Justice Department investigation has cleared Assistant Attorney William F. Baxter of conflict-of-interest charges stemming from his involvement in the IBM antitrust case, a federal court was told today.

The results of the investigation by the department's Office of Professional Responsibility were made public by Assistant Attorney General J. Paul McGrath, head of the civil division, during an appeals court hearing. The court heard arguements on IBM efforts to shut down proceedings on the Baxter matter and issues raised by the closing of the IBM case.

McGrath said the department will not, therefore, reopen the IBM case, which Baxter dismissed Jan. 8 on the grounds it had no merit.

The decision on the conflict of interest matter was made by Solicitor General Rex E. Lee, McGrath said. According to Justice Department spokesman Arthur Brill, Lee received the 50-page staff report Saturday and concluded that no conflict existed. "No further action will be taken," Brill said.

U.S. District Judge David N. Edelstein, who heard the IBM antitrust suit, is holding dual proceedings on whether he can hold oversight hearings on the IBM dismissal and whether the dismissal itself was improper in light of work Baxter once did for the computer giant.

During the case, IBM also had been sharply critical of Edelstein, charging that he was biased against the company. The appeals court rejected an earlier IBM motion to have Edelstein thrown off the IBM case.

The new move is an effort to close firmly the 13-year history of the IBM litigation, although representatives of Philip Stern, a Washington legal gadfly and philanthropist, and Public Citizen, a lobbying group affiliated with Ralph Nader, are "friend of the court" petitioners in motions to keep Edelstein's authority over the case in tact.

But IBM lead counsel Thomas Barr and McGrath urged the three-member appeals court panel to block the proceedings in Edelstein's court before a hearing scheduled for Monday to consider the conflict-of-interest charges against Baxter. IBM and the government asked the appeals court to stay that hearing if no decision is issued before Monday.

IBM and the government say Edelstein's authority ended when the two sides signed dismissal papers. Barr said that it would be "unconstitutional" for Edelstein to "hold hearings without the power to enter orders."

"It is plain that Judge Edelstein has become the prosecutor in his own mind," Barr said.

The government, while not backing IBM in its move to get a court order tossing Edelstein off the case, urged the panel to block further hearings. But McGrath was sharply questioned by U.S. Court of Appeals Judge Jon Newman about why--if there was no official matter before Edelstein--McGrath told Edelstein last month that the Justice Department would not comment on conflict-of-interest charges until the internal investigation closed.