A law firm is resurrecting investigations that preceded its filing of a RICO lawsuit against eBay and several auction companies in 2007 in which plaintiffs charged eBay with racketeering involving shill bidding. The parties in Michele Mazur versus eBay, Inc., et al. had settled the case individually, but the plaintiffs' law firm, now going by the name Balestriere Fariello, may file another class action lawsuit over eBay Live Auctions, eBay's Internet-bidding service for live auction houses that it closed in 2008.

eBay launched eBay Live Auctions to provide an Internet-bidding platform for auction houses such as Sotheby's, which already accepted phone bidding for its physical auctions. But eBay also allowed companies that did not hold physical auctions to participate in eBay Live Auctions - specifically named as "seller defendants" in the 2007 lawsuit were Hot Jewelry Auctions.com, GoAntiques.com, Inc., and Neimans Jewelry.

Bidding on eBay Live Auctions was different from bidding on eBay.com. eBay identified Live Auctions bidding as either Internet bids or Floor bids for participants watching the auction on their computers. Because the seller defendants had no actual physical auctions taking place, plaintiffs characterized eBay Floor bids as fake or "shill" bidding since it was the auction house itself making the Floor bids. Plaintiffs said as a result, they paid more for the items.

In a hearing last year, Plaintiffs' attorney John Balestriere explained the plaintiffs' position to the Court, saying bidders "spent as much as they did looking at a grainy image, thinking, "Well, there's a floor bidder there who just bid $132 on that. If I just looked at this online, I'm not sure I would be willing to pay 132. But if it's that good, if someone else bid on it, well, I will bid now $142.""

In a 2008 hearing, an attorney for the firm of what is now Balestriere Fariello told the Court, "We think this is a classic RICO claim. It's a classic hub-and-spoke conspiracy." Congress passed the RICO (Racketeer Influenced and Corrupt Organizations) Act in an effort to combat the Mafia. The attorney said, "There are certain instances where there are floor bids taking place on eBay Live that are not shill bids. For example, when Sotheby's has an auction on eBay Live, our understanding is that there are genuine floor bids taking place there. But virtually every floor bid, as it were, in the case of Hot Jewelry Auctions, is a shill bid. Because there is no floor. There is no auction taking place. There's just individuals working for Hot Jewelry Auctions, making these floor bids."

In 2004, AuctionBytes published an article about GoAntiques' participation in eBay Live Auctions. Then-president Jim Kamnikar freely acknowledged there were no "real-life" physical auctions and said consignors kept possession of the items being auctioned and were responsible for shipping them to winning bidders. He described the process, including an explanation of the fee structure.

In August 2007, Balestriere's firm sent letters to the defendants, including a letter to eBay CEO at the time, Meg Whitman, now running for governor of California. The letter demanded that eBay cease representing that all eBay Live auctions were safe and consisted of carefully-screened international auction houses and immediately refund to their client and all users of eBay Live Auctions all moneys made through their participation in the eBay Live Auctions service.

It's interesting that in its motion to dismiss the case in October 2007, eBay used Section 230 of the Communications Decency Act in its defense; it is often used to protect ISPs and Internet publishers from liability from user-generated content, such as comments left on a discussion board. The Court ruled that eBay's alleged misrepresentations that the auction houses were "carefully screened" and were "reputable" were indeed protected by section 230 of the CDA and therefore not actionable, though it was not enough to warrant dismissal of the case.

eBay also argued in its Motion to Dismiss that all of the Plaintiffs' claims were barred by eBay's User Agreements and wrote that "each of the causes of action fails to state a claim upon which relief can be granted."

eBay spokesperson John Pluhowski told AuctionBytes on Monday, "We prevailed in the matter. We defeated class certification, the judge found no evidence of any damages, and after several years of litigation plaintiffs voluntarily dismissed the non-class claims with no payment by eBay."

As far as damages, the Judge ruled it would be difficult to set damages for all class members given the individual nature of each class member's transaction on the platform - in a hearing, she said she had not heard "anything that comes close to a method for proving up damages" for a class. In her ruling denying class certification, she wrote:

"In sum, plaintiffs have failed to show that common issues predominate over individual issues. The court finds that individual questions of damages predominate and therefore the proposed class is not sufficiently cohesive to warrant adjudication by representation. The court notes that many of these factors could well be unprovable on a class-wide basis and therefore fatal to any class certification. The court hereby DENIES plaintiffs' motion for class certification."

Balestriere said plaintiffs settled the case when the Court denied the plaintiffs' motion for class certification, a decision with which the firm respectfully disagrees, he said, and believes there are many people who were affected by eBay Live Auctions.

Balestriere's resume reads like a character out of a TV crime drama. Before joining a private practice, he worked in the Manhattan District Attorney's Office in the Rackets Bureau and then for the New York State Attorney General's Office where he directed teams of former police detective investigators, financial auditors, and investigative analysts into long term investigations of organized crime, insurance fraud, human trafficking and large identity theft rings.

Asked if he would again go after the auction companies in addition to eBay, Balestriere said it was like organized crime - "you have one big family group, and smaller gangs helping them. You go after the big group and anyone who helped perpetrate the fraud."

As to why he is pursuing the investigation, he said, "because the fraud happened and there are many victims," and said he believed that he could provide sufficient basis for a new court to certify a class." And, he stated, "Any RICO allegations we believe would be essentially the same as before: eBay provides the platform through which the seller co-conspirators are able to perpetrate their fraud."

To help understand arguments of both sides in this case, see a transcript of the March 9, 2009 court proceedings.

To learn more about Balestriere Fariello's current investigation, buyers who used eBay Live Auctions can email laura.sayler@balestriere.net.

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