A federal judge in Alexandria yesterday ordered the Arlington County School Board to change regulations for student publications to conform to First Amendment freedom of the press guidelines and pay $2,500 in damages to a student suspended for distributing an underground newspaper.

The order also removes all record of the suspension of Joshua Leibner and gives him credit for the week of school he missed during the suspension. The order was the result of an out-of-court settlement between a school board lawyer and Leibner's American Civil Liberties Union (ACLU) attorneys.

The order was signed by Judge Albert V. Bryan Jr., although it was negotiated with Judge Robert R. Merhige Jr. who heard the case last month but was not available yesterday to sign it.

Last month Merhige granted Leibner, 16, of Washington-Lee High School, a temporary restraining order prohibiting school officials from disciplining him for distributing the newspaper called "The Green Orange."

Washington-Lee principal William Sharbaugh suspended Leibner for a week in November for selling his 25-cent, one-page fictional and satirical newspaper. Sharbaugh said the paper was of "questionable taste, decency and journalistic standards." Leibner also distribute the newspaper after Sharbaugh forbade it.

In his opinion granting the restraining order, Merhige said Arlington's regulation requiring student publications to conform to the "journalistic standards of accuracy, taste and decency maintained by the newspapers of general circulation in Arlington" is a "monument to vagueness" and thus unconstitutional.

A statement prepared by the school board said officials will change the regulations to "rely more strongly on control of the time, place and manner of distribution of materials that might be of a questionable nature in taste or good sense rather than on attempts to prevent or inhibit distribution."

"It's a reasonable settlement of the issue," said ACLU spokesman Lauren Selden. "We get damages and a rewrite of the code. What could we have gotten by having this case tried? They (school board) were wrong. Leibner was vindicated."

The school board stressed in its statement that the court found "no wrongdoing by the school board." The settlement state that Leibner was given a proper hearing in the case last fall, despite the fact his suspension is now erased.

Leibner said he will probably give most of the $2,500 to the ACLU, but he is not sure. "I'll probably end up keeping a dollar just for symbolism. The money wasn't that important. I'm more happy about the principle."

Leibner two weeks ago won a national student journalism award, The Quill and Scroll, for writing a sports story for the regular school paper, "The Crossed Sabres."

Leibner said all 300 copies of The Gree Orange printed during the period of the restraining order were sold and he plans to publish another edition soon. By the end of the school year Leibner said he will publish a 16-page satirical yearbook.

Other provisions of the settlement include an agreement by Leibner not to seek a further legal opinion in the case or a permanent injunction against the school board. The school board also cannot enforce its current journalistic regulations against Leibner.