The city’s Business Integrity Commission acted “arbitrarily and capriciously” when it issued a license to the Fulton Fish Market Cooperative to unload its own fish, a State Supreme Court judge said yesterday in a written decision.

The judge, Carol Edmead, found that the Integrity Commission failed to consider the possible implications of allowing the very fish wholesalers who were allegedly tied to organized crime, until the Giuliani-era fish crackdown, to take back control of unloading fish at the new fish market at Hunts Point in the Bronx. She also decided that a failure to separate unloading from selling could result in a fish monopoly.

Since the fish reform law was passed in the mid-1990s, an independent unloading firm, Laro Service Systems, had been unloading the fish arriving at the Fulton Fish Market in Lower Manhattan.

Laro sued the city late last month, claiming that its decision to allow the fish wholesalers to unload their own fish could allow organized criminals to return to the fish market when it reopens in the Bronx. The lawsuit delayed the move of the market to its new 400,000-square-foot city-owned facility.

Yesterday, the city vowed to appeal the court’s ruling, a decision that was likely to further delay the fish market’s move. The city’s top lawyer, Michael Cardozo, called Judge Edmead’s decision “erroneous.”

“The New York City Business Integrity Commission’s determination to issue an unloading license to the New Fulton Fish Market Cooperative at Hunts Point was proper in every respect,” he said. “It is unfortunate that last month’s anticipated move of the fish market to the new state-of-the-art facility in Hunts Point continues to be delayed by this lawsuit. We plan to seek an immediate appeal, and we remain confident that we’ll prevail in the appellate court.”

The lawyer representing Laro, Randy Mastro, who was a deputy mayor in the Giuliani administration, was exuberant.

“We’re very gratified by the judge’s decision because it vindicates the public interest in ensuring that the Fulton Fish Market remains free of organized crime corruption when it moves to the Bronx, and we look forward to that move now occurring, with our client providing unloading services that ensure effective unloading services at a fair price,” he said.

While technically there is nothing to prevent the move – since Laro is licensed to unload fish at the new facility – the cooperative remains unwilling to agree to terms for the firm’s unloading services.

A lawyer for the fish market did not return a call requesting comment.