           RECOMMENDED FOR FULL-TEXT PUBLICATION
                Pursuant to Sixth Circuit Rule 206                     2     Bituminous Casualty Corp.                    No. 03-5217
        ELECTRONIC CITATION: 2004 FED App. 0199P (6th Cir.)                  v. J & L Lumber Co.
                    File Name: 04a0199p.06
                                                                                            _________________
UNITED STATES COURT OF APPEALS                                                                   COUNSEL
                  FOR THE SIXTH CIRCUIT                                ARGUED: Jeffrey L. Freeman, JEFFREY L. FREEMAN
                    _________________                                  ATTORNEY AT LAW, Louisville, Kentucky, for Appellant.
                                                                       Robert E. Maclin III, McBRAYER, McGINNIS, LESLIE &
 BITUMINOUS CASUALTY              X                                    KIRKLAND, Lexington, Kentucky, for Appellee.
 CORPORATION ,                     -                                   ON BRIEF: Jeffrey L. Freeman, JEFFREY L. FREEMAN
             Plaintiff-Appellee, -                                     ATTORNEY AT LAW, Louisville, Kentucky, for Appellant.
                                   -   No. 03-5217                     Robert E. Maclin III, Pamela A. Chesnut, McBRAYER,
                                   -                                   McGINNIS, LESLIE & KIRKLAND, Lexington, Kentucky,
            v.                      >                                  for Appellee.
                                   ,
                                   -
 J & L LUMBER COMPANY ,                                                                     _________________
                                   -
 INC.,                             -                                                            OPINION
           Defendant-Appellant. -                                                           _________________
                                   -
                                  N                                      SUHRHEINRICH, Circuit Judge. Defendant-Appellant
        Appeal from the United States District Court                   J & L Lumber Company, Inc. (J & L) appeals from the order
    for the Western District of Kentucky at Owensboro.                 of the district court granting summary judgment in favor of
  No. 01-00106—Joseph H. McKinley, Jr., District Judge.                Bituminous Casualty Corp. (Bituminous) and denying
                                                                       summary judgment in favor of J & L in this declaratory
                     Argued: April 20, 2004                            judgment action. Bituminous brought this action against
                                                                       J & L in federal district court, seeking a declaration that it was
               Decided and Filed: June 29, 2004                        not required to defend or indemnify J & L in a personal injury
                                                                       action in state court relating to a logging accident that
Before: SUHRHEINRICH and GIBBONS, Circuit Judges;                      occurred on November 13, 1998, while Phillip Shields,
            LAWSON, District Judge.*                                   plaintiff in the state action, was preparing to haul a load of
                                                                       timber from a J & L logging site. The central issue in the
                                                                       federal aJune 29, 2004ction was whether Shields was an
                                                                       employee of J & L at the time of his injury and, therefore,
                                                                       excluded from coverage under the terms of J & L’s
                                                                       commercial insurance policies with Bituminous. For the
                                                                       reasons that follow, we VACATE the district court’s order
    *                                                                  granting declaratory judgment relief to Bituminous and
     The Honorable David M. Lawson, United States District Judge for
the Eastern D istrict of M ichigan, sitting by de signation.

                                 1
No. 03-5217               Bituminous Casualty Corp. v.        3    4    Bituminous Casualty Corp.                  No. 03-5217
                                    J & L Lumber Co.                    v. J & L Lumber Co.

REMAND the case to the district court with instructions to         permitting, Shields hauled for J & L at least once a week and
dismiss the complaint.                                             usually more. On occasion, he even drove a J & L truck.
                       I. Background                                  The payment arrangement between Shields and J & L was
                                                                   somewhat complicated. Primarily, Shields was paid by the
                           A. Facts                                load for his work hauling for J & L. When he drove a J & L
                                                                   truck, though, Shields received only driver’s pay in the same
  J & L is a small, family owned and operated sawmill in           manner as J & L’s own drivers. In addition, from March
eastern Kentucky. Besides family members, the mill employs         1998 through December 9, 1998, Shields was listed as an
approximately ten to fifteen additional workers in either the      employee on the J & L payroll registers. He received a
sawmill or the woods. In November 1998, J & L also owned           weekly payroll check of $250 from which taxes and health
three tractor-trailer trucks and two tandems for hauling           insurance premiums were withheld. He also received a check
lumber and employed drivers for these vehicles.                    from the general account from which no withholdings were
                                                                   taken.
  Phillip Shields, the plaintiff in the underlying personal
injury action against J & L, is a fifty-eight-year-old man who       J & L described this unusual payment arrangement as an
has worked in or around the logging industry most of his           accounting device that permitted Shields to obtain health
adult life. At different times, Shields has worked as a trucker,   insurance coverage. The deposition testimony indicated that
sawmill foreman, independent logger, and timber buyer. In          in March or April 1998, Wilma Myers (Myers), J & L’s
the past, he worked for J & L both as the sawmill foreman          secretary and general office manager, and Joel Smith, an
and as a truck driver.                                             owner’s son who had been insured with Blue Cross and Blue
                                                                   Shield, decided to change insurance providers due to an
   Sometime after quitting the sawmill foreman position at         increase in premiums. To get insurance under a plan with
J & L, Shields formed a trucking company with the name             MedQuest insurance company, however, they needed a group
Phillip Shields or Shields Trucking. He purchased two              of at least three. Shields, who also needed insurance, became
eighteen-wheeler trucks, which were garaged at his house and       the third member of the group. Myers placed Shields on the
were maintained primarily by him. Shields also employed his        payroll and began issuing him a weekly check from which the
own driver and incurred other expenses in connection with his      insurance premium was deducted. The amount of the payroll
trucking business, including fuel, contract labor, tolls,          check was then deducted from the total amount due Shields
business telephone, and subcontractors. In 1998, Shields’s         for his independent hauling. Although Joel was not an
trucking business yielded a gross income of $91,159.               employee, his insurance premium was paid directly by J & L
                                                                   because of his filial relationship to Jerry Smith, one of J &
  After Shields started his trucking company, he and J & L         L’s owners.
formed a business relationship. J & L hired Shields’s trucks
and drivers when it needed loads hauled and did not have any         Outside of their business relationship, Shields and the
available trucks or drivers of its own. Although there was no      owners of J & L were good friends. They had known each
formal contract between them, J & L used Shields’s trucks on       other for approximately thirty years. In fact, Shields
a regular basis, but not exclusively. In fact, weather             characterized his relationship with Jerry and Lester Smith as
No. 03-5217               Bituminous Casualty Corp. v.        5    6       Bituminous Casualty Corp.                 No. 03-5217
                                    J & L Lumber Co.                       v. J & L Lumber Co.

the “best of friends.” He lived approximately one mile from        asserted that Shields’s action was barred by the exclusive
J & L’s office and would go to the J & L property usually          remedy provision of the Kentucky Workers’ Compensation
once a day and sometimes two or three times a day to check         Act.
for work or just to socialize. Shields was also good friends
with Myers and the two had a social, dating relationship in the      J & L did not carry workers’ compensation insurance at the
past. In addition, Shields employed Myers’s son, Greg, as a        time of the injury.1 J & L did, however, carry accident
driver for one of his tractor-trailers.                            coverage for its employees under an Employers’ Underwriters
                                                                   policy. It also carried two commercial insurance policies with
   On the evening of November 12, 1998, Shields and Myers          Bituminous Casualty Corp., a general liability policy and a
were in the J & L office drinking coffee when they received        commercial auto policy. At the time of injury, Shields was
word that the woods crew was “blocked out” and could not           not covered under the Employers’ Underwriters policy.
continue working unless the cut timber was hauled away from        Therefore, J & L requested a defense from Bituminous in the
the logging site. Myers and Shields arranged for Shields to        state tort action, which Bituminous provided under
take a truck and haul the timber the next morning. On the          reservation of rights.
morning of November 13, 1998, Shields arrived at the J & L
lumber yard and picked up a J & L truck, which was loaded            On or about October 23, 2000, a few weeks before the
with pulp wood. He delivered the load and proceeded to the         expiration of the two-year statute of limitation under the
site that was “blocked out.” After hauling a couple of loads,      Kentucky Workers’ Compensation Act, Shields filed a claim,
Shields was injured during loading when a log dislodged from       presumably a protective filing, with the Kentucky Department
the truck and landed on him. As noted, at the time of the          of Workers’ Claims, alleging that he was injured on
injury, Shields was operating a J & L truck and was picking        November 13, 1998, while in the course of employment. See
up his third load of the day.                                      Ky. Rev. Stat. § 342.185. This claim was dismissed on
                                                                   January 24, 2003, after an Administrative Law Judge for the
   Both Shields and Myers stated that Shields was doing a          Kentucky Department of Workers’ Claims determined that
favor for J & L at the time of the accident and was not going      Shields was an independent contractor and not an employee.
to be compensated for his work. Shields testified at               The Administrative Law Judge stated that, although it was a
deposition that his work on the morning of November 13 was         close question based upon the facts and Kentucky case law,
strictly voluntary. Moreover, Shields, Myers and J & L’s           he found the intent of the parties to be paramount in
owners, Jerry and Lester Smith, all insisted at deposition that    determining that Shields was not an employee.
Shields was not an employee of J & L at the time of his
injury.                                                              In the underlying state personal injury action, on or about
                                                                   March 18, 2002, Shields filed a motion for partial summary
                     Procedural History                            judgment seeking to strike the affirmative defense raised by
                                                                   J & L that the Workers’ Compensation Act was his exclusive
  In July 1999, Shields filed a personal injury action in the
Ohio County Circuit Court of Kentucky alleging negligence
on the part of J & L or its employees related to his injuries on       1
November 13, 1998. As one of its affirmative defenses, J & L            This fact was certified by the Commissioner of the Kentucky
                                                                   Departm ent of W orkers’ Claim s on N ovembe r 13, 200 0.
No. 03-5217               Bituminous Casualty Corp. v.         7    8     Bituminous Casualty Corp.                    No. 03-5217
                                    J & L Lumber Co.                      v. J & L Lumber Co.

remedy on the grounds that he was not an employee of J & L.         Likewise, the finding benefitted Shields because it enabled
J & L did not respond to this motion. On March 28, 2002, the        him to collect any judgment awarded in the negligence action
Ohio County Circuit Court of Kentucky found that Shields            from J & L’s insurer, rather than J & L and his close friends.
was not an employee of J & L at the time of injury and struck
the Workers’ Compensation Act defense. Specifically, the               J & L filed a motion to alter, amend or vacate judgment,
Kentucky court found that J & L had little, if any, control         which was denied on January 6, 2003. J & L then filed this
over Shields, since Shields was volunteering on the day of          appeal, raising four issues: whether the district court
injury and that the true intent of the parties was that Shields     misapplied Kentucky law when it used a workers’
was not an employee.                                                compensation analysis rather than a common law analysis to
                                                                    determine whether Shields was an employee pursuant to the
   In the meantime, on July 2, 2001, Bituminous filed the           insurance contract; whether the district court erred in holding
instant action in the United States District Court for the          that Shields was an employee of J & L as a matter of law;
Western District of Kentucky seeking a declaratory judgment         whether the district court erred in failing to consider the
that it had no duty to defend or indemnify J & L under its          explicit policy definitions; and whether the district court erred
policies based on exclusions contained in each policy for           in applying federal preclusion law rather than state preclusion
employees. Bituminous argued that Shields was an employee           law to determine the effect of a prior state court judgment in
of J & L at the time of his injury and was, therefore, not          a diversity action.
covered by the policies. J & L maintained that Shields was
not an employee of J & L at the time of injury. The parties                           II. Standards of Review
filed cross motions for summary judgment.
                                                                                       A. Summary Judgment
  On October 16, 2002, the district court granted summary
judgment in favor of Bituminous, finding that Shields was an          This Court reviews a district court’s grant of summary
employee as a matter of law. The district court found, among        judgment de novo. Hartsel v. Keys, 87 F.3d 795, 799 (6th
other things, that J & L had the ultimate right to control          Cir. 1996). Summary judgment is appropriate “if the
Shields’s work, that the method of payment indicated                pleadings, depositions, answers to interrogatories, and
employment, and that the actions of J & L and Shields were          admissions on file, together with the affidavits, if any, show
inconsistent with their assertion that Shields was not an           that there is no genuine issue as to any material fact and that
employee. The district court did not make a finding regarding       the moving party is entitled to a judgment as a matter of law.”
the testimony that Shields had been working as a volunteer on       Fed. R. Civ. P. 56(c).
the day of injury. In addition, the district court found that the
October 28, 2002, Kentucky state court judgment in the                           B. Declaratory Judgment Actions
negligence action did not have preclusive effect because it
determined that the state court decision was not the result of        Exercise of jurisdiction under the Declaratory Judgment
an adversarial proceeding, since a finding that Shields was not     Act, 28 U.S.C. § 2201(a) is not mandatory. Brillhart v.
an employee benefitted both Shields and J & L. J & L                Excess Ins. Co., 316 U.S. 491, 494 (1942). Therefore, we
benefitted by the finding that Shields was not an employee          review the district court’s decision to exercise jurisdiction for
because the finding entitled it to indemnity from Bituminous.       abuse of discretion. Wilton v. Seven Falls Co., 515 U.S. 277,
No. 03-5217               Bituminous Casualty Corp. v.         9    10     Bituminous Casualty Corp.                  No. 03-5217
                                    J & L Lumber Co.                       v. J & L Lumber Co.

289-90 (1995); Scottsdale Ins. Co. v. Roumph, 211 F.3d 964,              B. Propriety of Declaratory Judgment Relief in this
967 (6th Cir. 2000).                                                                            Case
                         III. Analysis                               This Court generally considers five factors to determine
                                                                    whether a case is appropriate for declaratory judgment:
  As noted, J & L raises four issues on appeal. We do not
reach these issues, however, because we conclude that the             (1) whether the judgment would settle the controversy;
district court should have declined to exercise jurisdiction          (2) whether the declaratory judgment action would serve
over this declaratory judgment action and should have                 a useful purpose in clarifying the legal relations at issue;
dismissed the complaint.                                              (3) whether the declaratory remedy is being used merely
                                                                      for the purpose of “procedural fencing” or “to provide an
             A. Declaratory Judgment Actions                          arena for a race for res judicata”;
                                                                      (4) whether the use of a declaratory action would
   We have repeatedly held in insurance coverage diversity            increase the friction between our federal and state courts
cases that “declaratory judgment actions seeking an advance           and improperly encroach on state jurisdiction; and
opinion on indemnity issues are seldom helpful in resolving           (5) whether there is an alternative remedy that is better or
an ongoing action in another court.” Manley, Bennett,                 more effective.
McDonald & Co. v. St. Paul Fire & Marine Ins. Co., 791
F.2d 460, 463 (6th Cir. 1986). Further, “[s]uch actions . . .       Scottsdale 211 F.3d at 968 (citations omitted). The district
should normally be filed, if at all, in the court that has          court did not consider these criteria; therefore, we review
jurisdiction over the litigation which gives rise to the            them for the first time on appeal.
indemnity problem. Otherwise confusing problems of
scheduling, orderly presentation of fact issues and res             1. Whether the judgment would settle the controversy.
judicata are created.” Id.; see also Scottsdale Ins. Co., 211
F.3d 964; Omaha Property and Cas. Ins. Co. v. Johnson, 923             The controversy in this case is one of insurance coverage.
F.2d 446, 448 (6th Cir. 1991); Allstate Ins. Co. v. Mercier,        Bituminous seeks a declaration that it has no duty to defend
913 F.2d 273, 278-79 (6th Cir. 1990); Grand Trunk W.R. Co.          or indemnify J & L based on exclusions in its insurance
v. Consolid. Rail Corp., 746 F.2d 323, 326 (6th Cir. 1984).         policies for employees. If Shields was an employee of J & L
That is not to say that there is a per se rule against exercising   at the time of his injury, Bituminous would have no duty to
jurisdiction in actions involving insurance coverage                defend or indemnify J & L in the state court personal injury
questions. See Allstate Ins. Co. v. Green, 825 F.2d 1061,           action. If Shields was not an employee, on the other hand,
1066 (6th Cir. 1987); State Farm Fire and Cas. Co. v. Odom,         Bituminous would be obligated under its contracts to defend
799 F.2d 247, 250 (6th Cir. 1986). Nevertheless, the factual        and indemnify J & L. Thus, resolution of the controversy
and procedural postures of this case make exercise of               hinges solely on whether Shields was an employee of J & L
jurisdiction particularly inappropriate.                            at the time of his injury, a fact-based, and in this case very
                                                                    close, question of state law.
No. 03-5217              Bituminous Casualty Corp. v.       11    12   Bituminous Casualty Corp.                   No. 03-5217
                                   J & L Lumber Co.                    v. J & L Lumber Co.

   When this declaratory judgment action was filed, however,         Moreover, a declaration of insurance coverage would not
Shields’s employment status was already being considered in       resolve the controversy. Although a declaratory judgment
two independent state court proceedings: the state tort action    would settle the controversy between Bituminous and J & L,
between Shields and J & L, and Shields’s action before the        Shields was not made a party to the declaratory judgment
Kentucky Department of Workers’ Claims. In the state tort         action. Therefore, any judgment in the federal court would
action, which Shields had filed against J & L on negligence       not be binding as to him and could not be res judicata in the
grounds, J & L defended, in part, on the grounds that             tort action. Regardless of the judgment rendered in the
Shields’s action was barred by the exclusive remedy               declaratory judgment action, Shields would be entitled to
provision of the Kentucky Workers’ Compensation Act. This         pursue third-party recovery from Bituminous in Kentucky
defense was only viable if Shields was an employee of J & L       state court if he were successful in his tort action.
at the time of the injury. Furthermore, although J & L did not
have workers’ compensation insurance and the exclusive               A declaratory judgment would not resolve the insurance
remedy defense might have been dismissed on this ground           coverage controversy here. On the contrary, as we have seen,
alone, a determination of Shields’s employment status was         the judgment in federal court declaring that Shields was an
still necessary in the tort action because, under Kentucky law,   employee was contrary to two state court findings that Shields
if Shields was an employee, J & L would not be allowed to         was not an employee, complicating the underlying issues of
plead the defenses of assumption of the risk or contributory      liability. The state negligence action is still proceeding and
negligence in the state court. See Ky. Rev. St. § 342.690(2).     the effect that will be given to the inconsistent judgments in
                                                                  a collection suit by Shields against Bituminous, if any, is
  In the action before the Kentucky Department of Workers’        unclear. Therefore, this factor weighs against exercising
Claims, Shields’s employment status was a crucial issue           jurisdiction.
because, had Shields not been an employee of J & L, he
would not be eligible to collect compensation under the Act.      2. Whether the declaratory judgment action would serve a
Thus, to rule on the issues presented, all three courts had to    useful purpose in clarifying the legal relations at issue.
address the identical issue of whether Shields was an
employee of J & L. The declaratory judgment action in               Like the first factor, although a declaratory judgment would
federal court could serve no useful purpose. The federal court    clarify the legal relationship between Bituminous and J & L
could either reach the same conclusion as the state court, in     pursuant to the insurance contracts, the judgment would not
which case the declaration would have been unnecessary and        clarify the legal relationship between Shields and J & L in the
the federal litigation a waste of judicial resources, or the      underlying state action.         The question of Shields’s
federal court could disagree with the state court, resulting in   employment status would not be resolved by the declaratory
inconsistent judgments. Ultimately, inconsistent rulings on       judgment. Furthermore, an adverse judgment against J & L
Shields’s employment status did issue from the state and          in the state court action could still leave Bituminous subject
federal courts. Both state courts determined that Shields was     to liability in a subsequent collection suit by Shields against
not an employee of J & L, and the federal court determined        Bituminous.
that he was.
No. 03-5217               Bituminous Casualty Corp. v.       13   14   Bituminous Casualty Corp.                    No. 03-5217
                                    J & L Lumber Co.                   v. J & L Lumber Co.

3. Whether the declaratory remedy is being used merely for        factual issues are important to an informed resolution of this
the purpose of “procedural fencing” or “to provide an arena       case.
for a race for res judicata.”
                                                                    Second, both the issue of Shields’s employment status and
  This case does not present the appearance of a race for res     the issue of the insurance contract interpretation are questions
judicata. Bituminous filed its action in federal court two        of state law with which the Kentucky state courts are more
years after Shields filed his initial negligence action against   familiar and, therefore, better able to resolve. “[S]tates
J & L in state court and nine months after Shields filed his      regulate insurance companies for the protection of their
claim for workers’ compensation benefits. We give                 residents, and state courts are best situated to identify and
Bituminous the benefit of the doubt that no improper motive       enforce the public policies that form the foundation of such
fueled the filing of this action.                                 regulation.” Mercier, 913 F.2d at 279.
4. Whether the use of a declaratory action would increase            Furthermore, resolution of the insurance controversy in this
friction between our federal and state courts and improperly      case requires a ruling on previously undetermined questions
encroach upon state jurisdiction.                                 of state law. The insurance contract at issue here includes
                                                                  exclusions for obligations arising under workers’
  To determine whether the exercise of jurisdiction would         compensation laws. Yet, J & L did not carry workers’
increase friction between federal and state courts we have        compensation insurance at the time of the injury. Although
considered three additional factors:                              recently a number of courts have held that such exclusions
                                                                  remain applicable despite an employer’s lack of insurance,
  (1) whether the underlying factual issues are important to      there is precedent from at least two courts supporting an
  an informed resolution of the case;                             alternate position. See Johnson v. Marciniak, 231 F. Supp.2d
  (2) whether the state trial court is in a better position to    958, 960 (D.N.D. 2002); Weger v. United Fire and Cas. Co.,
  evaluate those factual issues than is the federal court; and    796 P.2d 72, 74 (Colo. Ct. App. 1990); Tri-State Constr., Inc.
  (3) whether there is a close nexus between the underlying       v Columbia Cas. Co./CNA, 692 P.2d 899, 903 (Wash. Ct.
  factual and legal issues and state law and/or public            App. 1984). But see Hunt v. Hosp. Serv. Plan of New Jersey,
  policy, or whether federal common or statutory law              162 A.2d 561 (N.J. 1960); and Rose v. Franklin Sur. Co., 183
  dictates a resolution of the declaratory judgment action.       N.E. 918, 919 (Mass. 1933). Kentucky has not decided the
                                                                  issue.
Scottsdale, 211 F.3d at 968.
                                                                     Similarly, the parties dispute whether, if Shields is an
  First, in this case, two state actions, involving the same      employee, he falls within the insurance contracts’ definitions
factual issue that is presented in this declaratory judgment      of temporary worker, a category of worker that would not be
action, were pending when this action was filed. The issue of     excluded from coverage. The contracts define a temporary
whether Shields was an employee, the key issue in the             worker as “a person who is furnished to you to substitute for
declaratory judgment action, was a necessary component of         a permanent ‘employee’ on leave or to meet seasonal or short-
both Shields’s negligence action against J & L and his claim      term workload conditions.”          Contract definitions of
for workers’ compensation benefits. Thus, the underlying          “temporary worker”, identical to the definitions in the
No. 03-5217                  Bituminous Casualty Corp. v.           15     16    Bituminous Casualty Corp.                    No. 03-5217
                                       J & L Lumber Co.                          v. J & L Lumber Co.

Bituminous policies, have been interpreted in two                          of the Scottsdale factors indicate that exercise of jurisdiction
jurisdictions, each giving different meaning to the phrase                 in this case could create friction between the state and federal
“furnished to” in the definition. Depending on the                         courts.
interpretation chosen, Shields could be classified as a
temporary worker. See Ayers v. C & D Gen. Contractors, 237                   A friction between the courts was an actuality, not a mere
F. Supp.2d 764, 768-69 (W.D. Ky. 2002), and Am. Family                     possibility. Indeed, the district court’s decision is contrary to
Mut. Ins. Co. v. Tickle, 99 S.W.3d 25 (Mo. Ct. App. 2003).                 two decisions rendered by the state courts on the same facts.
Kentucky courts have not yet interpreted the controversial                 The district court’s finding that Shields was an employee was
language.2                                                                 made on summary judgment, indicating the district court’s
                                                                           belief that Shields was an employee as a matter of law. See
  While a district court should not necessarily refuse to                  Fed. R. Civ. P. 56(c) (Summary judgment is appropriate “if
exercise jurisdiction because a case involves undetermined                 the pleadings, depositions, answers to interrogatories, and
questions of state law, it is an appropriate consideration when            admissions on file . . . show that there is no genuine issue as
determining the suitability of a case for declaratory judgment.            to any material fact and that the moving party is entitled to a
See Scottsdale, 211 F.3d at 969. Where as here, there are two              judgment as a matter of law.”). Prior to the district court’s
potential unresolved questions of state law concerning state               ruling, however, the state court found, on the same facts, that
regulated insurance contracts, this consideration weighs                   Shields was not an employee. Thus, the district court’s
against exercising jurisdiction.                                           contrary opinion leads to the ultimate conclusion that the
                                                                           district court believed the state court erroneously decided a
  Finally, this case was brought pursuant to the federal                   question of state law.
courts’ diversity jurisdiction and neither federal common law
nor federal statutory law apply to the substantive issues of the              Although the district court did not, indeed could not, know
case. The declaratory judgment action involved the same                    what the state court would ultimately hold regarding Shields’s
underlying factual issues that were pending in two state court             employment status, it did know that two actions were pending
actions. The state courts were in a better position to evaluate            in the state courts both revolving around the issue of Shields’s
the factual issues because they rested solely on state law with            employment status. Therefore, the district court should have
which the state courts are better acquainted. Furthermore,                 recognized the possibility that it would render a judgment
resolution of the declaratory judgment action required                     inconsistent with the state court on that issue. We conclude
consideration of two undetermined questions of state law and               that considerations of comity weigh against exercising
did not involve the application of any federal law. All three              jurisdiction.
                                                                           5. Whether there is an alternative remedy which is better or
    2
      It appears from a non-final Kentucky Court of Appeals opinion that   more effective.
Kentucky would hold the workers’ compensation exclusion app licable
and would follow the interpretation of “temporary worker” found in            Kentucky does provide a procedure for a declaration of
Tickle. See Indiana Ins. Co. v. Brown, _ S.W.3d _, 2003 WL 23008788        rights. Ky. Rev. St. § 418.040 (“In any action in a court of
(Ky. Ct. Ap p. 2003). Nevertheless, under Kentucky rules a non-final       record of this commonwealth having general jurisdiction
opinion shall not be cited as authority in any of the courts of the        wherein it is made to appear that an actual controversy exists,
Comm onwealth.
No. 03-5217                Bituminous Casualty Corp. v.        17    18    Bituminous Casualty Corp.                    No. 03-5217
                                     J & L Lumber Co.                      v. J & L Lumber Co.

the plaintiff may ask for a declaration of rights . . . and the         We are cognizant of the fact that it is easier in hindsight to
court may make a binding declaration of rights . . . .”). Thus,      conclude that jurisdiction in declaratory judgment actions was
Bituminous could have presented its case to the same court           improvidently granted, especially when faced with the tangle
that will decide the underlying tort action. Given that the          of inconsistent judgments that is presented here. Nonetheless,
issues presented involve questions of state law only, the state      although the district court cannot be expected to foresee the
court is also in a superior position to resolve the case. See        unforeseeable, the district court must be attentive to the
Mercier, 913 F.2d at 278-79. In addition, a superior                 potential problems that can arise when there are dual, let
alternative remedy exists in the form of an indemnity action         alone triple, actions in state and federal court and should
filed at the conclusion of the underlying state action. See          dispose of declaratory judgment actions accordingly.
Manley, Bennett, 791 F.2d at 462-63.
                                                                       Because we find that declaratory judgment relief was
   There is no reason to suppose that the alternate remedies         inappropriately granted, we do not reach the issues regarding
available in state court would not adequately protect                the district court’s order granting summary judgment.
Bituminous’s interests. We “question the need for . . .
declaratory judgments in federal courts when the only                  For the foregoing reasons, we VACATE the district court’s
question is one of state law and when there is no suggestion         order granting declaratory judgment relief and REMAND the
that the state court is not in a position to define its own law in   case to the district court with instructions to dismiss the
a fair and impartial manner.” Am. Home Assur. Co. v. Evans,          complaint.
791 F.2d 61, 63 (6th Cir. 1986). This factor, as well, weighs
against exercising jurisdiction.
                        IV. Conclusion
   We find that at least four of the above five factors indicate
that a federal declaratory judgment was inappropriate in this
case. Although it does not appear that Bituminous filed this
action for the purpose of procedural fencing or to win a race
for res judicata, the lack of improper motive in filing alone
cannot justify the exercise of jurisdiction when all the other
factors weigh on the side of declining. See Mercier, 913 F.2d
at 279. A declaratory judgment in this case would not settle
the controversy or resolve all the underlying legal relations.
Any resolution that could be achieved by the declaratory
judgment would come at the cost of increasing the friction
between state and federal courts. Finally, a superior remedy
exists in state court.
