PCGS' major grading error
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18 hours ago, coinman_23885 said:

I agree that it is absurd that PCGS would have missed something like this, but the language of the guarantee is extremely broad and regardless of the source (whether in the grading room or in inputting the data on the label), for purposes of the guarantee it is a "mechanical error:"

Clerical or "mechanical" errors. PCGS occasionally makes clerical errors in inputting data which is shown on the insert in the PCGS holder; consequently the PCGS Guarantee does not cover obvious clerical errors, what we call "mechanical errors." The key concept is how obvious the error is to the naked eye. If you can easily tell just by looking at the coin that the description on the holder is wrong, then the coin/holder combination is not covered by the PCGS Guarantee. Examples would include the following:

  • A date listed on the holder that does not match the date of the coin. For example, if you had a 1928 $20 St. Gaudens, but the PCGS holder showed the date as 1929 (a much more valuable coin), this coin would not be covered by the PCGS Guarantee as the date on the coin itself is obviously 1928.
  • A designation that is obviously incorrect. For example, if you had a 1945 Philadelphia Mercury dime and the bands on the reverse were as flat as a pancake and obviously not fully struck, but the PCGS holder showed the designation as "FB" for fully struck crossbands, this coin would not be covered the PCGS Guarantee as the crossbands are obviously not fully struck.
  • Proofs shown as regular strikes and regular strikes shown as proofs. For example, if you had an obvious regular strike 1907 $2.5 gold piece, but the PCGS holder showed the coin as a proof, this coin would not be covered by the PCGS Guarantee as the difference between a regular strike and proof 1907 $2.5 is obvious.
  • An obviously misidentified coin. For example, if you have a Hudson silver commemorative, but the PCGS holder showed the coin as a Hawaiian silver commemorative, this coin would not be covered by the PCGS Guarantee as a Hudson is obviously not a Hawaiian.
  • A variety attribution that is obviously incorrect. For example, if you had a normal date 1942 Mercury dime, but the PCGS holder showed the coin as a much rarer 1942/1 overdate, this coin would not be covered by the PCGS Guarantee as the date is obviously normal. Another example would be if you had a 1945 Mercury dime with an obviously normal size mint mark, but the PCGS holder showed the coin as a "Micro S." This coin would not be covered by the PCGS Guarantee since the mint mark is obviously normal size.
  • A blatantly obvious clerical input mistake with respect to the actual grade of the coin. For example, if you had an 1893-O Morgan dollar and the PCGS holder showed the coin as MS65 (a Gem quality coin), but the coin was so beat up and marked up that it would grade MS60 at best, this coin would not be covered by the PCGS Guarantee as this would be an obvious input error. The rule of thumb here would be a difference of more than two points on the grading scale.

Of course PCGS will argue that is was "obviously" not a matte proof (and I say that facetiously since few average collectors could tell you the diagnostics or make the distinction) as it was a business strike and not a proof.

It seems OBVIOUS that they expect the average person to know more about coins and grading than they do. If a company wants to give themselves kudos for grading the most, grading the best, ect, they ought to be accurate. If I took my vehicle to a shop for an oil change, and the engine seized a few miles down the road, could they claim "the engine OBVIOUSLY had no oil, so it's not our fault, you should have noticed." The above is an easy out for all the mistakes. You would think that a company with "Professional" in it's name, might try to be a bit more professional. Why get the "guarantee" of a coin's authenticity and grade, if you have to determine rather it's accurate, or an "obvious" error, by yourself? Maybe I'm just becoming jaded after 40 years of collecting, not to mention, I haven't really liked Kool Aide since I was a kid.....

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21 minutes ago, Treeman1 said:

It seems OBVIOUS that they expect the average person to know more about coins and grading than they do. If a company wants to give themselves kudos for grading the most, grading the best, ect, they ought to be accurate. If I took my vehicle to a shop for an oil change, and the engine seized a few miles down the road, could they claim "the engine OBVIOUSLY had no oil, so it's not our fault, you should have noticed." The above is an easy out for all the mistakes. You would think that a company with "Professional" in it's name, might try to be a bit more professional. Why get the "guarantee" of a coin's authenticity and grade, if you have to determine rather it's accurate, or an "obvious" error, by yourself? Maybe I'm just becoming jaded after 40 years of collecting, not to mention, I haven't really liked Kool Aide since I was a kid.....

I have no problem with the result in this case. As, when all was said and done, the original submitter was denied being unjustly enriched, due to a mistake. But if he had already sold the coin to someone else and later refused to unwind the transaction, the buyer would be stuck, big time. In that scenario, I feel that the grading company should step up to the plate, but seriously doubt that they would.  

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Or if the guy had gotten the coin back, did not discuss it online or other proveable place and then run the "PR65 RB" cent on ebay, with less than great pictures and it had sold well over $10K, what would PCGS' liability have been then?

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1 hour ago, MarkFeld said:

I have no problem with the result in this case. As, when all was said and done, the original submitter was denied being unjustly enriched, due to a mistake. But if he had already sold the coin to someone else and later refused to unwind the transaction, the buyer would be stuck, big time. In that scenario, I feel that the grading company should step up to the plate, but seriously doubt that they would.  

 
 
 
 

Why don't the services have one professional grader who verifies the slab once it is encapsulated to avoid this type of mistake?  It would take 30 seconds for each slab, and it would eliminate many potential problems in the future.  For bullion coins/ the newest moderns, the process would probably require an even less time (and this accounts for a good portion of TPG submissions).

Edited by coinman_23885

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3 minutes ago, coinman_23885 said:

Why don't the services have one professional grader who overlooks the slab once it is encapsulated to avoid this type of mistake?

That was part of what I did on a daily basis, while at NGC.  But I'm sure I wasn't perfect at it, and there are a lot more coins going out the door of each major grading company than there were when I was a grader.

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6 hours ago, MarkFeld said:

I have no problem with the result in this case. As, when all was said and done, the original submitter was denied being unjustly enriched, due to a mistake. But if he had already sold the coin to someone else and later refused to unwind the transaction, the buyer would be stuck, big time. In that scenario, I feel that the grading company should step up to the plate, but seriously doubt that they would.  

Why do you doubt that PCGS would honor the guaranty ?

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11 minutes ago, TonerGuy said:

Why do you doubt that PCGS would honor the guaranty ?

Because I think they would say it was a mechanical error and that they would therefore, not have any liability.

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6 hours ago, MarkFeld said:

I have no problem with the result in this case. As, when all was said and done, the original submitter was denied being unjustly enriched, due to a mistake. But if he had already sold the coin to someone else and later refused to unwind the transaction, the buyer would be stuck, big time. In that scenario, I feel that the grading company should step up to the plate, but seriously doubt that they would.  

Even if you have no problem with the result in this case (which I kind of do have a problem), can you explain how anyone could put any trust in the paid for opinion of a grading and authentication service, if there always exist a loophole if they are wrong? I could start a service, take peoples money, and give an "expert" opinion that may, or may not, be correct. Just seems like a rather worthless guarantee. Again, just my opinion, but it seems they expect the average collector to already be sure of the grade, authenticity, and category of the coin. Should be "obvious", so why do they exist?

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Both grading services are for profit businesses, their business plan is to charge as much as possible while delivering as little as possible to make money for the shareholders/owners.

 

Why are you surprised at the weasel words in the 'guarantee'.

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1 hour ago, MarkFeld said:

Because I think they would say it was a mechanical error and that they would therefore, not have any liability.

Oh I think the subsequent purchaser could possibly file suit under a negligence claim though. The warranty wouldnt necessary need to apply. I dont think has happened yet simply because PCGS has rectified the situation or there wasnt enough damages to warrant a suit.  I dont think PCGS would let it go that far though.

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55 minutes ago, TonerGuy said:

Oh I think the subsequent purchaser could possibly file suit under a negligence claim though. The warranty wouldnt necessary need to apply. I dont think has happened yet simply because PCGS has rectified the situation or there wasnt enough damages to warrant a suit.  I dont think PCGS would let it go that far though.

 
 
7

Does PCGS owe a duty to the would-be plaintiff above and beyond its guarantee/warranty?  I don't think it does, but if someone could devise a plausible theoretical basis for imputing liability outside of the guarantee, it would be a watershed case for the collectibles industry and perhaps warranties generally.   The numismatic community would be very wise to follow the case.

P.S.  Choice of law principles would seem to dictate that California law would apply.  California has unusually rich consumer protection statutes (compared to many other states).  Would any of those apply?

Edited by coinman_23885

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2 hours ago, TonerGuy said:

Why do you doubt that PCGS would honor the guaranty ?

Given that PCGS retroactively voided its copper color guarantee, I am not surprised.  If it would refuse to honor its warranty when there is clear liability or attempt to retroactively amend it into oblivion, it wouldn't make any sense for it to pay out when PCGS has no liability under its guarantee for a putative "mechanical error". 

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52 minutes ago, coinman_23885 said:

Does PCGS owe a duty to the would-be plaintiff above and beyond its guarantee/warranty?  I don't think it does, but if someone could devise a plausible theoretical basis for imputing liability outside of the guarantee, it would be a watershed case for the collectibles industry and perhaps warranties generally.   The numismatic community would be very wise to follow the case.

P.S.  Choice of law principles would seem to dictate that California law would apply.  California has unusually rich consumer protection statutes (compared to many other states).  Would any of those apply?

I wish I had more time to exhaustively research this but here's California's codes related to warranties...

http://www.dca.ca.gov/publications/legal_guides/m-1.shtml#warranties

The theory is just exactly why TPGs came into existence. They make the industry more trustworthy, liquid and professional. The idea of a TPG grade is that you can trust in it's accuracy and reliability, especially PCGS and NGC. Grading is subjective, but identifying a coin as either a proof or an mint state example is not usually open to debate. Therefore, trusting a reputable TPG to "get it right" is indeed what PCGS and NGC use as the basis for their success. It was a lawsuit over grade, I think its a loser. But if its about designation or a counterfeit coin, I think it may be a go. 

Here's an article in regards to counterfeit wines and a billionaire's lawsuit over them. Interestingly, Christie's, who authenticated the Jefferson owned wine, was originally a defendant but was dismissed based on a statute of limitations defense. Unfortunately, we dont know how a judge would have felt about the merits of his claim vs. Christie's...

http://www.winespectator.com/webfeature/show/id/42436

http://www.forbes.com/sites/deborahljacobs/2013/04/08/in-billionaires-legal-crusade-against-counterfeit-wine-money-is-the-least-of-it/#9c855202389b

 

 

Edited by TonerGuy

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On 2/21/2017 at 6:40 PM, MarkFeld said:

Because I think they would say it was a mechanical error and that they would therefore, not have any liability.

I did experience an exception to the above opinion, and also to the broad language of PCGS bullet point #5 posted above, re: mechanical errors.   I purchased a PCGS certified Morgan Dollar through a signature auction about 10 years ago.  The variety designation of 7/8 TF Strong on the PCGS holder proved to be wrong as in fact it was the 7/8 TF Weak variety.  At the time, PCGS offered the Presidential review, which afforded a review by David Hall.  Since the coin was graded MS64 DMPL, the market value between the incorrect and correct variety designation represented a significant spread. PCGS could have instructed me to ask the auction house to undo the transaction and let the auction house address the problem to their consignor.  Instead, they accepted liability for the mistake, re-designated the variety while preserving the grade, and returned the coin to me with a check for $2,000 to account for the lesser market value of the corrected designation. That may not be protocol today, but in that instance, I believe PCGS took the proper approach and made the right decision. 

Edited by Tonto
omission in original post

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They CHOOSE to extend their guarantee to subsequent purchasers to protect the value of their brand. But there is no contract between the TPG and the 2nd, 3rd or 9th owner after a coin is slabbed.

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7 minutes ago, bstrauss3 said:

They CHOOSE to extend their guarantee to subsequent purchasers to protect the value of their brand. But there is no contract between the TPG and the 2nd, 3rd or 9th owner after a coin is slabbed.

Why not?

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Partly it is the doctrine of first sale. Once you sell something the buyer has full rights to it and can do anything with it they want. This is why so much modern Commerce is moving to license not sale.

 

If I license you a piece of software, I can continue to control usage. You buy a smart TV or a smartphone but you license the software. That allows the manufacturer to continue to place restrictions on use.

 

PCGS is selling the service and slab. Not licensing it.

 

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33 minutes ago, bstrauss3 said:

Partly it is the doctrine of first sale. Once you sell something the buyer has full rights to it and can do anything with it they want. This is why so much modern Commerce is moving to license not sale.

 

If I license you a piece of software, I can continue to control usage. You buy a smart TV or a smartphone but you license the software. That allows the manufacturer to continue to place restrictions on use.

 

PCGS is selling the service and slab. Not licensing it.

 

I disagree. While it might be extremely difficult to collect under a grading guarantee, the guarantee doesn't apply only to the original submitter.

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I agree with Mark on this one. The encapsulated coin could be sold 20 times and if the 20th person discovers that the coin inside does not match what's on the label and it greatly devaluates the value of the price paid, IE; value prices previously paid at auctions, posted price charts, etc., it should trigger the 'so-called guarantee to make the buyer whole again.

Note, since a numerical grade is subjective, it would be hard to prove a coin to be a point or two lower, but attribution is usually covered under some sort of diagnostics, it's either there or not and the word vague is not a grading standard.

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I spoke with Ron Guth on this subject several years ago.  If someone buys an already graded PCGS slab in the open marketplace and it turns out to be wrong the guarantee will often protect them.  But if someone sends in a coin to be slabbed and it is misattributed or graded wrong in such a way as to provide a windfall to the submitter when it is corrected the guarantee will not apply.  The guarnatte is to protect buyers that depend on the accuracy of the slab when making their purchase decisions, not to provide a lucky submitter with a windfall if they make an error.  The submitter hasn't risked anything based on the PCGS slab.

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15 minutes ago, Conder101 said:

I spoke with Ron Guth on this subject several years ago.  If someone buys an already graded PCGS slab in the open marketplace and it turns out to be wrong the guarantee will often protect them.  But if someone sends in a coin to be slabbed and it is misattributed or graded wrong in such a way as to provide a windfall to the submitter when it is corrected the guarantee will not apply.  The guarnatte is to protect buyers that depend on the accuracy of the slab when making their purchase decisions, not to provide a lucky submitter with a windfall if they make an error.  The submitter hasn't risked anything based on the PCGS slab.

That is my understanding, as well.

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38 minutes ago, Conder101 said:

I spoke with Ron Guth on this subject several years ago.  If someone buys an already graded PCGS slab in the open marketplace and it turns out to be wrong the guarantee will often protect them.  But if someone sends in a coin to be slabbed and it is misattributed or graded wrong in such a way as to provide a windfall to the submitter when it is corrected the guarantee will not apply.  The guarnatte is to protect buyers that depend on the accuracy of the slab when making their purchase decisions, not to provide a lucky submitter with a windfall if they make an error.  The submitter hasn't risked anything based on the PCGS slab.

And thats the way it should and needs to be...

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PCGS has been very sloppy as of late from improperly labeled coins to improperly attributed varieties.  The one referenced in this thread was a fairly large mistake but at least it wasn't sold.  

I'm aware of several coins improperly attributed varieties that "were" subsequently sold for several thousand and they are nothing more than  $10 dollar coins.  PCGS was informed of these obvious errors and fortunately there are trueviews of the misattributed coins but to date they have

done...wait for it...nothing~!

Seems a screw up has to be in the tens of thousands otherwise it's just not important.

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Sometimes it's better to be quiet than bringing attention to yourself.

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9 minutes ago, WoodenJefferson said:

Sometimes it's better to be quiet than bringing attention to yourself.

Not if you've made a mistake that is going to cost someone other than yourself.

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Why would PCGS need a verifier at the end of the grading cycle when they could eliminate a salary and benefits as well as speed up turnaround time for us common folks. Just kidding but I think grading guarantee should be honored just to save face. Does it really come down to the fact that nobody got hurt here ?

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If someone that doesn't own the coin tells them about it they don't have to do anything about it.  OK they should put a note on the verification to be contacted, but until the actual owner of the coin contacts them they have no obligation.  It's to their financial advantage to keep mum.  Who knows it may get cracked and resubmitted or sent to another TPG. in which case they would be off the hook completely

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3 hours ago, Conder101 said:

If someone that doesn't own the coin tells them about it they don't have to do anything about it.  OK they should put a note on the verification to be contacted, but until the actual owner of the coin contacts them they have no obligation.  It's to their financial advantage to keep mum.  Who knows it may get cracked and resubmitted or sent to another TPG. in which case they would be off the hook completely

Sure, that would be to their financial advantage, but do,you really think that would be OK?

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Ethically no, financially, yes. Just about every business model has a small percentage of human error built into it, course the goal is 0 % but anytime you deal with humans there are going to be mistakes. You attempt to keep those mistakes down to a minimum with quality control, but some slip through and once the product leaves your control you wait until there is a legitimate complaint from the buyer before you do anything. With grading coins, you are dealing with a unique singularity here and cannot trigger a recall of sorts to correct a defect.

In the case of the PCGS being notified that there were some errors made and you are waiting for a response, perhaps they did contact the submitter and they are the one who choose to do nothing because they still have the graded coin and want to do nothing, sold the coin and have no record, etc. etc. Perhaps the parent company is still waiting to resolve the issue and left the truevues up because it hasn't been resolved yet? Jumping to conclusions is not the way to approach this problem. You did your part by notifying the parent company and now the ball is in their court. What goes on behind the scenes the collector will never know. If there is a media storm, as with what happened with the 1909 VDB proof, then yes, it would behoove the company to take quick action to resolve the error and prove that yes, they do make an occasional mistake and they will, within their powers to correct that mistake.

 

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