In a courtroom filled with police officers on one side of the aisle and adult bookstore employees on the other, Judge Paul F. McArdle yesterday briskly dismissed a law suit by Walter F. (Buster) Riggin charging a campaign of police harassment against his Columbia Road bookstore and amusement arcade.

The suit had taken a confused turn when it emerged that a key witness for the plaintiff - a former bookstore employee who had helped marshal evidence documenting the alleged harassment - had simultaneously been acting as an unpaid police informer against Riggin. The witness, Robert Merritt, although called by Riggin's attorney, devoted most of his testimony yesterday to accusations of misconduct by Riggin rather than by police.

Merritt, who said he was subsequently fired from the store, acknowledged that he had made tape recordings and written memos in support of Riggin's planned law suit, but said he did so "under physical duress."

"Mr. Riggin was always reminding me that he was Mafia and all that business," Merritt testified. As for the memos, which described visits to the store by third district police officers who allegedly turned their radios up loud and turned their flashlights on peepshow customers, Merritt said "90 per cent of the stuff on there is made up and false."

Merritt went on to offer explanations for a number of the police inspections cited by Riggin in his lawsuit. Merritt said, for example, that he had seen Officer Peter F. Catale go into the peepshow area on one occasion but it was "to investigate fumes of marijuana," not to harass customers.

Riggin testified that it was Merrit who had first suggested the idea of trying to combat the alleged harassment with a law suit, and that Merritt had provided the tape recorder with which they jointly recorded conversations between Riggin and police.

Further muddying the case was Merritt's role as a one-time informant against the Institute for Policy Studies, which he said he infiltrated in the early 1970s, only to decide later that "I was a little disgusted with what I was doing." As a result of this reversal, Merritt is a witness for the plaintiff's in another pending lawsuit - in which the IPS alleges harassment by agents of the Federal Bureau of Investigation, the D.C. Police, and the Internal Revenue Service.

Although Riggin and two of his employees disputed Merritt's testimony yesterday, Judge McArdle repeatedly made it clear that the instances of harassment struck him as too brief, too few, and too far between.

"The evidence is just totally without any basis for loss by plaintiff," he said.

Riggin was arrested on Oct. 1, for having unlicensed machines in his bookstore and adjacent arcade, and police seized a number of peepshow and pinball machines as evidence. Last Friday he surrendered to police again after being indicted for sale of obscene material.