Aaron Klein talked before those gathered at the Omni Shoreham Hotel about the fallout from he and his wife's refusal to make a same-sex wedding cake. | (Photo: Family Research Council/Carrie Russell)

An Oregon appeals court told a state agency Wednesday to reconsider its order for a Christian couple to pay $135,000 in damages for refusing to bake a cake for a same-sex wedding on grounds that the state's actions did "not reflect ... neutrality toward religion."

However, the panel upheld its earlier ruling that their bakery violated state law prohibiting discrimination based on sexual orientation.

Aaron and Melissa Klein, who owned Sweetcakes by Melissa in Gresham, have engaged in years of litigation over an Oregon Bureau of Labor and Industries order punishing them for refusing to make a wedding cake for a lesbian couple.

In a decision Wednesday, a three-judge panel of the Court of Appeals of the State of Oregon maintained that the Kleins unlawfully discriminated by refusing to make a cake for the wedding of Rachel and Laurel Bowman-Cryer in 2013.

However, the panel reversed the order requiring the couple to pay $135,000 in damages.

Circuit Judge Erin Lagesen, the author of the panel opinion, concluded that "we adhere to our prior decision upholding BOLI's determinations that Aaron unlawfully discriminated against the Bowman-Cryers based on sexual orientation."

"We reach a different conclusion with respect to our prior affirmance of BOLI's noneconomic damages award," ruled Lagesen.

"BOLI's handling of the damages portion of the case does not reflect the neutrality toward religion required by the Free Exercise Clause. We therefore set aside the damages portion of the order and remand for further proceedings related to remedy."

Stephanie Taub, senior counsel for the First Liberty Institute, a legal nonprofit representing the Kleins, said in a statement that she believes "Oregon is trying to have its cake and eat it, too."

"The Court admits the state agency that acted as both prosecutor and judge in this case was biased against the Kleins' faith. Yet, despite this anti-Christian bias that infected the whole case, the court is sending the case back to the very same agency for a do-over," stated Taub.

"Today's opinion should have been the end of this ten year long saga. It's time for the state of Oregon's hostility toward Aaron and Melissa to end."

In the refusal to bake the cake for the wedding ceremony, Aaron Klein cited his religious beliefs and a verse from Leviticus.

The Bowman-Cryers filed a complaint with BOLI, which ruled that the Kleins had violated Oregon's accommodations statute barring discrimination based on sexual orientation.

As a result of the BOLI ruling against them, the Kleins were fined $135,000 in damages and closed the bakery.

The Kleins appealed the BOLI order to the Oregon Court of Appeals in 2016. After the Oregon court upheld the order, they appealed to the U.S. Supreme Court in 2018.

In June 2019, the Supreme Court issued an order vacating the ruling against the Kleins and sent the case back to the state court of appeals. The nation's high court cited its 2018 decision in Masterpiece Cakeshop v. Colorado Civil Rights Commission.

In Masterpiece, the Supreme Court ruled 7-2 that Colorado Civil Rights Commission showed an unconstitutional anti-religious animus toward Jack Phillips of Masterpiece Cakeshop when it punished him for refusing to make a cake for a gay wedding.

"To describe a man's faith as ‘one of the most despicable pieces of rhetoric that people can use' is to disparage his religion in at least two distinct ways: by describing it as despicable, and also by characterizing it as merely rhetorical — something insubstantial and even insincere," wrote Justice Anthony Kennedy for the majority.

"This sentiment is inappropriate for a Commission charged with the solemn responsibility of fair and neutral enforcement of Colorado's anti-discrimination law — a law that protects discrimination on the basis of religion as well as sexual orientation."

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