An auction disclaimer I saw in court
It’s not often that I can disclose specifics from court cases in which we’re involved. However, with permission in this particular case, I’m able today to reveal one particular passage which I argued on the witness stand was preposterous.
The essence of this case was the auctioneer was providing estimates of value on items being put up for auction. One such item was estimated as having a value of $1,000,000. The item subsequently sold for $1,050 ($998,950 less than this estimate — over 99% less)
The litigation resulted interestingly enough from both the seller and buyer — where the seller argued breach of fiduciary duty and the buyer cried misrepresentation upon trying to resell the item.
In response to both claims, the auctioneer had provided this disclaimer (which he said he found on Facebook) that was in both his contract with his seller, and in the terms and conditions furnished to the bidders:
“This estimate is the amount that the auctioneer believes the property will demand at a well-publicized and well-attended auction with at least two interested bidders. This estimate is not a valuation and cannot be relied on as such.”
For one, as a personal and real property appraiser myself, and Distinguished Faculty at Hondros College of Business where I teach classes including appraisal principles, you can’t say that you have an estimate that isn’t a valuation because an estimate is a valuation.
We bolded the key terms in this above passage. In other words, we’re going to say all this, but you can’t rely on it — in other words, we can lie to you and/or we can falsely induce you to believe our words and you have no recourse.
Intent does matter if a party unknowingly misrepresents, but shouldn’t auctioneers know a $1,050 item isn’t a $1,000,000 item? Further, what’s to keep auctioneers from simply — routinely — claiming, “they didn’t know …?” As long as I say I don’t know I can say anything? I could say a $1,050 item is worth a billion dollars? A trillion dollars?
We wrote about this unfair, unreasonable, inappropriate approach to auction representation (misrepresentation) here:https://mikebrandlyauctioneer.wordpress.com/2015/05/01/as-is-and-fairness/
And sadly the courts (thus far) largely agree. In the case Pardo v. Mecum Auction Inc. (Isaac Pardo, Plaintiff, v. Mecum Auction Inc. (Mecum,) William Mullis, and Jan Mullis, Defendants, United States District Court, N.D. Illinois, Eastern Division, March 31, 2017) Mecum misidentified a 1963/1964/1968 Corvette as a 1967 but that’s okay, because they told the bidders/buyer to not rely on their description.
Interestingly, in this Pardo case, the court wrote that Mecum’s terms noted:“The vehicle and information presented at the time of auction is final and supersede any previous representations. That information provided is deemed reliable, but is not guaranteed.” Reliable? But you can’t rely on it?
Mecum is correct to have this “non-reliance” clause in their terms — if the sole goal is to protect from buyer recourse. However, does the lack of buyer recourse at this level discourage bidder/buyer participation? I wouldn’t be surprised if this is Isaac Pardo’s last auction for a while, at minimum.
I can tell you that the case we’re involved in might counter Pardo v. Mecum Auction Inc. in that the jury seemed perplexed that auctioneers could conceivably lie, misrepresent and/or falsify details about property up for auction regardless of intent, and get away with it because they tell you not to rely on such reliable representations.
Our legal team demonstrated this principle while I was on the witness stand. The lead attorney asked me if I could give an example of what I was proposing was farcical … and I asked the jury if I could lie, misrepresent or otherwise tell untruths if I coupled such testimony with a non-reliance clause? The judge presiding over this case remarked that such strategy would, “Not be a good idea.”
Auctioneers are not part of the annual CNN, USA Today, Gallup Honesty and Ethical Poll. However, those occupations most like auctioneers garner less than 20% (of the respondents) considering auctioneers honest and ethical. We as auctioneers can ignore perception I suppose and continue to play bait and switch with representation and facts, or maybe better hold ourselves up to a higher standard, and try to improve our reputations?
It seems to me the auction business is headed in a dangerous direction if all auctioneers put (or are encouraged to put) non-reliance clauses in their advertising allowing them to most likely avoid liability for false advertising. We as auctioneers have enough trouble now competing with Amazon, Walmart and other friction-less shopping environments and now we’re going to claim we can advertise property and then tell the public it’s not reliable information?
And finally, when auctioneers are selling any property, this particular issue of buyer dismay can be better resolved by the seller understanding they have a duty to ensure buyers receive what they (auctioneer and seller) say they (the buyers) are getting. That is, of course, unless we want these buyers (and their family, and their friends, and their neighbors and their coworkers) to never willingly participate in the auction process again?
This article has been published with permission from the author.
The original image and article can be found here.
Mike Brandly, Auctioneer, CAI, AARE has been an auctioneer and certified appraiser for over 30 years. His company’s auctions are located at: Mike Brandly, Auctioneer, RES Auction Services and Goodwill Columbus Car Auction. He serves as Distinguished Faculty at Hondros College of Business, Executive Director of The Ohio Auction School, an Instructor at the National Auctioneers Association’s Designation Academy and Texas Auction Academy. He is faculty at the Certified Auctioneers Institute held at Indiana Universityand is approved by the The Supreme Court of Ohio for attorney education.