Mastro and FBI

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Posted By: Kenny Cole

Peter,

Sorry it took so long to respond. I've been having power outage issues.

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.

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.

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.

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. .