Legal issues in the hobby

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Posted By: Bob Casmer

Joann,

I've got another question for you related to both Ebay and contract performance. What would be your recourse, if any, in the following case where you were the auction winner. Someone listed a series of auctions on Ebay and while they were ongoing, negotiated with various individuals to sell their entire lot of cards, including the ones he had listed for auction. You also communicated with the seller, via email, where he attempts to get you to also bid on the entire lot of his cards, all while the auctions are still running. When you decline to bid on his entire lot off Ebay, he tells you he's probably going to pull the auctions and sell the entire batch of cards off Ebay, as one lot, so don't bother bidding on the lots. Meanwhile, you had already bid on several of his auctions before any of these online conversations/emails occurred. Surprisingly, the various auctions end and you end up the high bidder on several of them. For whatever reason, the seller never ended the auctions. You assume he never followed through with selling the entire lot offline and contact him about payment for the items. He emails back in a very angry manner and tells you he sold everything offline as one lot, just like he said he was going to do. He further says he tried to go to Ebay and cancel the auctions but, THEY must have someone screwed up because they never cancelled them. He also claimed that he went out of town right after he attempted to cancel the auctions so that he never saw they were not cancelled. While the dollar amount of the cards in question was not extremely high, about $1,000, they did involve cards that you had been looking for over some time to complete sets off and in a couple cases, you had never seen a couple of these cards offered anywhere, shows, auctions or Ebay, in several years. Thus, though not considered 1 of 1 items, there were nonetheless, extremely difficult to obtain from elsewhere, in your experience.

Ebay claims that every bid is a legal, binding contract so does a seller in this case have an obligation to complete the sale to the high bidders who entered into the auction contracts or, does the seller have the ability to negate an Ebay auction by communicating to the bidders that they aren't going to complete the auction but, then fail to properly cancel it. Of course when questioned about the items, the seller claimed they were already sold and gone so he wouldn't send them. He also quit responding to emails about the situation. I'ld welcome your thoughts on this one. Thanks.
Bob

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Posted By: Ted Zanidakis

The let's go back to my "plan A" and talk about lawyers who are BB HOFer's.

......OR........

Let's have a legal debate why the current "genius lawyer" in BB didn't put his star player up to bat
with the bases-loaded in the 9th in the ALL STAR game ? ?

TED Z

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Posted By: barrysloate

Ted- we are baseball card collectors.

Joann will speak to a group that likely doesn't collect baseball cards. They are more interested in the legal issues of collecting. Big difference.

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Posted By: Todd Schultz

Barry, I believe Ted's topics would be of substantial interest to aspiring lawyers or talent agents, although other than factual distinctions, it looks like the same issue repackaged over time. The rights to protect and control the use of one's image seems germane and important to professions where these people may be working one day. I do not know the level of audience sophistication or what depth Joann would care to provide, but I don't think Ted's ideas are off base.

Bob, your question was directed to Joann, but I believe you would have a cause of action under the facts of your scenario, although the practical obstacles outlined by others may prove it unwise to proceed, and specific performance will not be available if the cards in fact are now gone from this seller.

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Posted By: Corey R. Shanus

Joann,

Interesting thread. Here's an issue I've been wondering about, especially with all the discussion about altered cards.

Suppose someone buys a graded slabbed card at an auction, sends it in to another grading service for a cross over and is told the card is altered. Let's say too, so as to simply the issue, that the evidence that the card is altered is legally irrebutable. What recourse, if any, does the buyer have against the auction house and/or the consignor? And, let's also assume that in the terms and conditions of sale the auction house stated not only that all sales are final but they will not be responsible for any misrepresentations/errors made by any reputable grading service.

At first glance it would seem the auction house has protected itself. However, given that in my view at least the auction house knew or reasonably should have known that some statistically significant percentage of graded slabbed cards will not withstand re-examination, do they have an additional disclosure obligation that goes beyond merely saying they will not be held accountable for grading company misrepresentations/inaccuracies? Will it be found that unless and until they have a disclosure along the lines of "Not only will we not be responsible for grading company misrepresentations/inaccuracies, we explicitly want to alert bidders that in our view some statistically significant percentage of graded slabbed cards are in fact altered and as a result have a market value (if the alteration is known) substantially less than its nonaltered value"? Or, can the auction house argue that bidders know or reasonably should know this and therefore no additional disclosure is required?

I raise this issue because I feel it is only a matter of time before people who have bought at auction for staggering sums graded slabbed cards find a number of the cards are altered, and will look for legal recourse wherever they can find it.

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Posted By: D.C. Markel

......I've got a good lawyer joke! Ah wait -- nevermind. The problem with lawyer jokes is that the lawyers don't think they are funny and everyone else doesn't think they are jokes.

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Posted By: P Spaeth

I don't see any liability unless you can prove the auction house/consignor actually knew or was reckless in not knowing the card in question was altered and that the opinion expressed by the grading service was wrong. Otherwise they are not selling a guarantee of authenticity just an opinion. EDITED TO ADD The mere fact that the auction house/consignor know that SOME cards are improperly slabbed would not create liability in my opinion, one because the same thing is known generally by buyers who assume that risk, and two because unless it was so obvious the auction/house consignor knew or was reckless in not knowing, it really says nothing about the particular card in question.

Now here is a question I find increasingly interesting: does a seller have an obligation to state if a card in a holder has been rejected by another company? Generally there is an obligation to disclose "material" facts. Why isn't that material?

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Posted By: Corey R. Shanus

In my view that info is material and therefore should be disclosed.

To go back to the question I raised, here's another twist. Why couldn't it be argued that (i) because there seems to be a consensus that the percentage of altered cards in graded slabs is 15% or higher (yes, I know some think it is much lower but at least from the posts on this board I think that number reflects general consensus), (ii) the economic loss from buying such a card could be staggering, and (iii) auction houses can cost effectively take reasonable measures to substantially lower the risk, that auction houses will be found to have acted recklessly unless and until they themselves conduct their own examination of such cards, which shall include examination under halogen and black lights?

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Posted By: Frank Wakefield

An area to discuss could be the legal issues involved in 21st century internet baseball card transactions.

Or, lawyers in the Hall of Fame.

Or both.

Or those 2 plus the legal issues in baseball... Delehanty's league jumping and contract breaking (read Sowell's book July 2, 1903, a GREAT baseball book) which explains why the leagues formed as they did, and then the National Agreement. And it get's you to the beginning of the Reserve Clause. The Players' Association. You can see why baseball "outed" Ed Reulbach (who'd be in the Hall but for the owners putting him out), Curt Flood's case, free agency. Some of those law students may well end up in sports law, or being an agent. An lawyer friend of mine who has been an agent for a few players, an umpire, a few drivers, suggested I read License to Deal, about baseball agents. He says the players flock to whoever tells the biggest lies....

I'd stick a bit of it all in there, but not too much of any of it.

Might even add a minute about why the area behind home plate is screened off... the real reason is because back there a patron is safe, if we sit anywhere else we assume the risk of thrown or batted balls, players falling into the stands, or a bat or part of it. If a patron doesn't want to take that risk, he should buy a seat in the safe, screened area. There are turn of the century cases in the old reports about that... The clubs provide a screened area to avoid liability, that is the real reason.

Frank.

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Posted By: barrysloate

Corey- if I had to assume legal liability on 15% of the slabbed cards I sell, I would go out of business. It would be early retirement for me.

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Posted By: P Spaeth

I tend to agree with you on the first point from a strictly legal point of view ("materiality" is defined as something a reasonable buyer would consider important to the total mix of information and the fact that a major grading service had rejected a card would seem to pass that definition) but I can't see it ever happening, can you? A catalog description stating FYI this PSA 8 was rejected by SGC, or vice versa? No chance.

As to your second point, take it to its logical extreme. Why impose such a duty of independent verification only on an auction house? Why not every seller, or at least every seller who you could prove is reasonably knowledgeable about graded cards? It isn't crazy, to be sure, but I think unless and until the whole concept of third party grading is completely discredited, I can't see a tribunal imposing that duty of independent inspection -- otherwise it would mean a seller has essentially no right to rely on the industry standard third-party verification. So I think, just my opinion of course, that unless the visible evidence in the case of a particular card was such that the seller knew it was altered, or set off red flags such that it was reckless not to look into it further, you would not see liability imposed in the case of a subsequent finding by another grading service that a mistake had been made. Now whether in those circumstances the grading service itself could be liable of course leads back to the Wagner hypothetical discussed earlier. EDITED TO CORRECT TYPOS

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Posted By: Corey R. Shanus

My questions don't assume you would have to have legal liability. Rather they raise the issue of what disclosures/actions, if any, you might have to take to avoid it.

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Posted By: P Spaeth

Where will you retire?

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Posted By: P Spaeth

I am not sure any boilerplate disclosure would negate liability for actual fraud, that is knowingly selling an altered card.

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Posted By: Bob Casmer

Todd,

I agree with you as to the inability to get specific performance in my case. What I thought might be a more interesting question for Joann to raise would be the involvement of Ebay and their rules. The seller clearly enters into a "contract" with the bidders on his auctions. In subsequent emails to the bidders he informs them of his intentions to terminate the auctions and sell the items elsewhere. (He did not make this communication through Ebay channels either.) He then fails to properly terminate the auctions and ends up with various people thinking they won the auctions but, according to the seller, they didn't. Had the buyers just dealt directly with the seller and not through an Ebay auction, I agree he terminated the auctions and there was no binding deals. What happens though when you insert Ebay into the equation as a third-party go between? Can he legally terminate the auction without properly doing so through Ebay? If he can, then what good is Ebay's claim that their auctions are binding contracts? Does this somehow make Ebay liable to the buyers if they can't enforce what Ebay all along claims is a valid contract?

And finally, assume one of the auction winners decides to take the seller to small claims court. As you suggested, if the seller doesn't have the item anymore you can't get specific performance. Furthermore, assume the buyer never paid the seller when it was found out the items were already sold to someone else. Now the buyer isn't out any money so he/she doesn't need to sue to recover their funds either. So what would you be able to take the seller to court for? If nothing, what good is Ebay's claim that these auctions are binding contracts?

Bob

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Posted By: barrysloate

Brooklyn

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Posted By: Corey R. Shanus

First, I would argue that in regard to cards slabbed in the early days before the grading companies had the equipment and people with the experience/expertise to detect alterations, the grading industry has been sufficiently discredited to make the risk of alteration sufficiently great that it would be reckless to sell such a card without either current re-examination or very explicit disclosure.

Second, I would also argue that people reasonably hold a national auction house to a higher standard than, say, a 15 year-old kid selling on eBay, so therefore there would be different legal standards for the two based on what a reasonably prudent buyer would reasonably expect. For example, if Sotheby's was saying that a painting was a Renoir, a buyer would reasonably assume they wouldn't say it unless they took all reasonable steps to ascertain that. On the other hand, if I saw a "Renoir" in an eBay auction that some guy said he found in his grandfather's attic and that he knew it was Renoir because it looked like his style based on his high school art class chapter on Renoir, I don't think a buyer's reliance on that information would be deemed to have been reasonable.

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Posted By: P Spaeth

Corey why do you think cards in the "early" days are less likely to be properly authenticated? What advances in technology have there been since 1992 vis a vis detecting trimming, recoloring, rebuilt corners, etc.? EDITED TO ADD As far as people go, Mike Baker was not at PSA at its very inception but joined pretty soon thereafter, and many folks believe him to be the best there is in terms of people working for the major grading companies.

I agree as to the 15 year old kid, I believe in my post I stated I saw no real difference between imposing a duty of independent inspection on the auction house and any reasonably sophisticated seller (such as folks here, for example).

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Posted By: barrysloate

Corey- what if Sotheby's had a full plate tintype of a baseball player and they claimed, for example, that it was Jim Creighton. What would be their liability in that case?

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Posted By: Corey R. Shanus

Peter,

Fair point in regard to the grading companies, though one could argue that the experience component of detecting alterations wasn't around in grading's early years; in addition, possibly the companies themselves have better equipment today than they did then. But the thrust of your point, at least as regards PSA (assuming what I read is correct that they have inexperienced graders, perhaps working without adequate equipment) is correct; therefore I would argue that it is reckless to sell any slabbed graded (PSA) card without current re-examination or explicit disclosure, or at least those cards that show a high percentage of alteration (e.g., T206's (but not, say, 1997 Upper Deck)).

In regard to the seller, sorry, I did miss your qualification that the individual seller was to be experienced. Two points. First, that fact would have to have been known to the buyer before he/she bought the card. Second, even if it were known, even experienced sellers wouldn't be reasonably expected to have the equipment needed to detect alterations, as well as the experience in using it, not to mention the access to information and outside expert corroboration, that a national auction house would. Therefore, I continue to believe even experienced sellers would be held to a different standard than a national auction house.

EDITED To add that even with Mike Baker on the PSA payroll, inasmuch as there have been posts saying that experienced card doctorers submit their cards to PSA when they know the experienced graders are away, I still think PSA has a ways to go before people have confidence that all PSA submissions undergo "state-of-the art" examination.

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Posted By: Corey R. Shanus

Barry,

Reread our article. I think it's pretty clear that I believe the buyer would have an auction for fraud.

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Posted By: P Spaeth

Corey these are all good points but the essence of what you are saying (simplifying slightly of course) is that, for vintage cards, third party authentication is meaningless. Perhaps that is so, and certainly there are adherents of that view on this board and elsewhere, but I doubt that at this point -- given the general acceptance of third party grading -- a tribunal would agree with that. If third party grading is meaningful, I can't see a tribunal imposing a general duty to independently examine a card on an auction house -- not to mention of course the practical difficulties of examining edges inside a slab etc. etc.

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Posted By: Kevin Saucier

"But the thrust of your point, at least as regards PSA (assuming what I read is correct that they have inexperienced graders, perhaps working without adequate equipment) is correct"



Can anyone find that article written by Orlando not so long ago where he states the common misconceptions about grading (no lights, loupe, etc.)



Kevin

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Posted By: Corey R. Shanus

Peter,

Perhaps there's a middle ground a bit less harsh than saying third party authentication is meaningless (which by the way is not my position)-- that perhaps it's not the end-of-all-ends some make it out to be and therefore a bit more explicit disclosure about the alterations risk (as opposed to the risk that, say, an 8 is really a 7) is a standard we can impose on an auction house. Such a disclosure would be merely a warning to give grading its proper balance, and I'm not sure such a warning would be interpreted by a tribunal to be equivalent to saying third party authentication is meaningless.

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Posted By: P Spaeth

Disclosure is generally a good thing, but how meaningful would it be, really, to put in the fine print somewhere (or in a letter for that matter as REA did) a disclosure that third party authentication is no guarantee of authenticity and that the slabbed cards you bid on may in fact be altered? Does that really give anyone meaningful information? I tend to think not.

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Posted By: P Spaeth

As to your other point, if the auction house is not entitled to rely on the third-party opinion but instead is held to a duty to independently authenticate, then at least in this context how "meaningful" is the third-party opinion? It seems to me, because it is difficult to articulate partial duties, one must either take the position that the third-party opinion absolves the auction house of duties except in the case of red flags; or the auction house has a duty to independently authenticate certain types of material, in which case the third-party opinion has no legal effect.

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Posted By: Corey R. Shanus

We might agree to disagree on this one. I think if a guy is prepared to fork over $75k for a PSA 9 T206 Johnson portrait, then happens to read a warning that there is a not insignificant possibility the card is altered, he might think twice. Certainly no harm in having the disclosure, right? In fact, seems to me, that any resistance by an auction house to having it might be indicative of their concern that people might actually notice it and be influenced by it, thereby lowering the profitability of the auction!

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Posted By: barrysloate

The hobby has evolved to the point of near total dependence on the decisions of the grading companies. That's why roughly 90-95% of the cards that go to auction are graded, and that number is likely to increase.

Therefore, my opinion is if one of the big three (or four) slabs a card as authentic, and it turns out not to be, then they are the ones who have to make restitution. If it were the responsibility of the auction house, and especially a small one like my own, I could easily be put out of business if the most expensive card I sold turned out to be altered and it was simply impossible for me to detect (and I had already paid my consignor).

I would be forced to turn back consignments left and right out of fear of what my legal exposure might be. If the hobby wants to live with grading, they have to die with grading. That's my position.

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Posted By: P Spaeth

Corey, no harm in the disclosure, I agree with you there. I just think most people buy with that general knowledge and that at that level of generality the disclosure doesn't say much. Maybe I overestimate buyers' sophistication.

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Posted By: Kevin Saucier

"I could easily be put out of business if the most expensive card I sold turned out to be altered"



Curious, would your busines do better if you made an effort to rule out alterations? Isn't this what REA does?

Kevin

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Posted By: Corey R. Shanus

Peter,

As to your last post, I'm not saying an auction house to absolve itself of liability has a duty to independently corroborate; I believe I've also said explicit disclosure would be an adequate duty.

I would also argue that statistics can in and of itself establish the necessary red flag to necessitate the disclosure duty (i.e., the belief that a statistically significant percentage of slabbed vintage cards are altered as a matter of law could establish the red flag).

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Posted By: barrysloate

Yes Kevin, absolutely, but what if I simply couldn't detect it? Some of these alterations, as you know, are incredibly sophisticated. And that is exactly why I pay that $100 fee to the graders- because they are supposed to have the skills that I don't.

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Posted By: Kevin Saucier

"And that is exactly why I pay that $100 fee to the graders"



ouch!

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Posted By: P Spaeth

Corey -- establishing a duty based on a BELIEF that a signficant percentage of graded cards are bad? Seems awful speculative to me. Not to mention the evidentiary issues in proving the existence of such a "belief" or "perception."

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Posted By: barrysloate

Kevin- I hear you, but I am going to put you to task:

What do you think would be the proper resolution for this situation? If I can't trust the graders, and I don't have the skills myself, should I turn down every card consigned to me above VG or worth more than $500, so that my risk is cut to virtually zero?

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Posted By: JimCrandell

My strategy from now on is that any card over $1,000 I buy they have to send it to Kevin Saucier who will then give me his opinion. If I choose not to buy the card based on what Kevin tells me, I will pay Kevin's fee and the cost of postage/insurance.

I haven't told Kevin this yet but based on prior conversations he has volunteered to look at my cards anytime so I assume this is fine.

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Posted By: barrysloate

Jim- I think that is great. But if he deems a graded card altered, who do you go to for restitution?

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Posted By: Kevin Saucier

"Kevin- I hear you, but I am going to put you to task:

What do you think would be the proper resolution for this situation? If I can't trust the graders, and I don't have the skills myself, should I turn down every card consigned to me above VG or worth more than $500, so that my risk is cut to virtually zero?"




Sure you can trust the graders, I think they get it right most of the time. I didn't know that if you spent $100 per card it was looked at closer than if you spent $10. Doesn't seem right. I thought the $100 just gave it a faster turn around time. Am I wrong? Trying to get a better understanding is all.

As an auction house, I would assume you wouldn't turn down any card that was sellable.


Kevin Saucier

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Posted By: D. C. Markel

"'But the thrust of your point, at least as regards PSA (assuming what I read is correct that they have inexperienced graders, perhaps working without adequate equipment) is correct"

Can anyone find that article written by Orlando not so long ago where he states the common misconceptions about grading (no lights, loupe, etc.)'"


I have the article. It's on page 14 of the June 2007 SMR. I have seen this article misquoted several times on various message boards. In short, the article states that graders don't measure EVERY card and don't look at EVERY card under magnification. It clearly states that they use those tools, but not on EVERY card. Do you need to "loup" a modern card with a crease or dinged corner or measure a card that appears to have wide borders for that issue? Of course not.

The article also debunks the myth that evidence of trimming is detected by a simple measurement with a ruler.

Again, people read a lot more into this article than what was written and concluded that PSA graders don't use loups nor measurement devices, which is false.

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Posted By: JimCrandell

Barry,

As I no longer buy at auctions(at least expensive cards), I would make my purchase contingent upon Kevin's seal of approval. If a seller refused my terms, that would tell me a lot about the card to begin with.

With collectors increasingly nervous about shelling out big money for a high end card, this would give me an edge in the marketplace.

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Posted By: Kevin Saucier

"Do you need to "loup" a modern card with a crease or dinged corner or measure a card that appears to have wide borders for that issue?"



IMO...yes.

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Posted By: Corey R. Shanus

Peter,

You tell me on this one. Can a duty of mere disclosure be established by it being evidentiarly established that the baseball card collecting universe recognizes that the percentage of slabbed graded altered cards is statistically significant, even though there is no known legally recognizable study that quantifies a precise percentage?

EDITED for spelling

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Posted By: barrysloate

Kevin- I've always wondered the same thing. You would assume that for $100 your card would get a much more thorough look, even though part of that money goes to fast turnaround and the fact it is valued in excess of 5K.

And you are correct, I never turn down valuable cards that are already graded.

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Posted By: Kevin Saucier

"Kevin- I've always wondered the same thing. You would assume that for $100 your card would get a much more thorough look"



Wonder if anyone knows the answer to this. If they all get the same look regardless of price, maybe this can save you some money.

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Posted By: Peter Spaeth

Corey, we are probably in uncharted legal waters here, but if I were a court I sure would be reluctant to do that, and that is assuming you could prove this "perception" which by the way is hardly "universal" I would think. And I am not sure how you would prove this "perception" anyhow consistent with the rules of evidence. Is it a proper subject of expert testimony? Possibly but possibly not. So how else would you prove it, print out a series of Net 54 threads and try to offer them into evidence not for the truth of the matter asserted (which would be inadmissible hearsay) but for the state of mind of the posters? And how far would that go really towards proving a "universal" "perception"? Have some collectors testify? As to what, their own perception or their perception of the general perception? I am not trying to be a wiseass here but it isn't as easy as you think to "prove" things sometimes.

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Posted By: Kevin Saucier

"As I no longer buy at auctions(at least expensive cards), I would make my purchase contingent upon Kevin's seal of approval."


I better go buy seal .

Jim, as I tell everyone...I try my very best to give an accurate opinion based on objective findings but don't claim to be an expert. I have no loyalty to any company and will tell it like it is based on what I know, for better or worse. Sometimes an opinion can't be made at all for one reason or another. On a good note, I do measure, use loups and various lights on all cards. Many thanks for your support.


Kevin

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Posted By: Corey R. Shanus

Peter,

Not saying it is easy though I can say this. Auction houses are making considerable sums from the sales of slabbed graded cards. In my view a statistically significant percentage of them are altered, and I hardly feel I am alone in this view. In time the s**t will hit the fan and some buyers will discover that what they own are worth substantially less than they paid. They will then look to recoup their losses. If I was running an auction house, I would be hiring legal counsel to advise me whether I should be making additional disclosure and/or undertaking additional measures to safeguard my company from potential exposure. Bottom line -- I am far from persuaded current disclosures/actions (or lack thereof) will provide the necessary legal safeguard. Perhaps I am wrong. I feel reasonably confident, though, one way or the other we will eventually find out.

EDITED to add my name

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Posted By: Peter Spaeth

Corey I agree it will hit the fan eventually. No question. And I would also counsel making as many disclosures as possible to protect myself, particularly as I don't think they would deter sales one iota.

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Posted By: leon

IS that SGC will look at a higher value card with more scrutiny than a lower valued one....I could be wrong but it seems like common sense....They are getting 5x-10x the fee and have more liability....If I were them I would be more careful.

As for legal issues I would go into them but then I would have to learn about them first. I think Joann has gotten her monies worth in this thread....

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Posted By: JimCrandell

Corey,

If you own vintage high grade cards chances are that you are able to sell them for substantially more than you paid for them--the returns on buying high grade sports cards have been spectacular in the last decade.

Any correction in prices will likely be minimal relative to how dramatically they have risen.

Part of this I think is the envy that some holders of ungraded vintage sportscards have of collectors who have bought a lot of graded cards. They are frustrated that they missed the boom in graded sportscard values and are wishing them down(like our friend Joe).

Tough question for many to answer is how could you have been right there in the middle of it and not benefitted financially at all. Its like working for Google and never buying any stock.