To avid collectors, coins that stand out as rare or of exceptional quality are worth more than their weight in platinum, silver or gold.
Numismatic enthusiasts are often willing to pay a premium for American Eagle, American Buffalo and other specialty coins labeled “first strikes” because they are billed as among the first of that year’s batch produced by the U.S. Mint.
But some collectors say the label is misleading and that the coins aren’t special at all. Now, a Miami attorney has filed class-action federal lawsuits on behalf of potentially thousands of collectors claiming that the “first strike” designation is unfair and deceptive. More than $10 million in damages could be at stake.
“Basically, what we are saying is that it’s impossible to know which coin is the ‘first strike,”‘ said attorney Charles Lipcon, who filed the lawsuits on behalf of collector Thomas Francisco and others. “People are paying a lot of money and not getting a better coin. Really, there’s no difference between those coins and any other coins.”
For example, a silver American Eagle dubbed “first strike” might fetch an additional $30. But a gold American Buffalo coin with that label could sell for $2,200 more, Lipcon said.
The lawsuits name as defendants two of the nation’s leading coin grading and authentication services: Numismatic Guaranty Corp., based in Sarasota, Fla., and Newport Beach, Calif.-based Professional Coin Grading Service.
About 150,000 coins labeled “first strike” by PCGS or NGC have been sold since Jan. 1, 2005, to collectors and investors in all 50 states, according to the lawsuits. The implication, according to Lipcon, is that these particular coins were among the first “struck” by the U.S. Mint from a certain die set, leading purchasers to think they are of far higher quality than those created later when the die is allegedly worn.
“There are tens of thousands of people who have been duped,” Lipcon said. “People think they are getting something more valuable, and they’re not.”
On its Internet site, the U.S. Mint says that it does not keep track of the date individual coins were created and that the dates on 500-ounce boxes of coins represent only when they were packed, weighed and sealed.
In fact, according to the Mint, about half of a given year’s production of these collectible coins are finished before they are actually released. Thousands of coins are minted before each die set is replaced.
“This means that coins may be minted from new die sets at any point and at multiple times while production of a coin is ongoing, not just the first day,” the Mint statement said.
For their part, NGC and PCGS say they have not misled any collectors and that their definitions of “first strike” coins are clear. Both companies are paid fees to grade, authenticate and designate coins.
“We are the friend of the consumer. We are there to make sure they get a fair deal,” said Michael Haynes, chief executive officer at PCGS. “We give the consumer peace of mind.”
To PCGS, a “first strike” coin is one that is delivered by the Mint within 30 days of its initial sales date. American Silver Eagles, for example, usually go on sale Jan. 1, so a first strike would be any coin delivered by Jan. 31.
Lipcon, however, said PCGS previously used a definition indicating that a “first strike” was one of the first coins produced by a certain die.
NGC says it will designate a coin “first strike” if it arrives with the proper documentation at the company within the first month of release or is submitted in sealed U.S. Mint packaging at a later date.
“We have had a very clear definition the entire time. It was based on timing,” said Steve Eichenbaum, chief executive officer at NGC. “Everything we have done is very transparent. We made no representation with regard to rarity or no representation with regard to value.”
The cases have been assigned to U.S. District Judge Jose Martinez of Miami, who has not yet ruled on whether class-action status is appropriate. If Martinez approves class-action status, the twin cases could involve $10 million or more in potential damages because it would cover anyone in the United States who bought a “first strike” coin in 2005 and 2006.
On the Net:
Lipcon, Margulies & Alsina PA: http://www.lipcon.com
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