Fiduciary Duty of an Auctioneer

November 15, 2007

An auctioneer’s fiduciary duty is to the seller. This means the auctioneer is an agent for the seller and must act in the best interests of the seller.

This falls back on the basis of general law, widely accepted in all courts of law throughout the U.S.:
(1) “Fiduciary” means an agent, trustee, partner, corporate officer or director, or other representative owing a fiduciary duty with respect to an instrument (i.e. “contract”).
(2) “Represented person” means the principal, beneficiary, partnership, corporation, or other person to whom the duty stated in subdivision (1) is owed.

In addition, the field of real estate is usually quoted in many examples because they are basically the only industry that allows for “dual agency”. However, to completely understand this “agency”, you must understand that the Broker has ultimate responsibility for all transactions by any salespersons working under the supervision of the Broker’s license, therefore the actual Broker is undertaking the role of dual agency (not the individual salespersons, as I will explain). In other words, the Broker can not be a direct party in the transaction (in any way and must remain neutral, or without specific directions to either salesperson) and will appoint two different salespersons to work for the seller and the buyer, since an individual agent cannot represent a fiduciary to both. On the same basis of law, if a RE salesperson has not specifically contracted to act as a buyer’s agent, then it is automatically assumed that the salesperson is acting on behalf of the seller, therefore is the fiduciary only for the seller.

To support that last statement, the Federal Trade Commission (FTC) speaks of this in numerous publications, one of which is:
http://www.ftc.gov/os/comments/realestatecompetition/518795-00391.htm
Fiduciaries are held to a higher standard under common law. Upon visiting, for example, a store, a consumer does not expect, or have any right to expect, the store’s salesperson to be looking out for the consumer’s best interest. But in hiring a trusted lawyer or real estate agent or investment trust company (you may also add “auctioneer”) to act for him, a client expects full fiduciary responsibility, including undivided loyalty, with no undisclosed conflicts of interest. Consumers are more easily misled when, as clients, not just customers, they are giving their trust to their own professional fiduciary.

In addition, you can find additional commentary on the basis of fiduciary duties at:
http://en.wikipedia.org/wiki/Fiduciary
Conflict of duty and duty
A fiduciary’s duty must not conflict with another fiduciary duty. Conflicts between one fiduciary duty and another fiduciary duty arise most often when a lawyer or an agent, such as a real estate agent (also add “auctioneer”), represent more than one client, and the interests of those clients conflict. This usually occurs when a lawyer attempts to represent both the plaintiff and the defendant in the same matter, for example. The rule comes from the logical conclusion that a fiduciary cannot make the principal’s interests a top priority if he has two principals and their interests are diametrically opposed; he must balance the interests, which is not acceptable to equity. Therefore, the conflict of duty and duty rule is really an extension of the conflict of interest and duty rules.”

Also see:
http://en.wikipedia.org/wiki/Conflict_of_interest

In other words, as a sole individual/entity, you can not have a conflict of fiduciary duties between the parties, or you are subject to a dereliction of duty to one or both parties. Therefore, under the basis of general law, it basically means that when an auctioneer signs a contract with a seller (the principal), the auctioneer has a fiduciary duty to the seller to act as their primary agent on their behalf and in their best interests or “as they would act”.

Now, this does not mean that if the seller misrepresents something, that the auctioneer doesn’t have a “duty” to the buyer to correct the problem. However, the auctioneer and the seller are both responsible for providing a reasonable duty to provide said goods in the condition stated for the agreed upon price/trade, as this falls under the Fair Trade Agreement statutes (that you can also search for under the FTC’s website). However, this does not create a fiduciary duty to the buyer, but only serves to treat the buyer fairly under the FTC’s Fair Trade Agreement.

The primary point is regarding the auctioneer’s fiduciary duty to act on behalf of the seller. The difference between the Fair Trade Act regarding buyers and fiduciary duty to the client (seller) is the same, regardless of whether it is a real estate transaction or the sale of any other type of property.

A Fiduciary can not represent two different parties with opposing intents. The primary fiduciary is to the client that has contracted the auctioneer to sell (act on their behalf for the sale of) their goods.

Some have attempted to imply that the Terms and Conditions of Sale implies a fiduciary duty. This is not the case, as the FTC’s Fair Trade Act specifically demonstrates that it is only an agreement for the terms of the sale and creates no other duty upon the seller (or their agent) as a representative of the buyer, as they are opposing parties until the final agreement has been reached. The Terms & Conditions (terms of their agreement) for an auction are only the conditions of finalizing the transaction, which both, the buyer and the auctioneer (seller’s fiduciary agent) are agreeing to as part of the sale, with only price being the final factor and determined upon the call of “Sold”. Therefore, the auctioneer has only “perfected a sales agreement” (that’s how a lawyer would state it) with the buyer on behalf of the seller (the principal fiduciary).


IRS Tax Refund? WOW! I Don’t Think So…

October 9, 2007

OK… while this is a little off-topic for this weblog, I couldn’t resist! The following is a spam phishing scheme that got into my inbox. Besides the fact that I knew it was fake because the IRS isn’t going to contact me through this email address, there were a couple of other minor things to indicate that something wasn’t quite right… like the url in the “click here” was not the IRS website! (unless they’ve moved their offices to .ru <which I believe is Russia?> – I removed the url to protect anyone from accidentally clicking on it) See if you can spot the other one…

After the last annual calculations of your fiscal activity we have determined that
you are eligible to receive a tax refund of $268.32.
Please submit the tax refund request and allow us 2-3 days in order to
process it.

A refund can be delayed for a variety of reasons.
For example submitting invalid records or applying after the deadline.

To access the form for your tax refund, please click here

Note: For security reasons, we will record your ip-address, the date and time.
Deliberate wrong inputs are criminally pursued and indicated.

Regards,
Internal Revenue Service

Yep! That’s right… You could be INDICATED! I think the sender should be INDICTED for stupidity, as this only INDICATED to me that the sender is also illiterate!! While I found this amusing, I also realize that there are a lot of other folks that will fall for this scheme, which is not so amusing. We hear about Identity Theft a lot these days… this is one example of Why It Happens! Out of excitement, greed or just plain ignorance, someone clicks the link and provides this scammer with all of their personal information and their bank account info (for the “IRS” to deposit their “refund”) and in only a few days or weeks they find their bank account empty and possibly new credit cards issued in their name with charges on them for all kinds of stuff. Not only are they robbed, but now they spend a lot of time and effort trying to clear their name and credit.

If you get ANYTHING that you didn’t specifically request in your Inbox… DELETE IT, IMMEDIATELY!! If you OPEN it and THINK it might be real… DON’T click the link provided. Instead, Google the REAL website and look for information about the subject… OR check out http://www.snopes.com for information about all kinds of scams. They also cover all those other fake emails that tell you to “pass it on to all your friends” (please don’t send them to me, as I’ve already seen most of them and deleted them without bothering my friends). If it’s been on the web, Snopes.com probably has the facts about it… bookmark the site and use it often!!


Ebay Class Action Lawsuit?

September 25, 2007

This was found in my Weblog Spam folder. While it may be a valid question, the fact that it originated from an Australian server and the guy is in New Jersey is probably why it got tagged. However, I also found it a little suspicious that his website has a link to Mr. Auction Vendetta’s blog (maybe a friend??? who knows). It’s been four days since a sent this guy an email and have receive no response.

Anyway, here’s his question/comment, followed by my reply.

I came across your website as I am fascinated with auction law and the auction process. I used to sell on Ebay. Since you are into electronics, you may find this fascinating and ripe for a class action lawsuit. Ebay claims they list items for 3, 5, 7, or ten days, but in fact this is not accurate. When a user posts an item, it takes upwards of 4 hours for the item to be found on the auction site. Thus a 3 day auction is really more like a 2 day and 20 hour auction.

Is is possible to be updated as to your new blog posts? Also, as an auctioneer, besides Ebay, would you be able to recommend any good dealers of Star Wars collectibles?

Thanks,
Rick

—My reply—

Rick,

Your post in the Auction Law blog was detected as “spam”. I am assuming that it is because the IP you were logged in under was in Australia (part of the Asia Pacific Network, which has a high rate of spammers). Looking at your website, it appears that the phone number is in New Jersey. So, I guess I’m a little confused, unless you’re using one of the random identity servers.

To get updates, if you are logged into WordPress/Weblog, you will find a “Blog Info” button in the top right corner and you can just click “Subscribe to Blog”. You can also use an rss reader.

I don’t do much on Ebay, except buying occasionally. I’ve listed a few items over the last 10 years, but I’ll usually sell my items through a live auction. Most items tend to do as well, if not better than on Ebay. Of course, there are the exceptions.

As far as my electronics background… while I still find myself fixing my own computers when I have to, I’m trying to forget as much as I can about it. That is my past and while it was a good career, it’s not what I do today. Your idea of a lawsuit based on Ebay‘s posting criteria… I would recommend talking to a lawyer. However, I personally don’t think it would have much of a chance of winning. Keep in mind, it says “days”, not “hours” (you’ve got to think about how a lawyer can rationalize it). So, if it was posted on a particular day, given a “reasonable” period of time for the computers to respond to the massive amounts of data that are being submitted, the listings are still posted for the “stated number of days”. It’s kind of like waking up at 5:00AM or 8:00AM… in the evening, you look back and you still had “your day”. (OK, maybe that isn’t the greatest explanation, but you get the idea.) Anyway… like I said, you would probably want to talk to a lawyer. There’s always one somewhere that will take on just about anything. (I’ve got two in my family.)

Finally… STAR WARS!!!! Sheesh… You already missed it! In the past few months, we have done two auctions with lots of Star Wars (& some Star Trek) collectibles. It’s not something we do regularly… we just happened to have two large consignments come in. Of course, we get stuff like that off & on, but not normally enough to feature an auction. But, then again, it would be a long trip from New Jersey… and one of the reasons I don’t do much on Ebay is I don’t care for the packing and mailing. At least, at a live auction, they just carry it out after they’ve paid for it.

You can also find live auctions listed on AuctionZip.com and search for items you’re interested in.