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Posted By: <b>JimCrandell</b><p>Peter,<br /><br />Doug Allen has admitted to taking creases out of cards to prepare them for grading.<br />That in my book is plain and simple card alteration...and it is unacceptable.<br /><br />I think my new friend Dan Bretta said recently that all this stuff about Mastro won't matter because at the end of the day collectors will still buy if they see a card they need. Well I for one won't--and I know others who have told me they won't as well.<br /><br />Jim

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Posted By: <b>leon</b><p>Just for a little edification I did personally ask Doug about his policy, for his company, as it pertained to removing wrinkles or creases. I know I have changed my view on them as it's too gray of an area. He told me that it wasn't worth the grief and that he no longer has his staff remove wrinkles or creases from cards. This was right before he got up and spoke at the Net54 Dinner at this last National. I sort of wanted to know since I figured the question would be asked. It wasn't.....Whether you bid in Mastro Auctions or not is obviously up to you. I know I put in extra bids last night just for general principle. Somehow I still don't think I will get any steals.....If you ask why Doug wouldn't come onto the forum again I think the answer is obvious. I am sure anything I say here will be taken to task by Jay B...but I know it's coming so what the heck...Again, just wanted to shed some light on that one fact...I will try to keep my nose out of these threads for the most part...best regards<br /><br />edited grammar...but it still ain't so good..

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Posted By: <b>P Spaeth</b><p>My recollection also was that Doug said he would not do it any more after it was pointed out PSA officially considers that alteration. Of course if it can't be detected there is no way to know he isn't still doing it, but I believe he did say the policy had changed.

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Posted By: <b>P Spaeth</b><p>So Jay your theory is that Mastro tried to commit intentional fraud with respect to the North Carolina jersey?

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Posted By: <b>barrysloate</b><p>Jim- in January Doug was your invited guest when we all met in your office. It's about six months later and Mastro Auctions has removed your name from their mailing list.<br /><br />That's a precipitous fall in a short period of time.

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Posted By: <b>jay behrens</b><p>Peter, I have no idea if the Mastro blunder was intentional or not. My point is that this sort thing shouldn't happen to one of oldest auction houses in the hobby. If it was an honest mistake by Mastro, it doesn't speak well to their competence to be selling this sort of stuff. If it was deliberate, then we are all in trouble.<br /><br />Jay<br><br>The richest person is not the one who has the most, but the one who needs the least.

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Posted By: <b>Jeff Lichtman</b><p>Will Mastro continue to sell game used items authenticated by the consignors without disclosing this relationship?

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Posted By: <b>Tom Boblitt</b><p>I agree that it's good you don't bid if you state you have concerns and I think that's admirable. <br /><br />BUT.....do any of the guys or other dealers you buy from buy from Mastro? If so, you would be buying PSA stuff from them. I'd bet that MANY of the people you might otherwise buy from buy from Mastro. Kinda hard not to I guess if you're in the business--especially for high graded cards.

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Posted By: <b>JimCrandell</b><p>Leon,<br /><br />I asked him a number of times to clarify his remarks about what he would do and would not do to cards. He refused to.<br /><br />Barry--sometimes you gotta take a stand for whats right.<br /><br />Jim

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Posted By: <b>JimCrandell</b><p>Tom,<br /><br />Mastro is not the only dealer I won't buy from. <br /><br />I pretty much would not buy any expensive(over $5,000 graded card) unless it was looked at by Kevin or perhaps SGC.<br /><br />I gave a lot of graders the chance to elaborate on their policies on Net 54--most refused to do so--people can draw their own conclusions--mine were negative.<br /><br />Jim

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Posted By: <b>Gilbert Maines</b><p>We all make mistakes. I know that I sure do.<br />But some things I do not make mistakes on because the subject is important. some of these subjects include driving at 65 mph, others are work related, some are payment related (such as taxes), and others are personal (I again remembered our wedding anniversary - whew).<br /><br />At this stage of the game, I find it difficult to believe that Mastro has holes in their communication network. Authentication is a key element in what they do. It is extremely high on the "must not err" list. I find it very, very difficult to accept that this error is possible.<br /><br />Its like Ford saying "what? you wanted tires that don't explode? Nobody specified that". Well ... going foward we will be sure to include that value added feature. Spare me the cliches, neither of us were born yesterday.

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Posted By: <b>PS</b><p>Jay I don't disagree with you that there is no excuse for that kind of carelessness, I am just hard pressed to believe there is any motive to have tried to defraud anyone.

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Posted By: <b>peter chao</b><p>I agree with you. Mastro probably has dozens of items in their warehouse that are more valuable, why would they want to defraud somebody on a Michael Jordan shirt? All I can say is that they have a problem with their quality control. That being said, they need to get their act together or their customers will go elsewhere.<br /><br />Peter C.

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Posted By: <b>Dan Bretta</b><p>Where are the customers going to go Peter? I still think Mastro can continue to make "mistakes" like this and get away with it because of the nature of the market. They have it and nobody else does which means people for the most part are going to continue to do business with them. I like to think of myself as principled, but if they come up with a rare Nebraska related baseball item that I "need" I'm probably going to bid on it.<br /><br />At the moment I tend to believe that this was not a mistake...I'm not saying that they knew it wasn't Jordan's jersey, but I think they had a good amount of reasonable doubt and still put it up for auction.

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Posted By: <b>jay behrens</b><p>Pete, money is a great motivating force and makes people do things they would otherwise not do. Also, any game used Jordan item is something of a coup and a highlight in any auction regardless how much or how little it is worth. If they can cover up a questionable report and get the item sold for maximum $$$ without getting caught, then they've just put a nice chunk of coin in their pocket. If they get caught, as here, they say oops, come up with a plausible deniability story and void the sale to try and make themselves look like good guys. <br /><br />Jay<br><br>The richest person is not the one who has the most, but the one who needs the least.

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Posted By: <b>dan mckee</b><p>In Leon's defense, when I posted the problem I had about the T207s having paperloss and that the backs were not pictured and no paperloss mentioned, Leon allowed the post to stay up when it technically violated the rules. I like and agree with Jeff most of the time, but Leon will also take the defensive against Mastronet or anyone else when he feels they are wrong or negligent. Doug Allen is a true class act and has an excellent staff. I am game worn and game used ignorant but agree that Mastronet acted as best they could here. But then again, I have been shredded on here before! Dan.

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Posted By: <b>Chris</b><p>Let's assume the Jordan jersey was an honest mistake. Why did they let the Darrell Griffith jersey run when it was obvious it wasn't real?

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Posted By: <b>cmoking</b><p>Dan McKee wrote: "In Leon's defense, when I posted the problem I had about the T207s having paperloss and that the backs were not pictured and no paperloss mentioned, Leon allowed the post to stay up when it technically violated the rules."<br /><br />I vaguely remember that thread, but I don't remember that you technically violated the rules. Which rule did you technically violate?

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Posted By: <b>Corey R. Shanus</b><p>While the purpose of this post is not to defend Mastro's actions, I'm trying to see the distinction between their actions here and the actions of shopping a card around among the different grading companies and failing to disclose if the card had ever been rejected as altered (or if not altered been given a lower grade). My understanding is that this kind of "card shopping without disclosure" is routinely done by the great majority of auction houses, and I dare say with the full blessing of their consignors. I'm also struggling to see the ethical distinction between what happened with the Jordan shirt and the actions of collectors/dealers/auction houses to consign or sell slabbed cards from certain issues (e.g., T206s) that have not been re-examined, knowing full well that a number of the cards are altered and will be acquired by good faith purchasers who will not be getting what they paid for. Just seems to me that there is a lot of hypocrisy at play here and maybe the best thing to come from this incident is to highlight the need to impose a duty on all auction houses and other sellers to disclose all opinions rendered by reputable grading/certification companies regarding for auction/sale items. Perhaps in the alternative the grading companies could compile a data bank of rejected cards, which would show an image of the card, the date of submission, the basis for rejection and (assuming any privacy issues can be overcome) by whom the card was submitted.

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Posted By: <b>PS</b><p>A seller has a duty to disclose all "material" facts. A material fact is one that, in layman's terms, significantly affects the total mix of information available. At first blush, one would think in certain cases grading history is obviously material. For example, a PSA 8 Ruth card that had been previously rejected twice by PSA itself and once by SGC for trimming. Then again, I am not sure buyers really care, as long as the card eventually is slabbed. One could cynically take the point of view that buyers know the games that are played and the fact that (except for Corey) no one seems to be demanding to know grading history shows they don't care.

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Posted By: <b>Jim Crandell</b><p>Peter,<br /><br />I care. I would like to know grading history and believe the seller if he has this knowledge has an obligation to disclose it.<br /><br />Jim

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Posted By: <b>Dan Bretta</b><p>I for one think there is a huge difference in shopping around a baseball card which everyone can at least agree the card is a card of the person pictured, and shopping around a jersey which belonged to a specific person when one company says they don't believe the jersey belonged to that specific person. It's like sending a Heinie Wagner card to PSA and having them certify it as a Honus Wagner card. You must also consider that a prominent forum of experts have already provided evidence that the jersey was not what it was claimed to be, and then be prepared to believe that nobody at Mastro reads that forum. Of course after the debacle with the football helmet in April maybe Mastro doesn't read that forum?

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Posted By: <b>PS</b><p>Jim, I am curious, before you buy or bid on a card do you ask?

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Posted By: <b>Dave</b><p> If Mastro acted "as best as they could" in this situation....that's just plain pathetic. why can't people just call a spade a spade anymore ? Mastro auctions has been exposed again....this is so transparent. <br /><br />as far as autographed and game used stuff goes. My advice is to not spend a load of money on any of it unless you have 1st hand knowledge of the items history. My brother will not even buy PSA DNA stuff anymore , and that's a whole other thread of horror stories !<br />

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Posted By: <b>PS</b><p>Dan I understand your distinction but I am not sure if it holds up. Why isn't an opinion that a card is trimmed (which, if true, would render most cards relatively worthless or certainly worth only a fraction of their value if they were not trimmed) just as relevant as an opinion that there isn't enough evidence to authenticate a Babe Ruth autograph or Michael Jordan jersey?

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Posted By: <b>Jim Crandell</b><p>Peter,<br /><br />For any card of significant value I do.<br /><br />Jim

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Posted By: <b>PS</b><p>So long as a seller honestly answers inquiries from people like Jim to whom grading history matters, and I cannot think of a context where there is not opportunity for such communication, I am not sure there is an affirmative obligation to disclose it. I guess one possible response might be that all buyers are not as sophisticated as Jim and would not know of the issue and therefore would not know to ask. I would think most people buying expensive cards DO know, but I am just speculating.

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Posted By: <b>peter chao</b><p>I know you guys demand high standards. However, I will tell you what the California Evidence Code requires and you can say whatever you want. The California Evidence Code does not require disclosure. For instance if you were trying to prove your case and you got 3 medical reports, two medical reports were favorable and the third wasn't. You are not required to produce the third report. However, if you are asked a direct question, you are required to answer that you obtained a third opinion.<br /><br />Peter C.

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Posted By: <b>PS</b><p>Peter I am confused what relevance that has to whether a fact is "material" for purposes of a fraud claim?

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Posted By: <b>peter chao</b><p>All I'm saying is that in California, it would not be material because you are not legally required to produce evidence of a contrary opinion.<br /><br />Peter C.

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Posted By: <b>PS</b><p>I am not sure I follow, the contexts seem unrelated to me, but if you have the Code provision handy maybe the fog would lift.

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Posted By: <b>peter chao</b><p>Since this auction wasn't conducted in California, it really doesn't matter. I'm suggesting that perhaps we are asking for too much from our auctioneers.<br /><br />Peter C.

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Posted By: <b>Dave</b><p>Peter or other lawyers on the board....I'm just curious as to how courts of law view baseball cards. I've always been under the impression that no matter what you pay for a card or piece of memorabilia that it really has only an intrinsic value.

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Posted By: <b>JK</b><p>Peter,<br /><br />I believe that in California there is a specific state statute regarding the sale of collectibles such as cards. Adam W. has posted it several times and I believe that it does specifically require disclosure.

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Posted By: <b>JK</b><p>Dave,<br /><br />If you are suggesting that a baseball card, in the eyes of the court, can only be worth a few cents because its only cardboard, I think that is incorrect.

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Posted By: <b>Corey R.Shanus</b><p>Interesting perspective that perhaps (at least at the expensive level) buyers know the games that are being played and really don't care about grading history as long as the card ends up in a graded slab. I would think if that is indeed the case then auction houses would be bending over backwards to disclose grading history. After all, what would be the harm, not to mention it would forestall any claim by a disgruntled buyer that all material facts were not disclosed. Or, to put it another way, if your perspective is true either we are dealing with auction houses that have not been legally advised or by their actions of nondisclosure feel that buyers would in fact care about grading history.<br /><br />I can't wait to see the first case of some buyer trying to cross over a six-figure card only to find out that the company he just sent it to had rejected the card as altered a few years prior. Word then gets out what happened and then, presto, when the guy tries to sell it it is regarded as tainted goods and he takes a whooping loss. He then sues the action house for failure to disclose a material fact (i.e., the card's grading history). I believe a case such as this is destined to show up, and boy will I love to read the auction house's brief explaining why the card's grading history was not material information.

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Posted By: <b>barrysloate</b><p>And I am curious to see how the grading services respond when they discover that cards they graded years ago, and are worth five-figures today, have been deemed altered. How will the unlucky owner of the altered card be compensated? This hasn't happened yet to my knowledge but it will become an issue in the future.

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Posted By: <b>Cobby33</b><p>Peter C-<br /><br />Your scenario is not necessarily governed by the Evidence Code. In the course of discovery, if you are asked to produce ALL information pertaining to a certain category of documents/information, you are legally AND ethically bound to produce ALL of them.<br /><br />With regard to duties of discloure, both common law and statutes require full discloure and the failure to fully disclose with the intent to deceive, is actionable, both civilly and criminally.

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Posted By: <b>Pas</b><p>Your argument seems to proceed from the premise that avoiding legal liability is what drives auction houses. To summarize: 1) It is in their interest to disclose as much as possible that people don't care about; because that will minimize their chances of being sued. 2) Ergo, if they aren't disclosing grading history, it can only be because people DO care about it. <br /><br />I don't think that sort of proof by inductive reasoning works here. I prefer the logic that if this really mattered to bidders, they would be pressuring auction houses to disclose it, and competition would require them to do so. Therefore, the fact that auction houses are not disclosing it must mean that bidders don't care, in general. <br /><br />EDITED TO ADD There may indeed be such a lawsuit, but how would the plaintiff respond if cross-examined as to why he didn't simply inquire as to grading history if it mattered to him? Surely, given the industry practice not to disclose (I have NEVER seen such a disclosure) the buyer could not reasonably assume there was no prior history.

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Posted By: <b>Todd Evans</b><p>I am not a Mastro apologist nor am I a Mastro hater, but I can tell you the situation with the Jordan shooting shirt is not right. I have had been a customer and consignor with Mastros for 8 or 9 years now and I have also had an experience with them knowingly selling a bad item.<br /><br />I was the one who called and questioned Mastros on the Darrell Griffith University of Louisville game used jersey" that was in the October of 2006 auction. When I saw the auction I called up and spoke to Brian Marren and told him why I thought this item was no good and that I wanted to see documentation on what Lou Lampson used to authenticate this particular jersey. I also provided him with pictures detailing that Griffith did not wear this type of jersey while playing at U of L. I was told that he would get with Lou and pass on this info to him. A couple of days later which was well before the auction was supposed to end I inquired about the findings and was told that Lou is staying with his opinion that the jersey was good and that he would not pull the auction. I was also told that they couldn't pull the jersey as it could cause legalality issues. I then contacted a person within the sports department at U of L and provided her with pictures of the jersey. It just so happened that the particular day I sent this Darrell Griffith was in her office where she showed him the pictures and he told her that they did'nt wear mesh jerseys while he played there. In fact they did not begin wearing mesh jerseys until 2-3 years later well after his #35 was retired by the university. This info and email from the university was passed on to Mastros and Lou Lampson but the jersey was still sold in that auction. When an auction house wants to side with a person that has experienced questionable abilities to properly document authentic jerseys to the person that actually supposedly wore the item then I have a big problem with it.<br /><br />Take this latest information about the Jordan jersey for what it's worth but I highly question what really happened. I can also tell you that alot of the questionable things that has happened concerning Mastros has caught the attention of the FBI as I was contacted just this week by an agent from Chicago concerning the Griffith jersey. Hopefully Mastros will take greater steps in the future to authenticate ALL items before someone pays alot of money for something worthless.<br /><br />Todd Evans<br /><br /><br />

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Posted By: <b>Jeff D.</b><p>I'm not sure what "it" refers to in your statement "...the fact that auction houses are not disclosing it," but there ARE auction houses that do in fact disclose cards as possibly trimmed and recolored. I've seen REA do it. Here are just two such examples:<br /><br /><a href="http://s210975194.onlinehome.us/auction/2006/167.html" target="_new" rel="nofollow">http://s210975194.onlinehome.us/auction/2006/167.html</a><br /><br /><a href="http://s210975194.onlinehome.us/auction/2005/208.html" target="_new" rel="nofollow">http://s210975194.onlinehome.us/auction/2005/208.html</a><br /><br /><br />In this description, the cards returned by SGC and not slabbed are disclosed in the "Four Ungraded:" section about halfway down.<br /><br /><a href="http://s210975194.onlinehome.us/auction/2006/90.html" target="_new" rel="nofollow">http://s210975194.onlinehome.us/auction/2006/90.html</a><br /><br />I would be surprised to hear anyone say that they are not interested in knowing if a raw lot they are bidding on has ever been returned because of some kind of alteration.

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Posted By: <b>Corey R. Shanus</b><p>What drives any rationale profit-maximizing auction house is the desire to maximize future net income stream. That net income stream is impacted both by money going in (consignment fees and buyers premiums) and money going out (a component of which are future liabilities). So of course avoiding future legal liability should be part of current considerations. If there is to be no reduction to the inflowing income stream by disclosing a card's grading history, then in my view it would be irrational not to make the disclosure. There is no downside. The fact that they don't do it I believe means more than their perception that their customers don't care. Maybe they don't care now, but they sure as heck might when down the road they take some huge economic hit on some altered cards, and a company acting rationally would take this future change of heart by their customers into consideration. I believe that the reason companies don't make the disclosure is because they feel both (1) they can get away with not doing it because nobody else does and (2) disclosure can be the economic kiss of death for a card. Both factors are at play here and a company could rationally feel that the future legal liability resulting from their current no-disclosure policy is more than outweighed by the big boost to current inflowing income allowed to take place by the no-disclosure policy. <br /><br />In regard to a company's defense against a future lawsuit predicated on no disclosure, your argument seems to be that provided everybody else does not disclose material information, the burden has shifted to the buyer to make the inquiry. So my response then on cross examination would be twofold: (1) just because other sellers breach their duty of disclosure doesn't mean that I should assume you will, especially given the barrage of advertising that you do extolling how you hold yourself to a higher ethical standard than your competition, which advertising I reasonably relied on; (2) by law the duty is on you to disclose, not on me to ask, and the fact that others might be breaching this duty doesn't relieve you of your obligation to comply.

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Posted By: <b>Peter S.</b><p>Jeff D. -- what I have never seen is an auction house saying "this card previously was rejected by PSA/SGC," or "this card previously was graded ---".

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Posted By: <b>Jeffrey Lichtman</b><p>Todd, are you sure your name isn't O'Keefe? Only Michael O'Keefe would state such awful things about Mastro and the FBI.

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Posted By: <b>Todd Evans</b><p>I think we are talking apples to oranges when talking about cards to game used material. It would be almost impossible to know if a card was earlier graded or rejected by someone like PSA or SGC and then have the auction house print those findings. You have cards that have been submitted multiple times to try to achieve higher grades by the same company as well as different ones so there could be no possible way for an auction house let alone a consignor to know unless they were to one that submitted it to be graded. Sure it probably could be done with some of the more rare cards but to do it on a 1956 Topps Mickey Mantle would be virtually impossible.<br /><br />When it comes to game used it's much easier as their are far less quantities of like game used items although with as many game used jerseys now being used and marketed it's becoming more difficult. When a auction house has an item authenicated by two different companies then they should be required to disclose the findings of both companies and not the favored one which is the case with the Jordan jersey. You can't tell me that if MEARS would have signed off on the Jordan jersey that Mastro still would have given this to Lou Lampson for his opinion.

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Posted By: <b>Todd Evans</b><p>No affilitation but thanks for asking. I'm just someone that has a story to share for the believers that this could have just been an oversight with Mastros.

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Posted By: <b>JK</b><p>Who is Mastros?

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Posted By: <b>Pas</b><p>Good points certainly, but (and this reminds me of our prior discussion on a related point) I do think a tribunal trying to decide whether there was a "material" omission might pay at least some attention to prevailing standards in trying to decide whether certain information met the litmus test. It would be a pretty cynical view (although not out of the question I suppose) that every single auction house, card show dealer, and ebay/internet seller regularly commits fraud by omitting known information about grading history (including bumps and rejections). And it seems to me at least in the present environment, you either have to draw that conclusion or you have to conclude that at least the majority of buyers do not consider this sort of information to be material to their purchasing decisions, and THAT (not a widespread pattern and practice of fraud) explains why the industry practice is one of non-disclosure. I don't see a middle ground on how else to explain it. Also, I repeat my view that this is a highly competitive market and if customers were demanding that information, sellers would get that message and start providing it. I believe in the free market, and if this information really mattered to the majority of people, sellers could not continue not to disclose (conceal?) it.

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Posted By: <b>Jeffrey Lichtman</b><p>Todd's story makes clear, again, that one would have to be out of his mind to buy a game used or autographed item from any auction these days.

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Posted By: <b>Pas</b><p>Jeff, how about a PSA 8 prewar card? <img src="/images/happy.gif" height=14 width=14>

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Posted By: <b>E, Daniel</b><p>What seems different to me between hawking baseball cards between grading companies and this jersey between the two named authenticators, are the players involved.<br /><br />The equivalent in terms of hobby respect between Mears and Sampson is SGC versus Pro.<br />If a card turns up in a PRO holder, having been rejected by SGC, there is absolutlely every ethical requirement to mention its history. Too few people trust and believe in PRO's judgements and give great weight of trust to SGC's. Similarly with Mears and Sampson.<br />Of course If the card had failed PSA testing but passes SGC, we're more able to make a judgement that the opinion was probably borderline for both but fell on either side of the fence between the two respected companies. <br /><br />It all comes down to the credibility of the players involved who are giving judgement. IMO, Mastro knows the competence and credibility perfectly well of the two authenticating agents who looked over the jersey, and chose the money-making avenue. The rest of the story is run-around.<br /><br /><br /><br />Daniel

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Posted By: <b>Jeff D.</b><p>It seems appropriate to mention that wrt keeping track of items that fail authentication, MEARS does keep such a record. This record is available to members on their website in their bat/jersey trade index area.<br /><br />Along these lines, MEARS is getting serious about cleaning up the memorabilia business, particularly as it pertains to auction houses. Although somewhat lengthy, check out the new requirements auction houses are going to be forced to comply with if they want to submit to MEARS:<br /><br /><a href="http://www.mearsonline.com/news/newsDetail.asp?id=302" target="_new" rel="nofollow">http://www.mearsonline.com/news/newsDetail.asp?id=302</a><br /><br /><br />A follow up with some commentary about this new policy (and mention of Mastro) can be found here:<br /><br /><a href="http://www.mearsonline.com/news/newsDetail.asp?id=303" target="_new" rel="nofollow">http://www.mearsonline.com/news/newsDetail.asp?id=303</a><br /><br /><br /><br />I suppose it should be mentioned that I have no affiliation with MEARS (although I respect them tremendously), but I do currently own one (1) MEARS authenticated g/u item.

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Posted By: <b>Todd Evans</b><p>Cost is another difference between MEARS and Lou Lampson. Sure a company like MEARS is going to charge more for actually taking the time to inspect and do research on an item compared to Lampson who is more cost effective but also passes almost every item that is put before him. Another difference is that MEARS is readily available to dicuss the facts of their findings to where it is impossible to even track Lou Lampson down. Why any auction house would want to put themselves in this position is beyond me. The money made off those items can never replace the respectability and confidence that is lost in the collecting community.

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Posted By: <b>Corey R. Shanus</b><p>This again might be a point on which we agree to disagree.<br /><br />Commiting fraud may be a perfectly rational economic decision to make (though ethically reprehensible). Ever see the movie "Class Action"? In it an automobile manufacturer makes a cold-hearted decision not to order the recall of a car with a propensity to explode under certain conditions. The company knew that down the road people would die and they would have significant legal payouts. However, they rationalized that the present value of those payouts would be less than the cost of the recall. So too (though thankfully on a much less morbid scale) with an auction house's non-disclosure policy. The anticipated future legal payout, factoring in the evidentiary problems of proving the auction house knew the card's grading history and the reluctance of people to sue due to the inhibiting legal expense, could be insignificant compared to the hit to inflowing income. <br /><br />So you see from this perspective one could forcefully rebut the presumption of non-materiality created by industry practice of non-disclosure by establishing the economic rational behind the fraud. And it seems to me it would be one terrific argument. "So please, Your Honor, do not give this greedy auction house a windfall by not imposing on them the legal payment they rationally expected to pay when they made the decision to commit the fraud!"

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Posted By: <b>peter chao</b><p>Unfortunately many of our states go through the same analysis in deciding whether to make our highways safer. A particular turn may kill a dozen people a year but in order to make that turn safe it would cost $500,000.<br /><br />Peter C.

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Posted By: <b>Peter S.</b><p>I am familiar with the Ford Pinto. That type of cost/benefit analysis goes on all the time, in many contexts, to be sure. However, how do you respond to my point that if the market were truly demanding this information, sellers facing robust competition would have no choice but to provide it? EDITED TO ADD Also, Corey, I doubt the auction companies go through the sophisticated calculations to which you allude. These are not huge public companies. I would guess the thought process is more along the lines of well no one else does it and no one is pressuring us to do it, and it might affect some sales, so why do it?

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Posted By: <b>Corey R. Shanus</b><p>Auction houses factor in the needs of both buyers and consignors. Inasmuch as nobody seems to disclose this info at present, an auction house will not lose a buying customer to their competition over the issue. However, they will lose consigning customers. In addition, even if an auction house wanted to make the disclosure, how would it be able to if the consignor pulled the item (which almost certainly it would) and gave it to another auction house that did not disclose?<br /><br />Also, and I say this very respectfully, simple common sense screams out that a person about to plunk down 100 grand on a SGC 88/PSA 8 piece of cardboard, the overwhelming majority of its value being tied up in the perception that the card is not altered, would be keenly interested to know there is split opinion as to whether the card might be altered.<br /><br />I do have a question for you, Peter. In deciding issues of materiality, would a legal tribunal interpret the law as favoring disclosure in cases where the issue is not so clear cut?<br /><br />EDITED TO ADD: Peter, think about what you just said in your "edited to add". If auction houses really do think in their truncated calculations that disclosure might affect some sales, isn't that a criteria for materiality!?

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Posted By: <b>Peter Spaeth</b><p>If you are correct, and buyers were so keenly interested, they can (and would, in my opinion) just ask. Maybe they do. Or they can (and would) demand better disclosure. They haven't, as far as I know, at least not in compelling numbers.<br /><br />As for your other points, I would guess you are right that most tribunals would in close cases err on the side of requiring disclosure. I don't think I have contradicted myself although of course I understand the tension. Materiality is not judged on a buyer by buyer basis but on an objective standard. Obviously some buyers want to know more than others, and there is almost nothing (for example, soaking) that SOMEONE wouldn't want to know about. So the mere fact that an auction house might not disclose grading history because SOMEONE might be dissuaded from bidding does not necessarily translate into that information being material to the objective composite reasonable buyer.<br />

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Posted By: <b>Corey R. Shanus</b><p>This sort of takes us back to where we started. Of course they can ask, and perhaps some/many do, at least for the high-priced cards. But the fact that someone didn't and down the road is stuck with a card that will not cross over, a card that he would not have purchased had disclosure been made originally, should not preclude him from bringing an action for fraud.

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Posted By: <b>Peter Spaeth</b><p>It might add to the discussion if other folks related their experiences. As a buyer, have you asked for a grading history (and did you get it)? As a seller, have you been asked to provide a grading history (and did you give it)?

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Posted By: <b>Peter Spaeth</b><p>In the action you describe, Corey, what are the damages? You aren't out the value of the card, presumably it has the same worth as an ABC 8 (or more, in a rising market) as when you bought it. Perhaps you wanted to cross it over and couldn't, but how have you been harmed economically?

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Posted By: <b>Corey R. Shanus</b><p>I can no longer stand to look at the card because every time I do I conjure up images of a scissor. So I decide to sell the card. Being the ethical person I am I insist that the auction house disclose the grading history and the fact that the card will not cross over. The card then sells for 10% of what I bought it for.<br /><br />To anticipate a response (and an auction company's defense) -- Well, why were you so stupid to disclose the grading history when you went to sell it? My response -- I was not aware the law required me to commit fraud to mitigate my damages.

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Posted By: <b>Peter_Spaeth</b><p>Do you REALLY think if I had (just by way of example) a PSA 8 Goudey Ruth, and I disclosed that SGC had rejected it, it would sell at a 90 percent discount? I don't for a minute. Indeed, and this goes back to where we started probably, I think most buyers of PSA 8 Goudey Ruths today recognize there is a possibility that precisely that has happened (or that the card used to be a 7) and don't care. EDITED TO ADD In my opinion people are buying the opinion of the grading service whose name is on the flip, period. Not some implicit assurance that the other grading service would see things the same way.

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Posted By: <b>Kenny Cole</b><p>Peter, <br /><br />I don't necessarily agree with you that materiality is always based on an objective standard. At least where I practice, our civil jury instructions define materiality as folllows:<br /><br />A fact is material if a reasonably careful person under the circumstances would attach importance to it in determining [his/her] course of action.<br /><br />A fact may also be material even though a reasonably careful person might not regard it as important, if [(the person stating it knows)/(a person conceals it knowing)] the person with whom [he/she] is dealing will very likely regard it as important in determining [his/her] course of action<br /><br />The first definition is rather clearly based on an objective standard. Therefore, I suppose evidence that the industry standard is non-disclosure is arguably relevant to the issue of what the mythical "reasonable buyer" would think is important when making a purchasing decision.<br /><br />However, under the second definition, materiality could very well be judged on a buyer by buyer basis, particularly when expensive/high end cards are involved. IMO, someone who is thinking about plunking down $100,000 on a card would almost certainly attach importance to information tending to indicate that another (undisclosed) grading company has previously deemed the card to have a problem. That seems to me to be true regardless whether the industry standard is non-disclosure, and regardless whether buyers of less expensive cards would care or even think about the issue. Moreover, while buyers can always ask such questions, I don't think they have any obligation to do so. Rather, the disclosure obligation rather clearly rests upon the seller who has the knowledge. <br /><br /><br /><br />

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Posted By: <b>Peter S.</b><p>Kenny that is interesting, but would that apply in an auction where the seller isn't dealing one on one with buyers and indeed doesn't know until it is over who won? It sounds to me like that provision applies or certainly was intended for the special circumstances of direct dealing where the seller knows particular characteristics of the buyer.<br /><br />Also, and forgive the defense bias here, wouldn't the fact that the buyer never inquired suggest the information really wasn't that material to him? I know there generally is no duty to investigate etc. etc. but it just strikes me as common sense that if someone is spending 100K on a card, in an industry where no one discloses grading history, and it is obvious there MIGHT be grading history, and he doesn't even ask, that suggests to me it wasn't so important.

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Posted By: <b>Corey R. Shanus</b><p>First, to clarify, I'm talking here about an instance where the card doesn't cross over because of concerns the card is altered, not because the 8 should be a 7. My view is that in such an instance (i.e., a split decision among the grading companies) it could sell for much less than it would had the cross-over rejection not been disclosed. We can argue as to how much less, but I firmly believe it will be a material reduction, especially if the card received its original numerical grade from PSA, say, ten years ago and was only recently rejected by SGC. <br /><br />In regard to your other point that there is never an assurance that another grading company would see the card the same way, on that one I agree. But it's all a probability game. It's one thing to talk about the risk abstractly, quite another to say it already happened and it is now a known fact that other experts believe the card to be altered. The latter instance in my view to the reasonable buyer would be regarded as material information.<br /><br />Peter, if you owned an auction company and there is documentary evidence that a card's grading history has been provided to you, would you make the disclosure? Let's assume we are talking about a PSA 8 Plank originally slabbed in 1998 and only last year rejected by SGC as being altered?

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Posted By: <b>Peter S.</b><p>Corey your example is interesting. Typically I would think of the sequence as card gets rejected, THEN slabbed. SGC refusing to cross-over a card ALREADY in a holder, without cracking it out, means very little to me. SGC would be crazy to cross over a card worth that much just looking at it in the holder, without being able to examine the edges. Indeed I think they have a policy that they typically won't do it over a certain value.

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Posted By: <b>davidcycleback</b><p>In the end, the arbiter is whether or not the item matches the sales description. If a Near Mint card is being sold as Near Mint, it doesn't matter if someone else incorrectly said it was trimmed-- the sales description is accurate. If this someone else correctly said it was trimmed, then there would be an issue with the sales.<br /><br />If the North Carolina shirt was Michael Jordan's, there would be no need to mention that MEARS wouldn't authenticate it. If it turns out not to be Jordan's shirt, then that seller didn't mention MEARS' opinion, and MEARS qualms were correct, would become an issue.

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Posted By: <b>Peter S.</b><p>Corey, I think we are back where we started, or at least I am. The very first thing I said was that at first blush grading history at least in certain circumstances would seem to easily meet the definition of materiality, but I questioned whether it really was material in light of what seems to be happening in the marketplace, namely that sellers don't tell, people generally don't seem to ask, and cards keep selling for more and more. I understand your points and certainly one could make out a strong plaintiff's case for the reasons you and Kenny state. But I keep coming back in my mind to the notion that very few people seem to care, and I am trying to assess what impact that has on the legal analysis.

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Posted By: <b>Corey R. Shanus</b><p>We can play around with different sequences. I chose that one, but the issue remains the same -- disclosing what the other grading service thought of the card.<br /><br />BTW, my understanding of what SGC will do is as follows. They will not officially opine a card is good without seeing it out of the holder. However, they can in certain instances tell you a card is no good by examining it in the holder. True, perhaps there is a margin of error to the in-holder examination that would not be present if the card was cracked out, but they still can give you a pretty good idea. Also, some alterations do not involve trimming (e.g., rebacking) and my understanding is that in certain instances you can see clear evidence of that with the card in the holder.

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Posted By: <b>Corey R. Shanus</b><p>Peter,<br /><br />I respect very much what you just said and certainly the current non-disclosure actions in the marketplace do merit consideration and make the anaylsis more complicated (and more interesting).

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Posted By: <b>barrysloate</b><p>Would you lawyers care to dumb it down a bit so the rest of us can follow this. I'm only catching every other word.

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Posted By: <b>Jeff Lichtman</b><p>Barry, we like it that way.

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Posted By: <b>davidcycleback</b><p>One reason for Mastro to mention MEARS letters is that there is a good chance that the winner will send the item to MEARS for a LOA. That alone is reason to mention the MEARS opinion.

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Posted By: <b>identify7</b><p>"The industry standard is non-disclosure" sounds to me a lot like "no one expects the truth from a seller"<br /><br />Does anyone else find that unacceptable?<br /><br />What is wrong with identifying completely and clearly what is for sale, and forget this caveat emptor bs. Let the seller beware. You lie, you cheat, you lose.<br />What is wrong with that rule? It has precedent.<br />Dump all this lawyer jargon and go back to a sidearm justice system.<br />Oh no Gil, we are civilized now.<br />Then be civil.

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Posted By: <b>Kenny Cole</b><p>Peter,<br /><br />Sorry it took so long to respond. I've been having power outage issues.<br /><br />In any event, I agree with you that the second definition of materiality set forth in my previous post is most applicable to one on one transactions. However, I don't necessarily think it is limited to that situation. For example, speaking only about high end cards, the pool of potential buyers is going to be pretty small due to the financial constraints most people have. Excluding eBay (where I think your argument is more valid), and limiting the discussion to auctioneers such as Mastro, I suspect that most of those potential bidders will be known by virtue of prior dealings. Perhaps not all, but most. It really isn't an offering to the world at large. For the most part the prospective bidders aren't unknown.<br /><br />Maybe I'm wrong, but I just don't buy the argument that someone who is contemplating spending what amounts to at least a year's wages for most people doesn't care about the existence of information tending to indicate that the card they are looking at may have issues. That doesn't make sense to me. In fact, I think I could probably make a pretty compelling argument that the "circumstances" attendant to the sale of a high end card require full disclosure of known grading history under a purely objective standard. However, I think I could also argue that, given the limited pool of prospective bidders and the seller's knowledge of the other grading company's rejection, definition number two also applies even if the specific identities of the bidders aren't known. IMO, that is information that most, if not all, of the potential bidders in the limited pool would "very likely regard as important" in determining whether to buy the card and/or how much to pay for it, regardless of whether the normal industry standard for "normal" cards is non-disclosure. I would try to frame the materiality issue in terms of the very few people who could actually afford to bid on that specific card. I suspect you would try to frame the issue in terms of the normal industry practice regarding disclosure applicable to all cards. It's an interesting issue however framed.<br /><br />As for the issue of asking questions, I agree with you that it would be a good idea to do so. However, I'm not sure how or when it should become "obvious" to a potential purchaser that a given card "might" have a grading history. IMO, that is a problematic standard to apply. Moreover, using it doesn't make much sense to me when you consider that the seller presumably KNOWS that the card DOES have a grading history. If I was defending the case, I would make precisely the argument you make. My response, which I really think is right btw , would be that in assessing responsibility, what a buyer "might have found out" had the right questions been asked should not exculpate a seller from liability for failing to disclose what he/she actualy did know. <br /><br />Looking at the equities, I think that requiring someone to inquire about whether the card in question really is as represented probably is not as important as requiring the person representing the characteristics of the card to be completely candid when making the representations. That's probably just my plaintiff's bias though. <img src="/images/happy.gif" height=14 width=14>.<br /><br /><br /><br />

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Posted By: <b>PS</b><p>Kenny, that is very convincingly put. There still, however, seems something unfair to me about a buyer who sits mutely instead of asking the obvious question, "is there a grading history," and then if things don't work out turns around and sues the seller for nondisclosure. It's litigation as insurance policy. Then again, I guess you would say well it's even more unfair for a seller to sit there silently knowing he is sitting on adverse information about grading history. Point well taken. I guess in your view, then, fraud is the industry norm. Not in the case of every card, of course, but in the case of every card where there is a known adverse grading history, because it just NEVER gets disclosed except perhaps in response to private inquiries. As I mentioned in my prior post, that was my initial reaction purely on the law of materiality, but it's hard for me to swallow the notion of fraud as an industry standard. Interesting discussion for sure. EDITED TO ADD I think the question, "is there a grading history," is a pretty obvious one even though nothing about a PARTICULAR card suggests it. Everyone knows the practice of cracking and resubmitting and trying to cross cards in holders is widespread. <br />

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Posted By: <b>PS</b><p>I wonder if the auction house that seeks to distinguish itself as morally/ethically superior has a position on disclosing known grading history, or on resubmitting rejected cards attempting to get them in a holder.

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Posted By: <b>Jeff Lichtman</b><p>Peter -- you mean Mastro?

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Posted By: <b>Kenny Cole</b><p>Peter,<br /><br />As an abstract legal theory, I suppose that disclosure should occur in every case. That's not going to happen though. I understand that. If there is a failure to disclose on a $30 card, it seems different to me. I'm not comfortable with fraud, at least not actual fraud, in a circumstance like that. I might argue constructive fraud, but don't think I'd argue actual fraud. I don't think I could get there on the intent issue because in that context your point is absolutely valid -- on a $30 card, I don't think a jury will hold the seller to the same disclosure standard as it would were the card worth six figures. Moreover, that sort of thing probably wouldn't involve a lawyer in any event. While the issue might pose an interesting law school exam question, it wouldn't really be something that I could tell a client to pursue. Anticipating a question, I don't know where the line is or where it should be drawn. <br /><br />It seems to me that the issue shifts somewhat when you are talking about what are undisputedly high-dollar cards, or other memorabilia for that matter, which is really what I was discussing. In that circumstance, I absolutely think that there is a duty to disclose adverse information. In that regard, like Corey, I'm not talking about whether a card that was previously a 7 was cracked out and got an 8. What I'm talking about is a card that was previously rejected as trimmed, bleached, recolored, etc., which subsequently received a grade from a different grader. Granted, it may be argued that the difference is one of degree, but failure to disclose that a card used to be a 7 and is now an 8 doesn't give me too much heartburn. On the other hand, knowingly failing to disclose that the card being represented as a wonderful 8 was previously deemed to be altered by a reputable third party is an entirely different situation IMO. I can't precisely articulate why it is so different in a manner that will withstand attack, but I know that it is. I suspect that you do too.