A Damascus couple agreed to a $350,000 out-of-court settlement in a medical malpractice case Thursday while a jury was deliberating its merits in Montgomery County Circuit Court.

A Maryland Health Claims Arbitration panel, which hears malpractice cases, had awarded the couple, Michael and Ann Mary Kelley, $625,000. The physician in the case, obstetrician Victoria Diaz of Silver Spring, appealed the award.

The Kelleys' attorney, John Domingues, argued that Diaz failed to diagnose early signs of pre-eclampsia, a pregnancy complication that he said forced the premature delivery of her twins in November 1980. One of the twins, who were born about 10 weeks prematurely, died two weeks after birth.

During the seven-day trial before Circuit Court Judge William Miller, experts for the Kelleys testified that Ann Kelley's 14-pound weight gain in the five weeks before her last visit to Diaz was a sign of pre-eclampsia and that she should have been monitored more closely, Domingues said. He said her next checkup was scheduled for three weeks later, but Kelley went into convulsions from pre-eclampsia two days before that visit, forcing the premature delivery.

David Levin, Diaz' lawyer, said experts for the defense testified that the weight gain was attributable to overeating and the twin pregnancy. Diaz testified that she examined Kelley for pre-eclampsia on her last visit and the disorder was not present, Levin said.