By Jill Colvin, DNAinfo Reporter/Producer

NEW YORK CITY — A Manhattan Supreme Court judge has ruled that the city's Five-Borough Taxi Plan — which would allow livery cabs to pick up street hails in Upper Manhattan and the outer boroughs — is unconstitutional.

In a decision released late Friday, Judge Arthur F. Engoron, said the city had unjustifiably circumvented local laws by bringing the issue to the state Legislature rather than the City Council, among other issues. As a result, he wrote, "The entire act is null and void."

The plan, which would create a new class of 18,000 "boro cabs," is meant to improve taxi service for millions of New Yorkers who live in Upper Manhattan and the outer boroughs — where yellow cabs rarely roam.

The city is also relying on the plan to raise more than $1 billion for the city's budget through the sale of 2,000 new yellow taxi medallions — which can legally only happen once the new livery cars hit the road.

But the City Council never passed a law allowing the new livery cars and yellow taxi medallions, because Mayor Michael Bloomberg instead took the issue directly to the state Legislature, which passed the law that made the Five-Borough Taxi Plan possible.

The city's decision to circumvent local government makes the plan unconstitutional, Judge Engoron ruled.

“The court’s decision today is a great loss to millions of New Yorkers outside of Manhattan, as well as for the professional livery drivers whose ability to feed their families by providing a popular service their communities want and deserve is now in jeopardy,” TLC Commissioner David Yassky said in a statement in response to the ruling.

The city intends to appeal “immediately," said Michael Cardozo, the city’s top lawyer, who criticized the yellow cab industry for trying to derail the plan.

“The irrational fear of lost profits by medallion owners and lenders should not be permitted to derail these important programs,” Cardozo said.

The Metropolitan Taxicab Board of Trade, which brought the suit, argued the plan would spell "economic disaster for more than 5,000 individual taxi driver-owners and thousands more taxi owners and cabbies who invested their life savings into what they regarded as the American Dream."

In addition to undermining the value of their medallions, drivers and owners have argued the move would violate what they believe is an exclusive right to pick up street hails in the city.

"Thousands of individual owner-drivers and hundreds of small business owners in both the taxi and livery industries are breathing a sigh of relief that their livelihoods will not be destroyed by this flawed and destructive plan," the group said in a statement celebrating the ruling.

Judge Engoron had issued a temporary restraining order back in June prohibiting the city from beginning to issue permits for the cars, which were supposed to hit the road this summer.

City and state attorneys maintain the move will have minimal impact on yellow-cab drivers, who rarely stray out on Manhattan's business core.

Under the plan, the drivers would only be allowed to pick up street hails in the outer boroughs, and in Manhattan north of East 96th Street on the East Side and 110th Street on the West Side.

The licenses were supposed to cost $1,500 each, with apple green cars that would be outfitted with roof lights and credit-card machines and would charge standard, by-the-mile fares.

In his ruling, the judge said lawmakers had upset "the constitutional balance of power" by trying to circumvent local control.

"Outside forces should not be allowed to tinker with a system so delicately balanced," he wrote.

However, the judge did reject several other arguments, including that yellow taxi drivers were contractually entitled to exclusive street hail rights, citing contradictory language in the TLC rules.