The Justice Department civil rights chief has created a furor in his department and in the mental health community over his interpretation of a Supreme Court decision affecting rights of mental patients.

The new policy was contained in an internal June 24 memo from William Bradford Reynolds. The memo came six days after the Supreme Court ruled on the rights of persons in mental institutions.

Reynold's memo says that while the Justice Department may investigate facilities to make sure patients are guaranteed safety and freedom from unnecessary restraints, those investigations should not include whether the institutions provide "psychiatric care, psychological treatment or individualized therapeutic efforts designed to enhance capacity, capability and competence."

"Such training is permissible, but the lack thereof does not make out a constitutional violation," he said.

Current and former Civil Rights Division lawyers say Reynold's memo presents an abrupt change from the policy that has been in effect since the early 1970s. Drew Days, former head of the division, considered the issue of whether mental patients had access to treatment so important that he argued some of those cases in court.

Arthur E. Peabody Jr., head of the Civil Rights Division's special litigation section, which handles cases involving patients in institutions, sent a 10-page protest memo to Reynolds on Aug. 4. He charged that Reynolds' interpretation of the law is "incorrect" and "unnecessarily restrictive." He said the policy reversal would force the department to change its position in all cases involving patients' rights.

Peabody also said that Reynolds' interpretation would result in "providing mentally retarded persons with fewer rights than convicted prisoners." He cited cases in which courts have ordered prisons to improve medical and mental health services.

In a staff meeting on Aug. 25, Reynolds refused to back down from the new policy. Reynolds said yesterday that he does not believe his memo will lead to a major change in the way cases are handled. "I simply explained that the Supreme Court had rendered a decision that had an impact on our enforcement responsibility and that we should be attentive to the Supreme Court."

Reynolds did not rule out the possibility that the department would assert a right to special training or psychiatric care in certain cases. "You've got to take each of these cases as they come up." But he said it is not clear that courts will agree that patients have a right to treatment. "The courts have been all over the lot in this area," he said.

In a narrow ruling June 18, the Supreme Court found that the patient in the case had constitutional rights to safety, to freedom from unnecessary restraint and to whatever minimal training was needed to guarantee that he could take advantage of the first two rights.

The court said the case did not raise the issue of whether patients have a constitutional right to treatment or training, and that question is still unresolved.

Three justices said in a separate statement that if the issue of treatment and training were before the court, it would be "a serious issue whether, as a matter of due process, the state could so refuse [to provide psychiatric treatment]. For many mentally retarded people, the difference between the capacity to do things for themselves within an institution and total dependence on the institution for all their needs is as much liberty as they will ever know."

Some lawyers inside and outside the department charged that Reynolds has misinterpreted the Supreme Court decision.

"They're taking the case and almost turning it on its head," said Martin Gerry, a lawyer who was a high-level civil rights official in the Ford administration.

"They're using it as their reason to stop litigating for basic psychiatric needs of people committed to institutions."

Robert Plotkin, who headed the special litigation section under the Carter administration and is a specialist in the rights of the handicapped, added, "I think he is totally wrong. Not only does the Supreme Court leave [the question of right to treatment] open, but there are 10 years of favorable decisions from federal courts all over the country.

"There has never been a federal court that says there is no right to treatment, and the Justice Department has been involved in at least half of those cases," he said.

Plotkin said the change in policy could be "devastating," and he said he is afraid that some institutions already under court order to provide treatment might go back to court to have their decrees amended.

"There's no way to overemphasize the importance of the Justice Department's role in this area, and the perception he's created is that the U.S. government is backing away from vigorous enforcement in these cases," he said.