(Bloomberg) -- A judge blocked a rate increase that would have raised pay for ride-share drivers in New York.

Manhattan state court Justice Arthur Engoron, a former cab driver, issued his decision Friday after a hearing packed with Uber and Lyft drivers. 

The ruling is a victory for Uber Technologies Inc., which last month sued the New York City Taxi & Limousine Commission. Uber claimed the commission used a new and flawed methodology to calculate the rate increase, which it said would result in higher fares for customers and damage the company’s reputation. 

Engoron, who had previously blocked the rate hike temporarily, said he would like for-hire drivers to get a raise but agreed with Uber that the commission didn’t offer a sufficient rationale for the rate hike.

“It’s just not enough to say there’s inflation and 100 drivers said gas prices shot up,” said Engoron, who drove a taxi while attending Columbia University decades ago. The judge added that he will issue a written decision next week more fully explaining why he was blocking the rate hike. 

Taxi and Limousine Commission Chair David Do said he was disappointed by the ruling and that the city’s drivers “deserve better.” Do said the commission planned to carefully review Engoron’s written decision “and continue to do what’s needed to protect this important pay standard.”

Uber shares jumped on the news, rising as much as 3.9% and slightly reversing a a 39% drop over the past year. Lyft Inc. shares, which plunged 74% in the past year, rose as much as 5.1%  on Friday. Lyft was not involved in the litigation.

Uber spokesperson Josh Gold said the company welcomes the finding that the hike was implemented arbitrarily.

“Drivers do critical work and deserve to be paid fairly, but rates should be calculated in a way that is transparent, consistent and predictable,” Gold said. “Existing TLC rules continue to provide for an annual review tied to the rate of inflation, which will take place in March.”

The hearing was punctuated by frequent applause when the city’s lawyer argued that ride-share drivers had been hit particularly hard by inflation. Many of the drivers present were dressed in blue t-shirts emblazoned with the logo of the Independent Drivers Guild. They chanted, “shame on Uber” as they departed.

The commission in November approved the first increase in metered fares since 2012, including increases in per-mile and per-minute rates for Uber and Lyft drivers. In its December suit, Uber said the hikes would force it to spend an additional $21 million to $23 million a month.

The New York Taxi Workers Alliance, which represents 25,000 taxi and ride-share drivers, immediately called on the commission to “immediately redo the rules so drivers do not have to wait one day longer.”

“@Uber you just woke up a sleeping giant,” the alliance said in a tweet. “This raise belongs to the drivers and we will not rest until it’s back in our hands.”

Uber and Lyft driver Israel Acevedo, 47, of Brooklyn, said he thought the decision was unfair and that drivers deserve an increase.

“When the gas went up, Uber gave all the other drivers in all the other states a surcharge,” he said. “We didn’t get a surcharge here. We had to bear that cost. And even though gas prices are going down, the cost of food is not going down. The cost of operating expenses is not going down. You can’t focus the pay increase just on gas.”

It’s not the first time Engoron has taken on the commission. A decade ago, he blocked a new law allowing car services to pick up passengers who hail them outside Manhattan after a challenge from taxi groups. His decision was later overturned by the state’s highest court. 

In 2013, the commission succeeded in having Engoron removed from a lawsuit filed by the livery industry to stop a city pilot program allowing riders to hail cabs with their smartphones. Engoron had called the program “illegal” during early proceedings in the case.

The case is Uber USA LLC v. New York City Taxi & Limousine Commission, 160451/2022, New York State Supreme Court, New York County (Manhattan).

--With assistance from Skylar Woodhouse.

(Updates with comments from judge and drivers)

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