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To appeal or not to appeal? Deciding whether to take a disappointing decision to a higher court is never easy. Conflicting opinions about when an appeal is frivolous--and sanctionable--complicate the question. Counsel must proceed with caution.

Article Excerpt
At some point in every litigator's career, he or she faces a dicey question: Should an unfavorable outcome in a case be appealed? The answer will depend on a variety of idiosyncratic factors, from client pressure and indignation to the lawyer's conviction about the strength of his or her legal position.

Whatever the reason, the trial lawyer often discovers, often with chagrin, that the rules of the game in the appellate court are a far cry from those in the more tolerant trial court.

This lesson from the appellate playbook can be costly, to both lawyer and client. Three years ago, William Colvin, a Tennessee lawyer, learned that the hard way.

Colvin was retained by Wilton Corp., a local manufacturer of wheel hubs, to resolve a contract dispute with one of the company's component suppliers, Ohio-based Ashland Castings. The two companies had entered a contract under which Ashland agreed to supply Wilton with metal castings for one year for a fixed price.

Before the end of the contract term, Ashland raised the price of the castings, citing financial hardship caused by a fire at its manufacturing facility. There were no alternate suppliers available, so Wilton, under protest, continued to purchase its castings from Ashland at the higher price. Apparently growing frustrated at having to pay the new price, Wilton hired Colvin to broker a satisfactory resolution to the problem.

Colvin filed suit against Ashland in federal district court for breach of contract. He later amended the complaint to include as a defendant Ashland's president, chairman of the board, and sole shareholder, Keith Brown. To further his objective of holding Brown liable for his company's contractual violations, Colvin asked the court to pierce the corporate veil between Ashland and Brown, whom Colvin alleged to be the company's alter ego. Brown moved for summary judgment on this request, and the district court granted his motion.

Ultimately, the parties entered a consent judgment in which Ashland agreed to pay Wilton monetary damages for breach of contract. Wilton then appealed from the district court's ruling declining to pierce the corporate veil. Convinced that Wilton's appeal was frivolous, Brown filed a motion for sanctions under Federal Rule of Appellate Procedure 38.

Under that rule, "If a court of appeals determines that an appeal is frivolous, it may, after a separately filed motion or notice from the court and reasonable opportunity to respond, award just damages and single or double costs to the appellee." In a rather illuminating opinion, the Sixth Circuit concluded that Wilton's appeal was indeed frivolous within the meaning of Rule 38. It granted Brown's motion, imposing sanctions...