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The local indie-rock labels—Dischord, Teenbeat, Slowdime, Lovitt, Resin, Deep Reverb, DeSoto, and others—operate largely on good-faith agreements with their artists, indefinitely splitting any profits 50-50. And, although the indie-rock folks scorn talk of commodification, it’s been a fairly successful business model.

But last month, the allure of the indie-rock handshake deal took a hit when the Butthole Surfers successfully sued Corey Rusk, owner of the Chicago label Touch & Go, for full ownership of back-catalog records they made together more than a decade ago.

The suit dates back to 1996, when the Butthole Surfers were enjoying MTV-style commercial success from their Capitol Records debut, Electriclarryland. Rusk’s label had kept six early Butthole Surfers records in print, and he began to see some return on investment with the new public interest in the band. But the Butthole Surfers were no longer content to share, and last month the contract was nullified in the absence of legal documents. Rusk was ordered to destroy remaining copies of the records and pay the band $100,000.

The records will now likely go out of print, and the point will become moot as the Butthole Surfers’ 15 minutes fade—today, the kids prefer Korn.

“The Butthole Surfers are kind of nuts,” says Kim Coletta of DeSoto Records, dismissing the notion that local labels will have to rethink their business practices. “I don’t work with any band like that.”

When Coletta founded her label nine years ago, she, like Rusk, took business cues from Dischord: even profit split, indefinite pressings, no extensive contracts, and no legalese.

“I know it sounds really simplistic, but I don’t choose my bands lightly,” says Coletta. “These are my best friends I’m working with, and we have the same goals. If they want to move on to a bigger label, they have my blessing. I don’t think there’s any need to be alarmist about this one snafu at Touch & Go.”

Most local label owners—and their lawyers—seem to agree. The Butthole Surfers’ suit is the first time Rusk has had problems with his mode of operating; Dischord has never had a problem. Dischord founder Ian MacKaye was unavailable to comment for this story, but he told the Chicago Reader that his system of verbal agreements is in no real danger: “If one party becomes a fucking jerk, no contract is going to help.”

Lovitt Records co-founder Brian Lowit says his label has had only positive experiences when dealing with artists on major labels: Last month, he released an exclusive 7-inch and the vinyl version of a new album by Elektra recording artist Jason Falkner. Lowit was delighted to press records by a bigger-name artist whom he respected; Falkner was delighted to have vinyl copies of his record to sell on the road. No paperwork was done to seal the deal, and Lowit is sure it was risk-free.

“We do the same thing as Touch & Go, Dischord, and a lot of the local labels: We don’t have any contracts with anybody we’ve worked with,” says Lowit. “All the money we make as a label just stays with the label and goes toward making more records.” And besides, when a label does only LPs and EPs, there’s simply not much money involved, he says. “For a band like the Butthole Surfers to take someone like Touch & Go down for $100,000 is just pathetic.”—Colin Bane