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Todd (nolemmings)as a diversity case, depending upon the residence of all parties and the amount in controversy. It could end up in Illinois depending on whether the court enforces the choice of forum provision in Mastro's bidding rules (likely in my opinion). It could apply Illinois law regardless of forum, depending on whether there is a choice of law provision or, if not, if the Court determines that Illinois law applies under a conflicts of laws analysis.
If it were here in Phoenix, I would estimate the chances of recovering punitive or exemplary damages to be remote, as it would require a showing of "evil mind", but it may be different in the Midwest. It would be easier, IMO, if Daniels sought rescission, i.e. undo the deal, but since he's asking for damages, he will bear the burden of proving what these are.
I agree the strongest point he could make is that the lot was unauthenticated, assuming he can prove that. Mastro acknowledges and advertises that the lot could make money for the bidder on a "breakout", so he is aware that such a breakout would be contemplated by the buyer. Depending on the particular photos shown not to be genuine or shown to be damaged, Mastro may have some problems arguing that damages are little when its own words foresee (read puff) decent profit. I really wonder how Mastro will show its people or third-party authenticators took the time to inspect over 2000 items for this lot. Curious case, but I'm hopeful for all concerned that it settles quietly.