A unanimous three-judge panel of the 9th U.S. Circuit Court of Appeals said that a lower court judge wrongly tossed out the lawsuit after the government asserted the case was a "state secret" that would harm national security if allowed to go forward.

The trial court judge dismissed the case before the prisoners could present evidence allegedly showing that the company's participation in the program was illegal. The Bush administration and then the Obama administration argued that the lawsuit should be thrown out before the government turns over any evidence because the nature of the legal action is itself a classified matter.

The federal government inserted itself into the lawsuit on the company's side because it said feared top-secret information would be disclosed.

The appeals court, however, said the five prisoners suing San Jose-based Jeppesen Dataplan Inc. can try to prove their case without using top-secret information that legitimately needs protection from disclosure.

Mattel sued MGA in 2004, alleging that Bratz designer Carter Bryant developed the concept for the pouty-lipped doll while working for Mattel.

After a four-year legal dispute, a jury last year awarded Mattel $10 million for copyright infringement and $90 million for breach of contract.

After the verdict, Mattel sought to block MGA from ever making the Bratz dolls, and Larson ordered the company in December to end its sales in early 2009.

MGA argued that retailers would not order the toys unless the court could guarantee they would remain in stores through most of this year. MGA got a reprieve in January when Larson ruled that the dolls could remain in stores for the rest of the year.

He left open the possibility that Mattel or a court-appointed receiver could ultimately market the dolls this year.

A hearing is scheduled for May 18 to discuss whether the receivership should be made permanent.

But economists expect that trend to moderate soon, as businesses bring inventories in line with slower sales. That should allow production to decline at a slower pace in the current quarter.

Still, the drop in March was steeper than expected. The Federal Reserve said production at the nation's factories, mines and utilities dropped a seasonally adjusted 1.5 percent, matching February's decline and worse than the 1 percent decline analysts forecast.

Factories and mines are increasingly idle, as the total industrial capacity utilization rate fell to 69.3 percent from 70.3 percent, the lowest on records dating to 1967.

Industrial production fell at a 20 percent annual rate in the first quarter, the Fed said, the sharpest quarterly downturn of the current recession. The drop will contribute to another steep contraction in the overall economy in the January-March period that economists estimate will be in the 4 to 5 percent range. The nation's economy shrank 6.3 percent in the fourth quarter of last year.

Some analysts expect industrial production to fall at a rate of less than 10 percent in the current quarter, as the economy's contraction slows.

His lawyers filed an emergency appeal with Justice Stephen Breyer after the federal appeals court in Denver turned down Nachio's latest bid to stay out of prison while he asks the high court to review his conviction in 2007 involving the sale of $52 million worth of stock in Qwest Communications International Inc.

Nacchio has been ordered to report to a prison camp in Minersville, Pa., by noon Tuesday to start a six-year term.

He says he should be allowed to remain free pending the Supreme Court's consideration of his case because there is a reasonable chance the justices will agree to consider overturning the conviction.

Federal prosecutors have opposed Nacchio's request.

They have said Nacchio hasn't met the requirement of showing that his Supreme Court appeal would probably win him a new trial or acquittal.

Investors reignited the market's two-week rally, cheering the government's plan to help banks remove bad assets from their books. They're also pleased with a report showing a surprising increase in existing home sales last month.

The Dow has ended the day up 497 points at 7,775 after rising more than 500 just before the closing bell. That was its biggest point gain in more than four months.

The Standard & Poor's 500 index is up 54 at 822 and the Nasdaq composite is up 98 at 1,555.

More than 2,800 stocks rose on the New York Stock Exchange, while just 262 fell. Volume came to a very heavy 1.91 billion shares.

Hawaii Superferry, which operates an Oahu-Maui catamaran that can accommodate 836 passengers and about 200 vehicles, was forced into the move Monday.

The high court rejected a state law that allowed the company to operate while an environmental study is being conducted.

Superferry said in a statement that it was "hugely disappointed" in the decision.

In order to proceed prudently, the company said it had "decided to cease operations for the present."

Superferry says it will make one additional Honolulu-Maui round trip Thursday to get vehicles back to their home islands.

In a conversation focused heavily on the economy, Obama met in the Oval Office with Brazilian President Luiz Inacio Lula da Silva. It was the latest in a series of talks the president has had with his counterparts around the world before a pair of international meetings where the economic crisis will dominate.

Both leaders will attend the Group of 20 countries summit in London on April 2, and the Summit of the Americas in Trinidad in mid-April.

Obama said the notion that the U.S. and Europe are already taking sides, with America pushing for more stimulus spending and European nations favoring tighter regulation of the financial industry, is a "phony debate."