from an Old French word (taxer) and, ultimately, from the Latin taxare meaning “to value or estimate” but curiously also meaning “to censure.” As one can see, the punitive undertone of taxation goes way, way back.

For centuries, the word tax was interchangeable with task, which also comes from taxare, but via the Norman dialect of French. Gradually, task took on its more general sense of “thing to be done” while tax kept its more specialized meaning. Both words, by the way, are related to taxi, which is an abbreviation of taximeter, a device used to measure the fare in a cab.

Despite the French origins of tax, the 17th Century English lawyer John Cowell proudly declared that tax “is a British word” and suggested that any talk about a French derivation was “frivolous.” No doubt Cowell was attempting to strike a patriotic chord (“we invented taxes!”) but the authorities were not impressed. Cowell was sent to prison because his discussion of subsidies displeased Parliament, although it is not clear what the politicians found so objectionable.

By the 18th Century, “tax” had become the generic term for all the various payments demanded by government. As everyone knows, King George slapped the colonies with a Stamp Tax and a Tea Tax and the founding fathers revolted against “taxation without representation.” In the early days of the Republic, Chief Justice Marshall memorably observed that “the power to tax is the power to destroy” (in McCulloch v. Maryland).

New forms of taxation do spring up with alarming regularity. Quite apart from such familiar friends as income tax, property tax, and estate tax, there is the jaunty amusement tax, which is imposed on tickets to sporting events and other diversions; the floor tax, which is based on all distilled spirits in (“on the floor of”) a warehouse; and the sin tax, a tax imposed on booze, cigarettes or other “sinful” products.

Somebody has to collect all these taxes. Nowadays, it’s usually the government, but historically, the job has often been outsourced to the private sector. The practice, generally known as tax farming, goes back to the Roman Empire. In 20th Century America, people started referring to tax farmers as tax ferrets, presumably because they “ferret out” money, but also conjuring up unsavory images of human weasels. The most famous tax ferret was Nicholas Panarella (who preferred to call himself the “tax commando”). In the 1990’s, Panarella collected millions of dollars on behalf of Philadelphia and other municipalities from which he deducted a contingency fee. Panarella’s career was cut short by his conviction for aiding and abetting a politician’s fraudulent scheme.

When a tax is imposed on imports or exports, it is known as a duty or customs duty. As in normal conversation, the word duty connotes that which is due (a related word). The word has been used to describe import taxes since 1474. The phrase duty-free is first recorded in 1958 and was soon applied to shops that sell tax free stuff. Of course, anybody who has trudged through an airport terminal weighted down with gifts of Scotch and perfume knows the paradoxical truth that duty-free shopping is terribly taxing.

It is a crime to evade taxes but not to avoid them. Tax evasion is the failure to pay taxes that are due. Tax avoidance, on the other hand, simply refers to arranging one’s affairs to reduce or even eliminate tax liability. For this, one may set up a tax shelter (a device that defers or reduces taxes), or decide to live in a tax haven (a nation with low or no taxes on foreigners), or exploit various loopholes (from Middle English loupe, or “opening in a wall”).

None of this is illegal, a fact that sometimes sticks in the craw of judges and other officials. As one British judge said, with a whiff of distaste, “the avoidance of taxes may be lawful, but it is not yet a virtue.”

The simplest tax around is a poll-tax, an equal sum demanded from each person regardless of income or property. It is, as one legal treatise puts it, “a tax on the privilege of being.” You can’t evade or avoid a tax on being, at least not without running into that other great certainty.

(This column first appeared in the June 2006 issue of New York Law Journal Magazine).

Monday, May 29, 2006

Column: All About Eaves

At the risk of stirring up controversy, the time has come for Legal Lingo to dip a toe into the troubled waters of warrantless searches.

In case you’ve been living in a cave somewhere, the country appears to be divided into two camps on the question of whether the Bush Administration can engage in electronic eavesdropping on U.S. citizens without a court order.

Personally, I haven’t a clue who’s right, but the whole thing does highlight what a curious word eavesdropping is. It is, of course, related to eave, the edge of a roof, which comes directly from an Old English word efes (also yfes). But how do you get from a roof edge to electronic surveillance?

It all begins with rain, which tends to fall on one’s roof and slide off the eaves. Yfesdrype (eavesdrip) is recorded as early as 1487 as a term defining the area around a house onto which water from the roof will fall. Because water from one man’s roof might fall on another’s property, Anglo-Saxon law recognized an easement of “eavesdrip.” In fact, ancient Roman law had the same doctrine, known as the right of stillicidium, presumably for the same reason – to stop busybodies from litigating over a little runoff from their neighbor’s roof.

But if busybodies can’t sue, they’ll snoop, so the Anglo-Saxons also tried to stop people from standing just outside a house (within the “eavesdrip”) and listening to their neighbors’ conversations. This became the common law misdemeanor of eavesdropping. Traditionally the crime involved not only listening, but also repeating in a mischievous way what one heard.

Tennessee officially abolished the common law crime of eavesdropping during the 19th Century. Other states appear to have let it die a natural death. Eavesdropping remains a technical legal term; its contemporary meaning is, roughly, “to listen, or attempt to listen, to private conversations without lawful authority.”

If the nosy neighbor looks as well as listens, then it’s even worse: he might be a Peeping Tom. A number of states have enacted Peeping Tom Statutes, which make it a crime to spy through another person’s window. The term Peeping Tom comes from the legend of Lady Godiva. As you will remember, Lady Godiva rode naked through the streets of Coventry, England to protest high taxes. She asked the townspeople not to look at her in the nude but one man – there’s always one – a tailor named Tom, just couldn’t keep his eyes shut. The tailor, who became known as Peeping Tom, was struck blind, or dead depending on the version, the moment he saw her.

Whether or not a warrant is required for all eavesdropping, the word warrant is one of the most ubiquitous terms in legal language. You might not think of it as a household word, and yet it’s used as a noun, a verb, and a term of art for public officials, military officers, and private corporations. The word seems always to be lurking around the corner – sort of like that guy under the eaves.

Warrant evolved from an Old French word (warant) meaning “protector or defender.” Around the 13th Century, the word began to develop its sense as “permission from an authority that protects one from blame.” Thus, a sheriff, armed with a search warrant could enter a home without fearing a lawsuit from the aggrieved homeowner.

The notion of a warrant as a grant of authority gives us such useful terms as arrest warrant, death warrant, warrant of commitment (that is, committing a person to custody), and even the relatively obscure interest warrant – a written order from a company to its bank directing the payment of interest to a bondholder. In the 17th Century, a confession of judgment was known as a “warrant of atturney.” Military lingo creates the warrant officer, who holds his rank by virtue of a written warrant rather than a commission. In Britain, companies that are exclusive suppliers to the royal family are granted the Royal Warrant.

Because they are such powerful tools, search warrants (and arrest warrants, for that matter) have been matters of debate for centuries. Until the middle of the 18th Century, English procedure allowed for General Warrants which gave law enforcement officials open-ended authority to search a citizen’s home in the mere hope of finding any incriminating evidence.

In the American colonies, British officials used a type of general warrant known as a Writ of Assistance to search for smuggled goods. The writs of assistance caused a firestorm in the colonies; indeed they are credited with being the first cause around which the founding fathers rallied.

The most succinct argument against writs of assistance, as voiced by the Massachusetts lawyer James Otis, was that a man’s house is his castle. This well-worn phrase, dating from 1567, first entered the law in 1644 when used by the English Attorney General Sir Edward Coke. By the 1760’s, the castle defense also called the castle doctrine was being referred to as a legal “privilege.” At common law, the doctrine is most often used to justify the use of force – even deadly force – against intruders.

When it came time to draft the Bill of Rights, the former colonists wanted no ambiguity on the matter of warrants. The Fourth Amendment stipulates that “no warrants shall issue, but upon probable cause, supported by oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized.”

Search warrants are issued ex parte and often in camera; or, if you’re not actually trying to impress your high school Latin teacher, without notice to the person to be searched and in private session with the judge. A valid warrant can authorize police to search for evidence of the commission of a crime as well as any loot allegedly taken in the crime; the latter is known as the fruits of the crime.

If, however, it turns out that the police search was not authorized by a valid warrant, then – in what appears to be a phrase designed to confound law students – everything seized by the police becomes the fruit of the poisonous tree. This doctrine, first used by Justice Felix Frankfurter in Nardone v. United States (1939), holds that any evidence that can be traced to an illegal search must be excluded from trial. It is not clear just how often the fruits of the crime have become the fruit of the poisonous tree but it is, at least, food for thought.

The humble warrant is also related to the foreboding quo warranto, which is the Latin name for a common law action used to challenge the authority of a government official or corporate board. The word warranto is not a genuine Latin word. English lawyers just made it up by adding the “o” to the end. This kind of reverse etymology – words usually go from Latin to English and not the other way – is known as “back formation” and it is really no better than the tendency of some people to add an “o” to the end of words to make them sound Italian or Spanish (“Rudolfo, please turn on the computer-o, I want to surf the web-o”).

The same French root of warrant also gave rise to the use of warrant in the sense of “to vouch for the quality” of something. Thus we have the noun warranty, which is basically a guaranty – not a surprise since warranty and guaranty are actually the same word. The Norman French dialect had the verb warantir (to warrant) whereas Parisian French, which avoided the letter “w,” used guarantir. Both words made their way into English along separate paths, spinning off such related pairs of words as ward/guard and warden/guardian.

In light of all that history, it comes as something of a disappointment that there is no such thing as a search guarrant. Perhaps there should be.

(This column first appeared in the May 2006 issue of New York Law Journal Magazine).

Thursday, February 2, 2006

Column: Lost in Translation

The Wall Street Journal recently reported a diplomatic kerfuffle between China and the United States that was caused by a single word – stakeholder.

It all started back in September, when Deputy Secretary of State Robert Zoellick delivered a major foreign policy address in which he urged China to become a “responsible stakeholder” in the international system.

The speech was meant to send a message to Beijing. The only problem was that the Chinese had no clue how to translate the word “stakeholder.” Any decent interpreter could tell you that a stake is a pointy stick, but why China should be holding a stake, and how do so responsibly, was lost on Chinese officials.

Ever since then, diplomats and scholars in the U.S. and China have been lobbing translations back and forth, each with a different spin on the S-word. The U.S. State Department translates “stakeholder” as a “participant with related interests.” The Chinese government, however, has yet to adopt an official translation.

Stakeholder is a legal term, but with several shades of meaning guaranteed to drive a translator up the wall. In its most traditional sense, a stakeholder is a person who holds money or property on behalf of two or more persons who are contesting the ownership of that property. An escrow agent, for example, would be a stakeholder if he or she is holding funds subject to a dispute. Escrow, by the way, comes from the Old French escroue, a roll of parchment that served as a deed.

Stakeholder entered the legal lexicon by way of the gambling dens of 16th Century England. Back then, wagers were placed on top of wooden stakes while the “stakeholder” supervised the betting. Long after the actual stakes disappeared from gambling, the word stake became a metaphor for the wager itself, as seen in such metaphors as “high stakes” and “raising the stakes.”

More recently, stakeholder has been broadened to include persons who – unlike escrow agents – find themselves involuntarily holding property subject to multiple adverse claims. A banker, for example, might discover that several parties are claiming the right to money on deposit at the bank. Rather than waiting for the lawsuits to come, the bank may file a “stakeholder” action and interplead the various claimants. Stakeholder Interpleader actions exist in various jurisdictions, including New York and in England.

In the meantime, the humble stake took on an entirely different meaning as a boundary marker for land surveying purposes. In the Old West, miners and land speculators would famously stake a claim – a usage that dates from 1857 – by driving wooden stakes into the ground. Those who made claims in this way might also be referred to as stakeholders.

But none of this was exactly what Mr. Zoellick was driving at. Rather, by referring to “participants with related interests” the U.S. diplomat was riffing on a much more recent use of stakeholder, this time in corporate law. In recent decades there has been a movement to grant legal rights to corporate stakeholders – meaning constituencies other than shareholders that are affected by a corporation’s activities. Stakeholders might include the corporation’s employees and customers, as well as the community in which the offices are located.

In 1990, the Pennsylvania legislature added a stakeholder provision to its anti-takeover law. This provision allows a company’s board of directors to consider the interests of stakeholders when voting on takeover proposals. Other states have followed and some politicians have even taken up “stakeholder capitalism” as a platform.

Although the use of the word stakeholder is new in this context, the underlying idea has been around for a long time. In the early days of the United States, corporate charters were exclusively granted by the state legislatures. The legislatures would sometimes require that the new corporation accept some duty on behalf of this-or-that constituency. In 1822, for example, a New Jersey bank charter required the bank to devote some of its money to aiding the fisheries at Amboy.

The corporate-law angle, unfortunately, only added to the confusion in Beijing. The director of China’s powerful Institute of International Strategic Studies confidently declared that stakeholder “means shareholder.” Nice try, but of course, the whole point of stakeholders is that they are not shareholders; that is, they have no ownership in the enterprise but they nonetheless have an interest in its performance.

As terms of corporate law, stocks and shares are as old as the hills. Stock comes from an Old English word (stocc) meaning “tree trunk.” At some point around the 15th Century, the word came to represent a money box or sum of money (perhaps because money, like a tree trunk, is a foundation for future growth). In the early 1600’s the word was borrowed for a new form of commercial endeavor: the joint stock company. Many of the first joint stock companies were formed to settle the New World. Thus, in 1607, Richard Hakluyt proposed

the raising of a PUBLIC STOCK to be employed for the peopling and discovering of such countries as may be found most convenient for the supply of those defects which this Realm of England most requires.

This might just have been the first recorded IPO in history.

But how to describe the ownership interest of the investors? Here again, Old English came to the rescue with a handy term – scearu – which refers to a cutting up, or division of the whole. Over time, scearu became the familiar share.

The corporation also began to take shape in the Elizabethan era. Initially, corporate charters were granted for things like universities and cities, not for commercial ventures. The City of London was an early corporation; New York City was chartered as a corporation during the colonial era (that the City’s top lawyer is still referred to as the “Corporation Counsel,” a title dating back to 1849.) The original purpose of the corporation was not to limit the liability of investors, but to allow collective entities to act as a single “bodie politique” in the words of John Cowell’s 1607 law dictionary.

New York’s incorporation statute of 1811 was the first to establish a streamlined method for setting up business corporations – it allowed five or more persons to form a corporation to manufacture such diverse items as “linens . . . anchors . . . hoop-iron and ironmongery.” The statute refers to corporations as a “body corporate and politic,” nicely echoing Cowell’s definition from 200 years earlier.

Small wonder the Chinese are befuddled by our legal terms. In fact, other cultures appear to have an equally hard time translating stakeholder. A brief review of online dictionaries shows Hungarian and Italian using the equivalent of “shareholder” while French and Spanish use terms that refer to an escrow agent. None of the dictionaries recognized the more recent sense of stakeholder.

Translating a legal term into another language is tough going. Imagine, then, translating a legal term into 20 different languages. That is the problem the European Union faces, and it is getting worse as yet more countries join the confederation. Every European regulation has to be translated – down to the subtle nuances – into languages as diverse as Czech, Latvian, and Swedish. The EU spends about $1.6 billion on translation services and yet, as of early 2005, it had a backlog of 60,000 pages of official documents waiting to be translated. The backlog is expected to reach 300,000 pages by the end of 2006.

EU officials have debated various solutions to the language problem, including limiting the entire bureaucracy to just one or two official languages: English, of course, has been suggested as a possibility, but so has Latin (talk about the revenge of the nerds), and even Esperanto, a language invented in 1887 by a Polish eye doctor. Unfortunately for Europe, there is no word in Esperanto for stakeholder.

(This column first appeared in the February 2006 issue of New York Law Journal Magazine).