The Maryland Court of Appeals ruled yesterday that parents cannot sue a public school system for "educational malpractice" even if their child is wrongly placed in special education classes and is illiterate as a result.

The court, in a 4-to-3 decision, did not dispute the claims of Michael and Bridget Dale, a Montgomery County couple who said their son Paul was incorrectly diagnosed and may have had a correctable visual problem. Instead, the court focused on the broader question of whether a public school system can be sued for the quality of education a student receives or for the way it administers its programs.

The court, citing an earlier decision, said that to decide in favor of the parents "would in effect position the courts of this state as overseers of both the day-to-day operation of our educational process as well as the formulation of its governing policies." Parents who have complaints, the ruling continued, can address those within the educational grievance process.

The Court of Appeals, Maryland's highest court, had heard the case earlier this year, but was unable to reach a decision. The six-member panel recalled retired Judge J. Dudley Digges, who had written the opinion in the state's first "educational malpractice" case earlier this year, to join them in rehearing the case.

Bridget Dale said yesterday she "could just cry" about the ruling. "It's terrible to watch your own kid go right down the tube," she said. "There just doesn't seem to be any light at the end of the tunnel."

School testing officials diagnosed Paul Dale as retarded in 1967, according to court documents filed by the family's attorneys, but as early as 1968 a private physician had informed the school board that Paul Dale suffered from dyslexia -- a learning disability that causes a person often to read words or letters in reverse.

It wasn't until 1975 that school officials reevaluated the boy, according to court documents, at which time they again recommended that he be put into special education classes. Paul Dale graduated from Montgomery Blair High School in the late 1970s.

School officials argued that they based their placement of the boy on the results of an I.Q. test in 1967 that showed he had a score of 75, well below average.

Paul Dale's attorneys -- Darrel Longest and John Domingues--argued in earlier trials that their client, now 23, is virtually illiterate as a result of his public school education and has only a third-grade level of arithmetic comprehension. The school system and the individuals who evaluated Paul Dale should be held to the same professional standards that any nonschool medical evaluator would be, they said.

Typically, throughout the country, courts have sided with the public schools in similar "educational malpractice" cases. Lawyer Domingues said the case would not be appealed any further because the U.S. Supreme Court usually will not hear cases involving educational matters that are not a question of violating federal civil rights laws.

Ken Muir, a spokesman for the school system, would not comment on the specific case but said the testing for and administration of special education courses have changed radically from the mid-1970s.

Now, Muir said, special education students are informally reviewed every year and are formally reevaluated every three years.