Caruso Music Company

1FED. R. B ANKR. P. 1007(a)(3) requires a debtor in a chapter 11 case to file a list of its equity
security holders. The debtor filed its list of equity security holders on August 25, 2005.
2By order of December 5, 2006, the Court required that objections by parties other than the plan
trustee to proofs of interests be filed on or before December 29, 2006. (A separate deadline, applicable
only to the plan trustee, had already passed.) The same order also specified that objections filed after that
date “shall be barred as untimely.”
In re
CARUSO MUSIC COMPANY,
Debtor
U NITED STATES BANKRUPTCY COURT
D ISTRICT OF M ASSACHUSETTS
Chapter
Case No. 05-15441-RS
MEMORANDUM OF DECISION ON
(a) OBJECTION BY JEFFREY B. KARLL TO
EQUITY INTERESTS OF LOUISE MAROTTA AND DR. ALFRED ARCIDI
AND
(b) MOTION OF DR. ALFRED ARCIDI AND LOUISE MAROTTA
TO STRIKE OBJECTION BY JEFFREY B. KARLL TO
EQUITY INTERESTS OF LOUISE MAROTTA AND DR. ALFRED ARCIDI
The confirmed plan in this case establishes a fund to be administered and distributed by a plan
trustee. Under the plan, the funds remaining after payment in full of all allowed claims against the estate
will be distributed on a pro rata basis among the debtor’s prepetition equity interest holders. The total
prepetition equity is comprised of 168 shares, of which Louise Marotta and Dr. Alfred Arcidi are, according
to the list of equity security holders filed by the Debtor,1 the owners of 41 shares each. On the deadline for
filing objections to claims of interest, 2 Jeffrey B. Karll, acting pro se, filed a document entitled “Objection by
Jeffrey B. Karll to Equity Interests of Louise Marotta and Dr. Alfred Arcidi” (“the Objection”). In its entirety
the Objection reads:
Jeffrey B. Karll as stockholder and claimant requests that the Plan
Trustee or an independent examiner be hired to review the 1999 Stock
Purchase Agreement between Louise Marotta and Alfred Arcidi and the
Caruso Music Company, to determine whether the agreement should be
set aside or rescinded due to lack of consideration, breach of contract,
and gross arithmetical errors in the closing documents in regards to the
consideration and calculations of the alleged classes of stock purchased
and distributed.
Marotta and Arcidi have filed a motion to strike Karll’s “objection” to their interests on the ground that it
asserts neither an objection nor a factual or legal basis for objection. In addition, Marotta and Arcidi have
filed a response that addresses the Objection on its merits. In a separate response to the Objection, the
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3The parties appear to agree that Arcidi and Marotta acquired their interests in the debtor under a
certain Stock Purchase Agreement of 1999.
2
Plan Trustee, indicating that he had conducted the investigation requested by Karll, set forth his findings.
At a hearing on the Objection, Karll stated that Arcidi and Marotta were supposed to pay $850,000 for their
stock but actually paid $50,000 less. Karll added: “and that’s why I want you to rescind that stock
purchase agreement of April 1999.”
The Court agrees with Arcidi and Marotta that the Objection is in substance not an objection at all.
It voices no objection. Nor does it set forth facts that might constitute a basis of objection. In it, Karll
merely calls for an investigation into whether cause exists to rescind the stock purchase agreement of
1999.3
FED. R. B ANKR. P. 3003(b)(2) states that “the list of equity security holders filed pursuant to Rule
1007(a)(3) shall constitute prima facie evidence of the validity and amount of the equity security interests
and it shall not be necessary for the holders of such interests to file a proof of interest.” Under 11 U.S.C. §
502(a), “a claim or interest, proof of which is filed under section 501 of this title, is deemed allowed, unless
a party in interest . . . objects.” Insofar as Rule 3003(b)(2) endows a listed equity interest with prima facie
validity without need of filing a proof of interest, the Court concludes that § 502(a) applies to listed equity
interests even when no proof of such interest is filed. That is, under § 502(a), a listed interest is deemed
allowed unless a party in interest objects. This requires a statement that the party in interest does in fact
object. Also, because the interest enjoys presumptive validity, the initial burden of proof in on the party
objecting, who must therefore, in addition to stating “I object,” state facts constituting a basis on which the
interest might be disallowed. An objection that does not state a legally sufficient basis for denial of an
interest having presumptive validity is like a complaint that fails to state a claim on which relief can be
granted. It may be overruled on its face and presents no need for an evidentiary hearing.
I construe Marotta and Arcidi’s Motion to Strike as just such a challenge to the objection. In
substance, the Motion to Strike is the functional equivalent of a motion to dismiss the objection for failure
to state a basis on which relief might be granted.
The Motion to Strike must be allowed, and Karll’s Objection overruled, because the Objection
lacks both requirements of a proper objection. First, though it is labeled an objection, it does not in any
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4I make no ruling here as to the legal sufficiency of the factual basis, which was sketchy at best.
3
manner state that Karll objects to the interests at issue. In substance it merely asks the Court to appoint a
third party to conduct an investigation. This falls short of the actual “objection” required by § 502(a).
Second, the Objection sets forth no basis on which the interests of Marotta and Arcidi might be disallowed.
I do not mean that an articulated basis is not legally sufficient; rather, I mean that the Objection articulates
no basis at all. For both reasons, the Objection, as an objection, is overruled.
At the hearing on the Objection and the Motion to Strike, Karll did finally indicate that he objects,
and he articulated a factual basis for the objection (that Arcidi and Marotta had paid less than the
bargained-for consideration). 4 The hearing, however, was held long after the time for objecting to interests
had lapsed. Neither does it relate back to the date of the filed Objection. Relation-back occurs only when
an amendment is in substance the same objection as was earlier filed. Here, the original filing contained
no objection at all. For that reason, the objection voiced at the hearing must be overruled as untimely.
Though the Objection fails as an objection, it does demand other relief: specifically, “that the Plan
Trustee or an independent examiner be hired to review the 1999 Stock Purchase Agreement between
Louise Marotta and Alfred Arcidi and the Caruso Music Company, to determine whether the agreement
should be set aside or rescinded.” 	The request for appointment of an examiner must be denied because,
under § 1104(c) of the Bankruptcy Code, a court may appoint an examiner only before a plan is confirmed.
11 U.S.C. § 1104(c). And the Court declines to order the Plan Trustee to conduct such an investigation for
two reasons. First, the Trustee has already investigated the issue and found no cause to disallow the
listed interest; indeed, he found that the matter had already been actually litigated and finally resolved in
favor Marotta and Arcidi, complete with a finding that the buyers paid the full purchase price. Second, the
deadline for objecting to interests is passed, so the proposed inquiry could not result in a timely objection
to claim, and its subject matter is now moot. For these reasons, the demands for relief contained in the
Objection will denied. A separate order will enter.
Date: June 25, 2007 	_______________________________
Robert Somma
United States Bankruptcy Judge
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4
cc: Joseph Butler, Esq., Trustee of Caruso Music Plan Trust
Jeffrey Karll, pro se
Paul Moore, Esq., for Dr. Alfred L. Arcidi and Louise Marotta
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