Mastro and FBI

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Posted By: Kenny Cole

Peter,

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:

A fact is material if a reasonably careful person under the circumstances would attach importance to it in determining [his/her] course of action.

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

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.

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.