In a 7-2 ruling in a case from Kentucky, the justices permitted states to exempt interest on their own bonds from taxation while taxing residents for interest on bonds issued by other states.

In the $2.5 trillion municipal bond market, 42 states exempt some or all interest on their bonds from income taxes, while taxing interest on bonds from other states.

The states have said that throwing out the system of exemptions that began 90 years ago would have a devastating impact on state finances.

Industry groups warned of possible turmoil in the municipal bond market if the existing setup were dismantled.

In the majority opinion, Justice David Souter said that the state tax exemptions go back to 1919 and have not hindered commerce among the states.

In dissent, Justice Samuel Alito said the majority decision "invites other protectionist laws."

Souter responded that that the dissent "rightly praises the virtues of the free market." But Souter said that overturning the tax exemptions now would upset the market in bonds based on the experience of nearly a century.

Domestic partnerships are not a good enough substitute for marriage, the justices ruled 4-3 in an opinion written by Chief Justice Ron George.

Outside the courthouse, gay marriage supporters cried and cheered as news spread of the decision.

"Our state now recognizes that an individual's capacity to establish a loving and long-term committed relationship with another person and responsibly to care for and raise children does not depend upon the individual's sexual orientation," the court wrote.

The city of San Francisco, two dozen gay and lesbian couples and gay rights groups sued in March 2004 after the court halted San Francisco's monthlong same-sex wedding march.

"Today the California Supreme Court took a giant leap to ensure that everybody — not just in the state of California, but throughout the country — will have equal treatment under the law," said City Attorney Dennis Herrera, who argued the case for San Francisco.

The California Supreme Court was scheduled to rule on a series of lawsuits seeking to overturn a voter-approved law that defines marriage as a union between a man and a woman.

If the court rules in favor of the plaintiffs, California could become the second state after Massachusetts where gay and lesbian residents can marry.

"What happens in California, either way, will have a huge impact around the nation. It will set the tone," said Geoffrey Kors, executive director of the gay rights group Equality California.

Supporters and opponents of gay marriage predicted a number of possible outcomes from the California court's seven justices, six of whom were appointed by Republican governors.

Like the top court in Massachusetts, they could hold that prohibiting same-sex couples from marrying constitutes unlawful discrimination and order state lawmakers to remedy the situation.

Attorneys for Williams are scheduled to argue in front of a three-judge panel on Wednesday that prosecutors must divulge all details about a racial slur used by an investigator in the case.

The dispute over the slur postponed Williams' retrial for reckless manslaughter, which was to have begun in January.

The 40-year-old Williams was convicted in 2004 of trying to cover up the shooting death of hired driver Costas Christofi two years earlier. The jury acquitted him of aggravated manslaughter but deadlocked on the reckless manslaughter count. Williams has been free on bail since the shooting.

In a similar ruling Monday, the court also reinstated a prosecutor who was taken off a rape case after she published a crime novel about a similar case.

In the "Alpha Dog" case, an appeals court had removed Santa Barbara County Deputy District Attorney Ron Zonen after he turned over probation reports, police files and other sensitive materials to director Nick Cassavetes. "Alpha Dog," a fictionalized account of the killing of a Southern California teen starring Bruce Willis, Sharon Stone and Justin Timberlake, was released last year.

Prosecutors accuse Jesse James Hollywood of masterminding a plot to kidnap and murder 15-year-old Nicholas Markowitz in 2000 because the teenager's older half brother owed Hollywood a $1,200 drug debt. Four people have already been convicted in the case, including triggerman Ryan Hoyt, who was sentenced to death.

Zonen said in court documents he aided Cassavetes with "Alpha Dog" to help publicize the hunt for Hollywood, who was captured in 2005 in Brazil after spending nearly five years on the lam.

The result is that a lawsuit accusing some prominent companies of violating international law by assisting South Africa's former apartheid government will go forward.

The court's hands were tied by federal laws that require at least six justices to hear any case before them.

Short of the required number by one, the court took the only path available to it and upheld an appeals court ruling allowing the suit to proceed.

The justices have ties to Bank of America, Bristol-Myers Squibb, Colgate-Palmolive, Credit Suisse, Exxon Mobil, Hewlett-Packard, IBM and Nestle, among nearly three dozen companies that asked the high court to step in.