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Touch and Go v. The Buttholes

After nearly 20 years of putting out records without lawyers or contracts, Corey Rusk was forced by one disgruntled band to defend his system in court. The outcome may change the way the underground does business.

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Who owns indie rock? On March 26, the federal appeals court in Chicago upheld the Butthole Surfers' right to end a handshake deal with their former label, Touch and Go--the granddaddy of Chicago independent labels. The Buttholes, who signed to Capitol in 1991, sued owner Corey Rusk to reclaim the six records and long-form video they made while on Touch and Go in the mid-80s. Though technically the band won because their contract for those releases didn't specify an end date, things might have gone differently if that contract had been in writing. But like all deals in the label's history, the Buttholes' agreement with Touch and Go was verbal.

"In reality doing this on a handshake basis may be hard to defend," says Rusk, "but in 18 years I've tried hard to only work with people I thought I could be friends with and who could understand how it is I want to work. This is the only time I've ended up in court. Most labels have probably been sued more than once."

Rusk operates on an honor system that's become nearly as influential as the label's roster, which has included the Jesus Lizard, Big Black and Shellac, Slint, Urge Overkill, and Girls Against Boys. He pays the bands 50 percent of the net profit on their records--about four times the industry's standard royalty rate. In return, or so Rusk thought until recently, Touch and Go gets the right to press those records for as long as it can keep them on the market. This is the label's forte, and also its bread and butter: almost all the nearly 300 records released by Touch and Go and its sister label, Quarterstick, are currently in print.

Now, however, as a result of the court's decision, Touch and Go and the dozens of labels that follow the same business model--including the local Thrill Jockey and Drag City imprints and Dischord in Washington, D.C.--face the possibility that their principles may cost them their back catalogs.

"We work hard for our bands, and I feel like we've always held up our end of the bargain with them," Rusk says. "A deal's a deal, and our deal's a fair one. Anytime a band wants to stop working with us they should, but that has no bearing on the records we've already done."

But in early 1996 the Butthole Surfers sued because they thought that the deal was no longer fair--that the label was no longer earning its 50 percent share, that it was merely benefiting from the work the Buttholes and their new label had done. "In the 90s they were not placing a lot of calls to music writers saying, 'Hey, how about the Butthole Surfers,'" says drummer Jeffrey "King" Coffey. "Those sales were generated by 'Pepper,'" the band's hit single from its 1996 album, Electriclarryland. Coffey also says the Buttholes disagree with Rusk about just what the deal was, and that they wouldn't have done business with Touch and Go had they known Rusk expected to own their work indefinitely.

The basis for the Buttholes' suit lies in copyright law, which has not kept pace with punk-rock business practices. Writing the decision for a three-judge panel of the U.S. Court of Appeals for the Seventh Circuit, which hears appeals from Illinois, Wisconsin, and Indiana, Judge Terence Evans opens: "Paul L. Walthal, Gibson J. Haynes, and Jeffrey S. Coffey are the Butthole Surfers. For the unenlightened, that's a musical group." He goes on to describe Touch and Go and its deal with the band, remarking, "One would ordinarily think that an agreement of the type we just described would be in writing, for as Yogi Berra observed, 'A oral contract isn't worth the paper it's written on.'"

Rusk's attorney, former Big Black guitarist Santiago Durango, thinks the court did not take his client seriously. "These contracts are so uncommon in big industries, but they are prevalent in the music industry," he says. "Any label in Chicago should be concerned about this."

The decision says that because a transfer of copyright from an author to another party must be in writing, an oral agreement between a band and a label is at best a "nonexclusive license," under which the artist can transfer the copyright to any number of other parties as well. Of course, in reality no label would ever agree to put out a record that could also be distributed by a rival, but legally Rusk had little leeway to try to enforce anything more binding. The court also held that under Illinois law a contract with no end date can be terminated by either party at any time. In practice, this probably applies to all oral indie-rock contracts, which are almost universally assumed to be permanent.

Congress wrote the Copyright Act of 1976 to protect artists from bad deals, Evans lectures in the decision, and as proof of the need for the law he cites critic Dave Marsh's 1994 history of "Louie, Louie." Author Richard Berry sold the publishing rights for $750 in the mid-50s only to see the song generate millions for others in the 60s and beyond. Evans doesn't mention that both Berry and the Kingsmen, who recorded the most successful version of the song, later recovered some of those millions in court. Nor does he mention that, according to the Seventh Circuit's decision, if Rusk had given the Butthole Surfers a bad deal with a time limit--even orally--it might well have been enforceable. Evans also bluntly rejects a decision from the federal appeals court for the Ninth Circuit that could be interpreted in Rusk's favor: while the deal might have been enforceable in Los Angeles, in Chicago the Buttholes win.

Rusk paid the band mutually agreed upon damages before filing the appeal, so he faces no more financial consequences beyond the loss of revenue from the Buttholes' back catalog. He now must decide, along with Durango, whether to pursue the case further--possibly appealing to the U.S. Supreme Court--or to let it rest. If they do appeal, they will most likely ask the higher court to resolve the difference between the two circuit decisions. But as Coffey notes, even if Touch and Go eventually won, "they'd be releasing a record against the band's own wishes, which is totally the opposite of the way they do business."

Still, the loss has been hard for Rusk to accept, because he feels he did the right thing--which may be why the normally reclusive 35-year-old agreed to speak for this story.

"I feel like Lenny Bruce at the end of his career," he says, "muttering to everyone about the law."

Touch and Go inspires fierce loyalty in its artists, and some bands--including Seam, Shellac, and the Rachel's--have stayed with Rusk despite offers from majors. There are practical reasons as well as emotional ones. Touch and Go doesn't give huge advances, which would only come out of the bands' royalties anyway, but under the profit-split system, a record that sells respectably but not with a bullet--say, 50,000 copies--can generate more in royalties than it would on a major label.

"We loved being on Touch and Go," says Johnny Temple of Girls Against Boys, which signed to Geffen after three records on Rusk's label. "We were eager to work with a major label, but not eager to leave Touch and Go."

"Touch and Go is a very good label because it is run in a very businesslike fashion," Jesus Lizard bassist Dave Sims told Darren Cahr for the Chicago-based zine Punk Planet in 1993. "When you first start talking to other labels, they will always, always promise you the moon....[Major labels] promise all this tour support, big advances, big recording budgets, and they never tell the band...that they're talking about spending all the band's money. They're talking about guaranteeing the bands will never get paid other than in the form of a big stupid bus they don't need on tour and all these stupid deli trays while they're recording that they don't need.

"Corey, on the other hand...he says, 'look, this is what we need to do to turn a profit on this record. If you want the deli trays, this is how much it's going to cost and this is how many records you're going to have to sell to pay for them. Do you want the deli trays or do you want the money from those records?' Then it all becomes very easy."

Even the Buttholes' Gibby Haynes admires Rusk's business smarts: "We felt lucky to be associated with a guy like Corey because of how businesslike and cool he was. He combined the mentality of punk rock with solid capitalistic business sense. If everybody on the block got into skateboarding, he'd get into it along with everybody else, but he'd be selling the skateboards. Everybody on the block would have a better skateboard than everyone on the next block, but everyone else would have paid for Corey's skateboard."

In the early days Touch and Go bands like Scratch Acid and Rapeman (both of which included Sims) were in little danger of being courted by major labels. Today those that do think they can do better elsewhere are free to leave, as the Jesus Lizard did in 1995 to sign to Capitol. Rusk has had multirecord deals with only a few bands, including Urge Overkill and Girls Against Boys. In the immediate post-Nirvana era, Rusk says, those groups wanted to put more money into promotion than he was comfortable spending on just one record. But when those bands left, Rusk did not profit by selling off the remainder of their contracts.

Sims says that the Jesus Lizard, which is no longer on Capitol, did not sell any more records on the major than on Touch and Go, and that the records Rusk released will always belong to Touch and Go. "That's an agreement we made," he says. "I expect my word to count for something."

Rusk says this is vital to the label's continued ability to operate. "One thing that enabled us to exist for so long is having income we can rely on," he says. "There's no way I could do as good a job if every day there was the possibility we could lose our steady income from our back catalog. There's no point in having a staff if tomorrow I can't pay them."

But Coffey takes exception to Rusk's argument. "It's our back catalog as well, our livelihood, our retirement money," he says. "It's what we have done as a band, what all three of us have devoted our lives to since 1983. This is what we have to show. Touch and Go puts out records by many bands, but we have only the Butthole Surfers' records. We can't rely on Shellac or the Jesus Lizard to pay our bills."

Touch and Go began as a hobby. Rusk grew up near Toledo, Ohio, where he started a band, Necros, in high school. At that time, "Touch and Go" was the title of a fanzine published by his friend Tesco Vee (who went on to lead the cartoony shock-rock band the Meatmen) out of Lansing, Michigan.

Rusk put out some Necros singles under the Touch and Go name while still in high school; two years after he graduated, he moved to Detroit. The third Touch and Go release, a 1981 seven-inch Necros EP, was produced by Fugazi's Ian MacKaye, then the singer for Minor Threat, and coreleased by Dischord, the label MacKaye had founded with his former bandmate Jeff Nelson. MacKaye and Rusk remain close.

"We started maybe a year before them, and they followed our model--a profit split with the band," says MacKaye. "At a certain point Corey had to choose between being in a band and running a label, and he realized he knew a lot about putting out records and just went for it." Toward the end of 1982, Vee moved to D.C. and Rusk met Lisa Pfahler, who would become his business partner and later his wife.

Coffey, Haynes, and Paul Walthal (aka Paul Leary) had formed the Butthole Surfers in San Antonio about a year earlier. The band combined gross-out humor with an abrasive psychedelia that was, at the time, genuinely transgressive. They developed a national following on the basis of their wildly theatrical live shows and two EPs released by Alternative Tentacles, the Bay Area label founded by Dead Kennedys front man Jello Biafra. They learned of Rusk through a mutual friend, and in 1984 he agreed to put out their first full-length studio album, Psychic...Powerless...Another Man's Sac.

"The first two bands I worked with who hadn't already been my friends for a long time were Die Kreuzen, from Milwaukee, and the Butthole Surfers," recalls Rusk. "The Buttholes didn't really live anywhere then, and they would stay with us for weeks at a time."

The Rusks and the Buttholes became friends quickly enough. "We were living out of a van for three years, working the records really hard," Coffey says. "If we were in Detroit, we knew we had a place to crash for as long as we needed while we tried to book more shows. If we needed a loan, he would wire it to us. If we needed to go into a studio, Touch and Go would write us a check. It was all recoupable, but Corey and Lisa were always there for us. One time Corey and Lisa were in New York while we were going to Boston to play a show. When we got to Massachusetts, the state police took away our van and dumped the band, our equipment, and our dog in a parking lot. Corey and Lisa drove up from New York, picked us up, and took us to the show. Another time, Corey sent his dad to get us in Ohio."

"He was very helpful to us, and we considered him a good friend," says Leary. "But after three years of living on the road in squalor, we wanted to have what Corey had--a house, cars, exotic animals....

Corey's always made much more money off the catalog than I did. A dollar for Corey, 20 cents for Paul Leary--I'd want that deal for perpetuity too."

Even in the beginning the Buttholes were in a much better negotiating position than Richard Berry. Haynes was an accountant with the national firm Peat Marwick until he quit to join the band full-time, and the band's official bio says he was a "star accounting and economics student" in college. Leary "almost" earned a graduate degree in finance, and both men were at least six years older than Rusk, who was 20 in 1984. But they didn't ask how long Touch and Go wanted to put out the records. "We weren't thinking about that at the time," says Haynes, who was doing double duty as manager then. "Who would?"

"When the agreement was made, the band said, 'Sure, we'll do some records on Touch and Go,'" says Coffey. "We never had any conversations that were, 'You, Corey, will put this out forever.' We never would have given away perpetual rights to our music to someone we had just met. I think the band's assumption was Touch and Go would have them as long as things were going well, which at that time we thought would be forever."

In the five years they recorded for Touch and Go, the Buttholes evolved from brash pranksters into a full-fledged national phenomenon. With their albums Rembrandt Pussyhorse (1986), Locust Abortion Technician (1987), and Hairway to Steven (1988), they brought a nasty exuberance to the dull world of college rock. Their live show was a raucous circus of detourned classic rock, electronic distortion, strobe lights, go-go dancers, pyromania, and film footage of car crashes, venomous-reptile battles, and penis reconstruction surgery, and they invariably concluded with a rousing version of R.E.M.'s "The One I Love." In taking Warhol's Exploding Plastic Inevitable concept to new levels of debauchery, the Buttholes helped pave the way for Jane's Addiction, White Zombie, Marilyn Manson, and the whole alternative freak-out to come.

In 1991, the year Nirvana broke, the Buttholes signed with Rough Trade, which gave them a large advance and which they say was more aggressive in promoting records than Touch and Go. Too aggressive, perhaps--the British indie collapsed not long after releasing their Piouhgd later that year. The Buttholes, unlike many of their labelmates, got their money out of the deal. Capitol reissued Piouhgd in '92, followed by their major label debut, Independent Worm Saloon, produced by Led Zeppelin bassist John Paul Jones, in '93. The Buttholes had gone from skewering rock's sacred cows to collaborating with them.

As punk grew up, so did Touch and Go. The Rusks moved to Chicago in 1986; they divorced in 1991 and Corey bought Lisa out of the business. The label now has 17 employees and, unlike sometime peers Matador and Sub Pop, who've both been in bed with large entertainment conglomerates, it has remained independent, making and distributing its own records and providing "P & D," or pressing and distribution services, for nine other labels--including Trance Syndicate, a small imprint owned by King Coffey.

Though Coffey recently decided to stop putting out records, he is keeping the ones he's already released in print. Rusk, who hasn't spoken to Coffey in about a year, says he'll continue to distribute them. "There are some cool bands on Trance," he says. "If Touch and Go stopped P & D'ing their catalog, a lot of their records would probably not be available."

Rusk says that despite Touch and Go's size he has remained personally involved with every artist on the label. "I won't put a record out until I've spent enough time with a band trying to understand the people and the music so that I can feel comfortable working with them," he says. "When Touch and Go started, the market wasn't like it is now. We'd sell two or three thousand copies of a record. Other labels would spend all this time and money drafting contracts, and by the time they were done the band couldn't make any money."

While he may deviate slightly from his standard agreement to accommodate the needs of a particular record or band, he tries to keep it simple. "Having the same deal every time keeps me from having to deal with contracts and the world of lawyers," he says. "It's more direct. Music industry contracts are superconvoluted. The only way deals like that can be constructed and maintained is with lawyers, and as soon as you involve lawyers it becomes expensive and drawn out and filled with suspicion and paranoia."

Rusk feels the same way about managers. Unfortunately, when the Butthole Surfers first decided they wanted to renegotiate their deal with Touch and Go--more than a year before they filed the lawsuit and almost two years before "Pepper"--they asked their manager at the time, Tom Bunch, to take care of it. Coffey says Bunch "called Corey and faxed him repeatedly, but we never heard back from him."

"The first couple times their manager called me, I did speak with him," Rusk says. "I thought what he was proposing was so ludicrous that he must be doing it on his own accord. I figured that if what he was proposing was really the wishes of the band, I would be hearing from the band. Eventually I did stop taking his phone calls." Rusk suspected that the manager was trying to get involved in the back catalog deal so he'd be entitled to a cut, which Leary and Haynes both deny.

Rusk says now that he may have been too stubborn: "I suppose maybe I should have picked up the phone and called them. I have to admit I was insulted I was getting these calls from their manager."

"Corey has a point," says Coffey. "He said, 'I didn't make a deal with the manager. I made a deal with the band. Why should I be discussing this with anyone other than Gibby?' But we pay our manager 15 percent of our income, and he has to earn his keep. Corey can't ignore him just because he doesn't like him. Corey didn't make it clear until well into the lawsuit that [he hadn't called back] because he wanted to talk to Gibby directly. We had to take it to court to force the issue because otherwise nothing would happen."

The legal battle started officially in December 1995 when the Buttholes sent Rusk a letter demanding that their share of the net profit be increased to 80 percent. When Rusk refused their proposal in writing, they sent him another letter demanding that he stop selling their records and give back the master tapes. When Rusk again refused, the Buttholes sued him and Touch and Go for copyright infringement, replevin (legalese for "return of property"), and invasion of privacy.

In January 1998, U.S. District Court Judge David H. Coar found in the Buttholes' favor on the first two counts, and in February he ordered Rusk to pay the Buttholes $100,000, to stop making and selling their merchandise, to return the master tapes, and to destroy his inventory of Buttholes records. Rusk smashed their merchandise in the back of a garbage truck, documenting the destruction on video, then filed the appeal that was decided on March 26.

"One of the most painful moments of my life was going to [my] deposition," says Coffey. "It tore me up to see my name attached to a lawsuit against a friend. I've lost friends in this process, I had to witness my friends turn against each other, and there wasn't much I could do about it because everyone on both sides felt so strongly that they were right.

"Near the end Corey agreed to pay us 70 percent, but by that point it was too late. We had already been deposed, and there was so much bad feeling on both sides that there was no way the records could remain on Touch and Go. I love Touch and Go. They're one of the best labels in the country. I wish the records could have stayed on Touch and Go and made money for Touch and Go. By their nature these records should have the Touch and Go label on them."

But Haynes says the band and the label simply had different goals. "Corey wanted a medium return, while we wanted to maximize our investment," he says. "You can only get so far on shocking band names and song titles. This isn't art. If it were art, I'd feel uncomfortable selling it."

Since signing to Capitol the Buttholes have seen both the high and low points of their career. Electriclarryland has sold more than 600,000 copies to date, according to SoundScan. But its follow-up, After the Astronaut--originally scheduled for a May 1998 release--has yet to come out, and Coffey says neither the band nor the label wants to release it at this point. A Capitol spokesperson confirms that there are "no plans" to do so. So when Rusk compacted Touch and Go's inventory, the better part of the band's catalog went out of print.

Last month a New York-based new-media company, CDuctive, announced that it had been authorized to make songs from the band's Touch and Go albums available through its Web site, which allows customers to create custom CDs from a library of "cutting edge" tracks licensed from the likes of Aphex Twin, Pere Ubu, and the Jesus Lizard. The band has also pressed 5,000 copies of each album. "We're helping ourselves out in a pinch, making sure they're in stores," says Haynes. "It's a stopgap measure, not an all-out assault." And if the Butt-holes have another hit, says Leary, they'll be able to market the back catalog to their satisfaction, without sharing the profits.

"The Buttholes are screwed," predicts Bettina Richards, founder of the Chicago indie Thrill Jockey. "Corey did so much for them, and they would have sold five times as many records with him as they're going to sell now."

Thrill Jockey, which over the last eight years has put out about 70 records by the likes of Tortoise, the Sea and Cake, and Trans Am, uses Touch and Go's P & D department as well as its business blueprint. But Richards, who started in the music business as an A and R rep for Atlantic, does occasionally employ written contracts.

"We're a small company," she says. "To make it work we have to be flexible. If an artist has a special concern, we try to accommodate them. For example, Oval were in Germany and I'd never met them; I sent them a contract to be sure we understood each other. On the other hand, we're putting out a record with DJ Takemura in Japan, and he doesn't want one.

"My whole label is based on trust and respect. That's the reason I do this: to deal with people as artists, not as commodities. The most important element for me is that communication be open and clear and that people are honest and trustworthy. I don't feel like I have to get a contract from everyone. Hopefully I've used my judgment well."

Sue Garner, who's played in the New York bands Run On and Fish & Roses and has worked with a string of independent labels, released a solo record on Thrill Jockey last year. Despite having been burned by other small companies, she admits she didn't think twice about making a verbal agreement with Richards. "I was so thrilled she'd want to put my record out, I didn't ask too many questions," Garner says. "I wouldn't have done that if I didn't know people who worked with her and spoke so highly of her. But if I were going to sign a major-label deal I'd go out and get the best lawyer I could, because that's a totally different world."

Dischord has kept its focus on the D.C. area precisely so it doesn't have to sacrifice its close relationship with its artists. "We can sit down if there's a problem and discuss the situation," MacKaye says. "We don't need letters and faxes and E-mail."

But if the Seventh Circuit's decision stands, a letter, fax, or E-mail may be all an artist needs to transfer the rights to a record from an indie that has a handshake deal to a major with an open checkbook. While that possibility has always existed, the Buttholes' victory has raised the stakes by making it explicit.

Some of Rusk's biggest defenders concede that the protections relied on by the Butthole Surfers are necessary. "Conceptually [the Copyright Act] is a good law," says MacKaye. "It happens that in this perverse situation it was used against something that's right. It doesn't surprise me. Courts don't understand this--it's outside of their domain. Courts are the domain of lawyers. If you have an oral contract, lawyers don't get paid. It's kind of perfect that a court would be offended by that."

Sally Timms of the Mekons, who settled on Rusk's Quarterstick imprint in 1993 after numerous struggles with other labels, says she would like to find a middle ground between corporate boilerplate and indie goodwill: "When it comes to a dispute in a verbal contract, it's very hard to say what one person's understanding was at the time. I'm in favor of one-page agreements setting out the basics. You don't have to go into legalese to do that."

Timms is in the process of negotiating a fifty-fifty profit-split deal with the local Bloodshot label for her next solo album. Bloodshot usually uses written contracts, though co-owner Nan Warshaw says she has relied on oral agreements with artists who'd been on major labels and weren't likely to go back--like Timms's bandmate Jon Langford.

Timms says the Butthole Surfers' lawsuit has already affected the way she's thinking about her deal with Bloodshot. "I asked them, 'What happens if you sell?' They said, 'We'd never sell.' I said, 'Well, what happens if you get hit by a bus and your relatives take over?'"

The system created by Rusk, MacKaye, and others depends on a code of mutual trust that has for the most part stubbornly survived the consolidation and corporatization of the rest of the music industry. Even after Girls Against Boys signed to Geffen, they delivered the last record they had promised to Touch and Go. The band's loyalty was due in no small part to its roots: three of the four Girls were in Soulside, which released several records on Dischord.

"Our whole band identity is wrapped up in where we came from," says Johnny Temple, who acknowledges that the band honored its agreement as much out of self-interest as out of principle. "We would have been shooting ourselves in the foot to alienate the people who got us where we are."

Even a written agreement can't guarantee that level of cooperation. "If one party becomes a fucking jerk, no contract is going to help," says MacKaye. "The Butthole Surfers wanted more money. What's at issue is one party let their greed totally upset the balance of the relationship."

"Greed is a curious word," Coffey responds. "There's greed all around here. You could also say Touch and Go is greedy for wanting to keep taking 50 percent of the profits forever, or to keep the records when they weren't doing as much work anymore. There's no punk-rock moral high ground here.

"Somebody asked me if we were setting a bad example for handshake labels, but I think this is a very unusual situation. Very few bands [on indie labels] have a back catalog approaching 15 years and go on to major labels. This case is not going to change the fundamentals of punk-rock deals. I just don't see this happening too often in the future. I hope I'm right."

But Leary's less enamored of those fundamentals. "If you look at punk-rock bands from 1981, their success rate is not good," he says. "It's basically poverty, misery, and death. We had to claw and fight for everything. The ones that made it are the ones that fight. That's what punk rock was about anyway. It's not about causes or right and wrong. It's about fighting."

Rusk and his peers say they will not change their business model, despite the precedent the appellate decision sets. "What do you learn from that?" asks Richards. "You learn not to work with those people again. I can't start looking at the people I work with with doubt. I just don't want to operate that way. I've got a lot of other stuff to worry about, like whether I'm doing a good job for the bands. Am I protecting myself as a business? No. But once you start putting in precautions, you wind up with the same system a major label has."

Rusk himself says the lawsuit was a "freak occurrence" and does not expect to be sued by anyone else in the near future. But the case has given him something to chew on. "Morally I don't think the bands we work with will act that way. I don't think they'd feel right," he says. But if for some reason they did, he adds, "I'd have to think again about whether there was still a need for a company that operates the way we do."

"If you go for a walk in the park," MacKaye responds, "and it's a beautiful sunny day but four guys jump out of a bush and beat you to the ground and take your money, that doesn't mean you shouldn't go in the park. It means you got robbed."

Art accompanying story in printed newspaper (not available in this archive): Corey Rusk photo by Rolled Steel Photo; Butthole Surfers photo by Will van Overbeek; Gibby Haynes photo by Will van Overbeek; Paul Leary photo by Will van Overbeek; King Coffey photo by Will van Overeek; Santiago Durango photo by Jim Newberry; Bettina Richards photo by Jim Newberry.

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