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San Juan Capistrano Publication : Business Magazine Weighs Investing in Legal Paper

March 12, 1987|MARY ANN GALANTE | Times Staff Writer

U.S. News & World Report is considering entering legal publishing through a joint venture with an ailing San Juan Capistrano-based legal newspaper.

Fred Drasner, president of U.S. News & World Report, said in an interview this week that the Washington-based news magazine is having "very preliminary discussions" with United States Law News, a weekly newspaper that has published three prototypes since September.

Drasner stressed that U.S. News & World Report will not buy the struggling Orange County paper. Instead, he said, U.S. News is "flirting with" acquiring a stake in the operation, without making an investment. One way to do that, he said, could be through a management contract.

Current and former staffers of U.S. Law News suggested that the potential deal could be the small legal paper's best hope for survival.

Since November, U.S. Law News has laid off 12 to 15 of its approximately 20 employees and was unable to meet its staff payroll at least once, according to Gary H. Smith, the publishing company's president and a co-founder.

Smith acknowledged that U.S. Law News "is fighting for survival." But, he added, "we intend to keep publishing as soon as we can complete financing" arrangements. According to Smith, the paper has "paid practically everybody practically everything that we owe" in back wages.

News of the paper's fiscal woes came as no surprise to legal publishers, who have criticized U.S. Law News as overly ambitious from the start.

When H. Reese Butler II, editor and publisher, announced his project last September, he said U.S. Law News was to be the nation's largest-circulation law newspaper, with 250 editors putting out a 24-page paper, and 20 additional specialized sections. The company planned to sell more than 96,000 subscriptions, and projected combined advertising and circulation revenues of almost $15 million for the first year of operation.

According to Smith, he and others have invested $600,000 to $700,000 in U.S. Law News. But press reports and legal publishing industry sources have estimated that $1.5 million to $2.5 million has been invested in the company.

The fledgling paper's problems began before it even went to press. The first prototype looked very much like the Wall Street Journal, and Dow Jones, owner of the Journal, strongly objected to U.S. Law News' similar appearance and its claims of a relationship between the two papers.

Although Dow Jones printed two prototype issues of the legal paper, it ended that arrangement after warning U.S. Law News "more than once not to use our name," said George Mahoney, Dow Jones counsel.

While the paper aimed at lawyers has never gotten past three prototypes, the company did publish 13 issues of Student Law News, a 12-page tabloid that was distributed to 5,000 law students.

In New York, Drasner said that U.S. News and World Report "is aware there are problems" with U.S. Law News, but said that his company's interest stems from "our desire . . . to invest in publishing opportunities that we think have a chance of being successful."

He cautioned, however, that "talks are at such a preliminary stage, tomorrow morning we could decide to forget the whole thing. . . . Right now, we're trying to see if it's worth pursuing."

Times staff writer James Granelli contributed to this story.

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