The long-running legal battle sparked by a Gresham bakery's refusal to make a wedding cake for a lesbian couple will proceed toward a March hearing after a failed effort to have the case thrown out.

An administrative law judge has rejected an attempt by lawyers representing the owners of Sweet Cakes by Melissa to dismiss the case and award them $200,000 for damages, court costs and attorney fees.

Instead, the judge said in an interim order that Aaron and Melissa Klein unlawfully discriminated against the same-sex couple by denying them full and equal access to a place of public accommodation.

The ruling clears the way for a March 10 hearing in Portland in a highly charged case centering on the business owners' religious beliefs and alleged violation of their customers' civil rights.

In Oregon, such contested civil rights cases can be heard before an administrative law judge or taken to civil court.

Sweet Cakes by Melissa

Read the 52-page

by administrative law judge Alan McCullough.

Both sides had sought summary judgment in the dispute. But in his Jan. 29 interim order, Alan McCullough found that the undisputed facts in the case supported charges of unlawful discrimination under the Oregon Equality Act.

Paul Thompson, a Portland lawyer advising the lesbian couple, said Monday morning that he was happy with the ruling. "The entire time, I felt the law was very much on our side because the law is black and white," he said. "You cannot discriminate on the basis of sexual orientation."

Anna Harmon of Canby, one of three attorneys representing the Kleins, disagreed.

"The (administrative law judge) recognized that all of the State's claims but one were baseless and not supported by the facts of the case," she said in an emailed statement. "We view this as a partial victory. However, the (judge) ruled wrongly that the Kleins' right not to design and create a work of art celebrating an event which violates the tenets of their religion is not protected by the Oregon or Federal Constitutions. This is a wrong and dangerous result for religious liberty and rights of conscience in Oregon...

"Americans should not have to choose between adhering to their faith or closing their business, but that is what this decision means."

The March hearing will focus on damages for the same-sex couple.

By then, the conflict will be more than two years old, but it won't be settled until Oregon Labor Commissioner Brad Avakian has the final say.

The controversy began in January 2013 when the Kleins turned away Rachel Cryer and Laurel Bowman from their bakery, saying that providing a cake for their wedding would have violated their Christian beliefs against same-sex marriage.

In August 2013, the women complained to the state Bureau of Labor and Industries. The agency conducted an investigation and in January 2014 brought charges that the Kleins had unlawfully discriminated against the couple because of their sexual orientation.

Oregon law bans discrimination against gay, lesbian, bisexual and transgender people in jobs and in places that serve the public, such as restaurants and bakeries.

BOLI investigators said the Kleins' refusal violated the women's civil rights and recommended they pay $75,000 in damages.

That triggered a conciliation process between the two parties to see if a settlement could be reached. The Kleins and the state, acting on the women's behalf, could not agree, so the case went before McCullough, a BOLI administrative law judge.

In rejecting the Kleins' claim for damages, McCullough said he lacked jurisdiction to grant or deny them, citing absence of legislative authority to do either.

A hearing date was originally scheduled last October but was postponed until this March.

At the March 10 hearing, the state has the burden of proving that the complainants were damaged by Aaron Klein's statement that his religious beliefs did not allow him to create a cake celebrating their wedding, Harmon noted.

Avakian, as elected head of the labor bureau, has authority to issue a final order and uphold or adjust the amount of proposed damages. The commissioner's final order may be appealed to the Oregon Court of Appeals.

Lawyers for the Kleins tried unsuccessfully last summer to remove Avakian from the proceedings on the grounds that he is biased in favor of gay rights.

In the months after the case broke and garnered national attention, Sweet Cakes closed up shop on the edge of downtown Gresham, and the Kleins moved the business to their home.

Herbert Grey, a Beaverton attorney representing the Kleins, said in a January 2014 interview that his clients "(are) being punished by the state of Oregon for refusing to participate in an event that the state of Oregon does not recognize."

Cryer, 31, and Bowman, 30, now using Bowman-Cryer as their surname, held a commitment ceremony June 27, 2013. They were married May 23, 2014, four days after a federal judge ruled that same-sex marriage was legal in Oregon.

-- George Rede

grede@oregonian.com

503-294-4004

@georgerede