Mastro and FBI

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Posted By: Corey R. Shanus

Peter,

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: barrysloate

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: Jeff Lichtman

Barry, we like it that way.

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Posted By: davidcycleback

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: identify7

"The industry standard is non-disclosure" sounds to me a lot like "no one expects the truth from a seller"

Does anyone else find that unacceptable?

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.
What is wrong with that rule? It has precedent.
Dump all this lawyer jargon and go back to a sidearm justice system.
Oh no Gil, we are civilized now.
Then be civil.

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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. .

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Posted By: PS

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.

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Posted By: PS

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: Jeff Lichtman

Peter -- you mean Mastro?

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Posted By: Kenny Cole

Peter,

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.

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.

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Posted By: barrysloate

I sell slabbed baseball cards almost exclusively now and nearly all are consigned to me in that form. I can not tell you the history of a single one of them. I wouldn't know if they were submitted only once or resubmitted eight times. So what legal liability would I have if one of those cards turned out to be bad?

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Posted By: PS

Barry I would argue none, but then I am biased towards defendants.
I suppose a good plaintiff's lawyer might be able to argue that if one of your cards turn out to be bad, you were under a duty to inquire of your consignors whether there was a grading history and to disclose if there was; or to disclose any private doubts you had based on your own examination of the cards.

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Posted By: Brian Weisner

Hi guys,
I attended every Carolina home game between 1977-1989, and still make most of them today. I also was lucky enough to get to know most of the players and the staff including the managers, so I know a little about how jersey's were distributed. I'll dig out my pictures of Michael in the warm up shirt in question and post them when I can this afternoon or evening, and maybe even a few practices jersey's given to me by some of the guys, including Joe Wolf.
While I'm sure Michael does have his original cover up, it is very possible that he had several during that 3 year period, and that one could have been recycled for another player. It's also even more likley that Jordan's name could have been replaced on one of Jimmy Black's or Buzz Peterson's shirts. After all this wasn't an uncommon practice before the shoe companies started providing the schools with enough equipment to arm a small army. I'll do a little digging tonight and post my findings, and let you make your own decisions. Be well Brian

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Posted By: barrysloate

Peter- I agree I should look at the cards and make my own decisions. But very few people know the history of the cards they bought. And there is no practical way to trace their past. This is getting into such a murky area that I can't see how it can be practically assessed.

Could you imagine a consignor offering me a hundred graded cards for my next auction, and I ask him for the history of each and every card- who did you buy them from, did you submit them to grading yourself, have any of the cards been submitted more than once, etc.

He would probably get fed up and ask for the consignment back.

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Posted By: PS

Barry there seems an inherent conflict between the interests of consignors (don't say anything bad about the card) and potential bidders (who presumably want the fullest possible disclosure). For a long time it seemed third-party grading solved this conflict, but now I am not so sure, as arguments can be made, in light of some of the failings or inconsistencies of third-party grading, that there may be additional information that should be disclosed.

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Posted By: Todd

Brian, there is no need to do your research as the jersey has already been indentified as Ranzino Smith's shooting shirt that was replaced with Jordans name. The stains on the jersey match up perfectly as well as the puckering on the patches. Here is a link to show you the two compared side by side.

http://www.gameuseduniverse.com/vb_forum/showthread.php?t=10128

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Posted By: boxingcardman

If so, how can you post drivel like this:

"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."

Of course the Evidence Code doesn't require disclosure...because the Civil Code contains the definitions for the various forms of misrepresentation.

Your statement not only cites the wrong set of laws, it utterly misstates basic black-letter law with regard to fraud. A seller of any item is required to disclose any material fact not known to the buyer. The MEARS rejection is material. Also, if Lampson can be proven to be an industry joke and/or if the sloppiness argument is accepted, a case for negligent misrepresentation can be made out

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Posted By: Brian Weisner

Thanks Todd,
As I said, I've been out of the loop for the last few days and you'll save me a lot of time. Be well Brian


PS My man Z never saw a shot he didn't like....If only he could have hit more of them and played defense.

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Posted By: barrysloate

Peter- the additional information that should be disclosed may not be available. Can you tell me the grading history of each of the cards in your collection?

No auction house should deliberately get involved in fraud, but it would be so easy to inadvertently accept a card that has a checkered history which the current owner knows nothing about.

Disclosure is a wonderful concept but there is so much information about any given item that is entirely lost.

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Posted By: PS

Sheesh I saw the heading of your post and thought you were talking about me not Peter C. Although based on my posts in this thread I suppose it might be fair comment about me as well.

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Posted By: PS

Barry first of all I am only saying that a good plaintiff's lawyer could make the case for additional disclosures. I personally think an auction house is entitled to rely on third-party grading because that is what they are offering, a card graded by the third-party whose name appears on the flip. But in any event you are right that if information is not knowable, there is no liability for failing to disclose it. Now maybe I shouldn't speak so fast because perhaps our friend Kenny could come up with a plaintiff's argument there too. Indeed, I do recall him posting something once about a cause of action for INNOCENT misrepresentation, if memory serves correctly.

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Posted By: Kenny Cole

Peter,

LOL, I think the post you are referring to concerned constuctive fraud -- where no showing of intent to deceive is necessary in order to impose liability. However, even in that type of case, you have to show a breach of duty. In that regard, I don't think one generally has a duty to disclose information of which they are unaware.

Barry, to answer your question, my posts have assumed that the seller knows the card's history. I am not arguing that a seller has a duty to investigate the bona fides of every card that comes into his/her possession because I don't think they do. What is generally required of them is disclosure of material facts they know about. To my way of thinking, particularly with respect to high end cards, knowledge that it has previously been rejected is such a material fact.

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Posted By: barrysloate

Hi Kenny- I am a regular seller of many high end graded cards, and I have to tell you I don't know the history of any of them. If they were consigned to me, I am seeing them for the first time when I open the package. And that is probably true of most dealers.

But let me share an example with everyone and I entertain all feedback. I am not one to repeatedly resubmit the same card again and again until I receive the grade I want; however, if I think a mistake was made I have the same right as anyone to ask for a review.

Last year I sent three cards that I owned to SGC for grading (let's leave them anonymous) and all three came back SGC 40. Two had noticeable creases, the third was crease free, so I was puzzled as to why all graded the same. SGC suggested I send back the card I questioned for review. They agreed with my assessment and regraded it a 50, which I in good conscience felt it should have gotten all along.

I sold it in my auction as an SGC 50, and did not reveal the past grade, which again I felt was in error. Did I leave out material information? Or does this apply only to cards deemed at one time trimmed or altered?

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Posted By: Cobby33

I agree that there is no viable cause of action for innocent misrepresentation, but let's not forget the "knew or should have known" standard for misrepresentation, fraud, etc.

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Posted By: Corey R. Shanus

That instance is somewhat different because you had the card re-evaluated by the same people who made the initial determination, unlike the other instances where it was a different company that formed the other assessment. Therefore, because there still remains only a single view as to the proper grade of the card, I could make a forceful argument your re-evaluation does not require disclosure. With that said, there is a rebuttal: the fact that SGC changed its mind means the proper grade of the card is not clear cut (at least more than is typically the case), and because some reasonable buyer would be troubled by a card teetering on the edge, you should make the disclosure. I personally think that argument would not prevail, at least in the case of a card being bumped from a 40 to a 50. If it was bumped from an "altered" to a 50, the argument would be stronger.

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Posted By: barrysloate

Okay, here is my opinion, and again for the sake of discussion.

I know how to grade too, I've been doing it for 25 years. When I submitted the cards I made a mental note of what I thought they would grade, and that is: VG, VG, and VG-EX. Ultimately, after that third card was reviewed, all three of my assessments were correct, and I was in agreement that all three had their proper designation.

So why bring a mistake into the mix, just to muddy the waters? We both felt that the VG was incorrect, and the VG-EX was in fact the proper grade. So doesn't my own opinion (grading is no more than an opinion) count for something?

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Posted By: Corey R. Shanus

As I said, I don't think you have to make the disclosure. However, your argument about your expertise could cut both ways: Ergo, "Mr. Sloate, if indeed you are that qualified and highly regarded as a grader such that your customers would have confidence in your opinion that the 50 was the proper grade, what was the down side in making the disclosure? Surely no one would have paid less for the card, so what was the harm in making the disclosure?"

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Posted By: davidcycleback

As noted earlier, what matters is whether the sales description matches the identity. It isn't fraud if you are selling something that is accurately described. Just as aren't libeling someone if what you say is true. If the description and item match, past opinions will usually be irrelevant. If the description and identity don't match, then suppressed official opinions that say they don't match are significant information if fraud is alleged.

Exceptions are when law requires disclosure or where disclosure is legitimately important to most buyers. Ala, saying 'don't bother sending the Jordan shirt to MEARS as they won't give an LOA for it.' As many buyers plan on getting a MEARS LOA, this info is important. Also, that MEARS didn't authenticate, is relevant information that would impact potential buyers' bids. Again, the problem with the Jordan jersey comes down to its authenticity. If the jersey is authentic and has letter of provenance from Dean Smith, lack of disclosure would be less significant. It's that the authenticity is now question that makes the lack of disclosure significant.

I don't see proof of fraud by Mastro. All collectors disagree with authentication and grading companies at one time or other, so dismissing an expert's opinion doesn't in and of itself prove malicious intent. That Mastro may have been wrong and MEARS right still doesn't prove fraud.

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Posted By: barrysloate

There is no harm other than it may sell for less money. Now, if I thought it was an overgraded VG-EX and SGC missed something, I agree there is an obligation on my part to point it out.

But if I feel they got it wrong the first time, and then corrected their error, isn't that sufficient?

And by the way, have you ever seen a listing: "this started out as a 40, but we resubmitted and got it changed to a 50"? Just curious.

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Posted By: Corey R. Shanus

Not sure you're correct about that one. There can still be fraud even though in the end the description ended up being accurate. Just then in that case there would be no damages, but there was still fraud (i.e., the failure to disclose material info). Let me give a real example, which Barry and I discussed on this Board some months ago -- the sale by Sotheby's some years ago of a tintype they opined was of Jim Creighton. We produced voluminous documentation to establish the image could not have been of Creighton. Sotheby's ended up disclosing none of it, and we wrote an article describing the incident and opining that the intentional withholding of that documentation constituted fraud. Now suppose years later it turns out that for reasons nobody could have imagined at the time that the image was of Creighton. That doesn't mean that Sotheby's did not commit fraud, only that now the buyer has suffered no damages.

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Posted By: Corey R. Shanus

No, I haven't, but maybe you want to take the lead here?! With a little luck you'll start a stampede!

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Posted By: davidcycleback

Assuming there are no other identity/grade/valuation issues, if Sotheby's sells a tintype they say is of Creighton and is of Creighton, you're going to have a darn hard time convincing a judge Sotheby's defrauded you. If, as you say, the tintype never was and isn't of Creighton and Sotheby's knew this, then you'd have a case for fraud. There is such a thing as attempted fraud where no financial harm was done. Akin to a robber stealing what he thought was a bag of diamonds but turned out to be gravel. Even though the robber only stole 10 cents worth of gravel-- financially the same as taking two nickels from a tip jar-- he can still be in big legal trouble.

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Posted By: Corey R. Shanus

If by sheer dumb luck it turns out to be Creighton, the case will never get before a judge because the buyer will have suffered no damages. But, again, that doesn't mean there couldn't have been fraud at the outset.

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Posted By: davidcycleback

If there was a crime under your miracle tintype scenario, I would say it would attempted fraud not fraud. They can potentially convict the above mentioned robber for many things, including intent to steal diamonds, but not for stealing diamonds. One can potentially convict a nefarious seller for many things, including attempt to defraud, but not for fraudulent description when the description is proven to be correct.

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Posted By: Corey R. Shanus

Maybe one of the other attorneys can help me on this one but I would think attempted fraud would be an instance where Sothebys did not disclose the documentation and believed you would never know of its existence, but before the sale you found out about it anyway.

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Posted By: PAS

I wouldn't disclose the original grade. They made a mistake the first time. End of story.

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Posted By: PAS

The tintype case is a classic "no harm no foul" scenario. I don't think it rises to the level of anything, except in an academic discussion.

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Posted By: barrysloate

David- Corey and I went to Sotheby's together and explained that we were both baseball historians, and we were able to explain to them categorically why it couldn't be Creighton (the fact that he died in 1862 worked in our favor, among countless other points). Their photo experts also made it clear to us they had never even heard of Creighton before this image was consigned to them. But they refused to listen and adamantly refused to add to the description that it very well may not be and probably isn't Creighton. Frankly, they didn't even seem to care. They saw us as a couple of gnats who needed to be swatted away.

Corey- no, I don't want to be first, thank you.

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Posted By: PAS

I don't necessarily agree with your initial analysis either. Fraud can be by omission as well as misrepresentation, so that if I accurately described an item that is not necessarily satisfactory disclosure if I omitted a material fact about the item. Now reasonable people can disagree over whether the omission was material to be sure, but as a general principle I believe you have overstated the case.

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Posted By: Robert

I have read a few of these and opinions and topics tend to stray a little, so let me give you my take on this.

Simply put, we as a (collecting) society place too much faith in what we believe is the "unknown truth", the opinion of something because it is stated as so. With a shirt like this, the value (if research is correct) is basically a hundred bucks, not the hefty final hammer price. If Mastro did not contact the winning bidder, then it's a company that should be shunned to a certain degree. How much else goes on that isn't reported is the main question here.

I enjoy Mr. O' Keefe's writing as it exposes the dark side of this business because he doesn't have to worry about upsetting advertisers. It appears he does have a vendetta against Mastro which most watchdog sites do have, but if he was really looking out on the behalf of the hobby, Mr. O' Keefe, there is this little company called Coach's Corner you should know about and their relationship with their authenticators (and the authenticators of ther past) and "the voice of the hobby" (an anemic periodical that is dying) that you should look into. That would make a far better story...better book...better mini-series than one dirty shirt.

Thank you. This site is great!

Bob

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Posted By: Jeff Lichtman

Ahh, Robert...if it were only one dirty shirt.

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Posted By: DJ

It isn't about one dirty shirt, but an army of them. Since I know nothing about Game Used Uniforms, the minute a catalog comes out, the detectives at the Game Used Universe go through their photo match database to prove the experts and the auction house wrong. I'm thankful that I never got excited about something someone wore...in most cases now, once at the most.

Bravo Robert.

If you guys want to see something TRULY amazing, check out the September Coach's Corner Auction (www.myccsa.com).

The images aren't up (at this moment) but I can't wait to see the Martin Luther King Jr. hand signed baseball bat or the 1927 Yankees complete signed bat that they are offering this month.

They estimate the Yankees bat at $40,000. How much do you think Mastro could get for this? $75,000? $100,000? How much do you think it will sell it for in CCSA land?

And people keep picking on Mastro?

DJ

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Posted By: Sean C

Expectations and reputation. No one expects good or legit items from CC, as their reputation is well past the point of salvation. Mastro on the other hand still has somewhat of a good reputation in the hobby, which causes people not to expect these kinds of problems with their auctions.