It was only a matter of time. Finally something is happening from a legality standpoint in regards to the latest card trimming scandal.
The class action lawsuit in question was filed this week in California and alleges that Collector's Universe (aka PSA) 'knowingly graded altered cards' and that PWCC and Probstein 'knowingly sold altered cards'.
The lawsuit claims that due to the widespread nature of available information, PSA "knew or should have known that it was grading altered cards". This part of the argument is a bit light on substance.
First, the lawsuit claims that given that PSA is an expert in the field of grading, they 'should be able to identify indicia of alterations such as removal of stains and smoothing out of creases'.
This part I agree with.
PSA and other grading companies should be able to pick up on these alterations or trimming such as the recently discovered trimmed Goudey Ruth.
Yet, the lawsuit also goes on to say this:
when a card is trimmed, it no longer fits perfectly into a PSA case. Trimmed cards can often be identified by a gap between the card and the edge of the case and they may even move within the case
This is most certainly not true in all cases, especially in the case of vintage cards which tend to have a lot of inconsistencies in regards to sizing and cuts. The suit also claims this
PSA maintains a record of all the cards that it rates including pictures of those cards as well as a record of purchasers of PSA rated cards.
I don't know about this -- do they? I've never heard about PSA keeping records or photos of old cards for comparisons in regards to grading. I mean they SHOULD, but I'm not sure how supportive this might be to the assertion that the 'knowingly graded altered cards'.
The allegations against PSA are going to be challenging to prove UNLESS there are witnesses that we aren't aware of it. All it takes is one rogue grader that has some sort of inside scoop. Not saying this is even remotely true, but is an example of something needed that would give the plaintiff any chance of success.
PSA can argue all day that it's methods aren't fool proof, that despite the use of 'expert' authenticators and graders, it is bound to make some mistakes.
Often times, these class action cases are squashed right from the start, so this might never even see the light of day. However if it does proceed and discovery is allowed then it could get interesting. PSA, PWCC and Probstein might be forced to hand over any pertinent internal records that could support the plaintiff's case.
Now if somehow, someway the plaintiff does prevail, what might the potential ramifications for PSA? That's where it could get interesting, and costly. Maybe PSA is forced to buy back all of the altered cards that they graded. In addition, they might have to compensate customers for any grading fees incurred while these alleged activities were taking place.
Note that in it's latest quarterly report, Collector's Universe noted the following:
We believe that none of the lawsuits or disputes currently pending against the Company is likely to have a material adverse effect on the Company’s financial position or results of operations.
It's quite possible when they made this statement from their quarterly report (dated February 4th) they weren't aware of this class action suit, or they were and didn't really believe it had any merit.
It's way too early to predict if anything at all might come from this, but I think it's a good thing that someone is at least doing something about this.