The majority opinion written by Chief Justice John Roberts, who was appointed to the court by President George W. Bush, said the law is unconstitutional as applied to issue ads that a Wisconsin anti-abortion group wanted to broadcast before the 2004 election.

The ruling was a victory for the group Wisconsin Right to Life, which argued the law violated its free-speech rights under the First Amendment to the Constitution.

"The First Amendment requires us to err on the side of protecting political speech rather than suppressing it," Roberts wrote. "Where the First Amendment is implicated, the tie goes to the speaker, not the censor."

The court upheld a ruling that the ads were not election ads covered by the law, but were general issue ads that did not aim to influence voters.

The court's four liberals dissented and said campaign finance reform laws seek to protect the integrity of elections from huge amounts of money.

"After today, the ban on contributions by corporations and unions and the limitation on their corrosive spending when they enter the political arena are open to easy circumvention," Justice David Souter said for the dissenters.

The part of the law at issue in the ruling bans corporations, unions and special interest groups from using unrestricted money to run television or radio ads that refer to a candidate for federal office two months before a general election or one month before a primary election.

In 2003, the Supreme Court by a 5-4 vote upheld the law, including the ban on certain issue ads broadcast before an election.

But since then, Justice Sandra Day O'Connor, who cast the decisive vote in 2003, has retired and has been replaced by the more conservative Justice Samuel Alito, Bush's other appointee to the court, who joined the majority opinion.

The ads criticized Sen. Russell Feingold of Wisconsin for supporting efforts to block confirmation of several of Bush's judicial nominees. Because Feingold, a Democrat, was running for re-election at the time, the ads were prohibited.

Feingold had co-written the landmark campaign finance law, along with Sen. John McCain, an Arizona Republican who is running for president.

McCain called it regrettable that the court carved out a narrow exception by which some corporate and labor expenditures can be used to target a federal candidate in the days and weeks before an election.

"It is important to recognize, however, that the court's decision does not affect the principal provision of the (law), which bans federal officeholders from soliciting soft money contributions for their parties to spend on their campaigns," he said.

One of McCain's Republican presidential rivals, former Massachusetts Gov. Mitt Romney, hailed the ruling "Score one for free speech," he said.

Frederick's sign was ambiguous. Was the 18-year-old supporting drugs or Christianity? The ambiguity matters because it places Frederick's sign within the confines of protected speech.

Supreme Court members, in a majority opinion written by Chief Justice John Roberts, convinced themselves that Frederick's banner was a public promotion of the use of illegal drugs. School authorities, according to Roberts — joined by Justices Thomas, Scalia, Alito and Kennedy — did not violate Frederick's constitutional rights when they went across the street, snatched his sign and ripped it to shreds.

The Supreme Court recognized student political speech with its 1969 decision, Tinker v. Des Moines (Iowa) School District. Justice Stephen Breyer, while siding with the majority, asserts that Frederick and his bong-hits banner make for an inadequate foundation on which to limit students' right to political speech.

The court's dissenters - Justices John Paul Stevens, David H. Souter and Ruth Bader Ginsburg - go further. Stevens, penning the dissent, called the student's banner "nonsense" and the court's ruling a reach for broad censorship that would ban speech that advocated for medicinal marijuana use or other related messages.

The majority worries that illegal drugs are a serious danger in schools. This argument gets some sympathy but not enough to trample on the First Amendment.

But the majority opinion written by Justice Ruth Bader Ginsburg stopped short of the tougher restrictions that many in corporate America had sought and left room for legitimate cases by aggrieved investors to proceed, experts said.

"This was something of a victory for investors in that Justice Ginsburg raised the bar but not that high," said Donald Langevoort, a Georgetown University securities law professor.

Typically, plaintiffs can build much of a case in a suit's evidence-discovery phase. But yesterday's ruling, by setting a higher standard for plaintiffs trying to defeat dismissal motions made by defendants, will make it harder to reach the discovery phase.

The decision was the second one this week by the court that was a defeat for shareholders and a victory for the defendant companies. The justices ruled Monday that securities underwriters on Wall Street are generally immune from civil antitrust lawsuits.

Yesterday's decision was hailed by business groups, particularly high-technology companies, which tend to have volatile stock prices and often face lawsuits when their shares unexpectedly tumble.

"Silicon Valley can breathe a sigh of relief," said Jim Hawley, general counsel of TechNet, an industry association that filed a brief with several other technology groups urging the court to set a high hurdle for shareholder lawsuits.

Several class action attorneys also expressed relief, however, saying the court did not endorse a tougher threshold that would have harmed their legal specialization.

The decision "may cut some of the lawsuits, but it won't make a dramatic difference," said Herbert Milstein, a partner at Cohen, Milstein, Hausfeld & Toll in Washington.

The case had been closely watched because it dealt with issues at the center of the debate over so-called frivolous lawsuits filed against companies on behalf of their shareholders.

Business groups claim that attorneys who represent shareholders launch unfounded lawsuits to pressure companies into paying out settlements. Firms say they indeed often feel compelled to settle to avoid the cost of litigation and the risk of eventually losing in court, even if the plaintiffs' case isn't that strong.

Investor advocates counter that fraud occurs more frequently than businesses suggest, as executives seek to maintain high stock prices and enrich themselves, as occurred in the Enron and WorldCom accounting scandals.

The ruling dealt with a lawsuit filed in 2002 against telecommunications equipment maker Tellabs Inc. by investors claiming that executives had publicly promoted the Naperville, Ill., company's outlook when they knew it was worsening.

The case's fate hinged on the legal interpretation of a law passed by Congress in 1995 to reduce securities lawsuits.

The law said plaintiffs must show a "strong inference" of corporate malfeasance for a case to proceed. But lower courts read that guideline in different ways, with some courts being far more hospitable to securities cases than others.

In the Tellabs case, the 7th U.S. Circuit Court of Appeals in Chicago let the suit stand, saying a "reasonable person" could infer that the company had committed fraud.

The high court had been widely expected to adopt a high threshold. The question was how high.