* The Honorabl e David M. Lawson, Unit ed Sta tes Dist ric t Ju dge f

or the E astern D istrict of M ichigan , sitting by de signatio n.
1 RECOMMENDED FOR FULL-TEXT PUBLICATION Pursuant to Six

th Circuit Rul e 206

ELECTRO NIC CIT

ATION: 2004 FED App . 0199P (6th C ir.) File Name: 04a01 99p.06



### UNITED STATES COURT OF APPEALS

FOR THE SIXT H CIR CUIT

_________________
B ITUMINO US C ASUAL TY C ORPORATI ON ,

Plaintiff-Appellee,

v.

J & L L UMBER C OMPANY , I NC ., Defenda nt-Appel lant. X - - - -
> , - - - - - N No. 03-5217

Appeal from the United States District Court for the Western District of Kentucky at Owensboro. No. 01-00106—Joseph H. McKinley, Jr., District Judge.

Argued: April 20, 2004
Decided and Filed: June 29, 2004

Befor e: SUHRHE INRICH and GI BBONS, Circuit Judg es; LAWSON, District Judge. * 2 Bituminous Casualty Corp. v. J & L Lumber Co. No. 03-5217

_________________ COUNSEL

ARGUED: Jeffrey L . Freeman, JEFFREY L . FREEMAN ATTORNEY AT L

AW, Louis ville, Ke

ntucky, for App ellant. Robert E. Maclin II

I, McBRAYER, McGI

NNIS, L ESLIE & KIRKL AND, Lexing ton, Kent u cky , for App elle e

. ON BRIE F: Jeff

rey L. Fre ema

n, JE F FREY L. FREEMAN ATTORNEY AT L

AW, Lou is vi ll e, Ke nt uc ky, for Appe llant. Robert E. Maclin II

I, Pam ela A . Chesnut, McBRAYE R, McGI NNI S, LES LIE & KIRKL AND, Lex in gt on , K en tu ck y, for Appellee.

_________________

OPINION

_________________ SUHRHEINRI CH, Circuit Judge. Defen dan t-Appellant J & L Lu mb er Co mp an y, Inc. (J & L ) appeals from

the order of the district court granting summary ju dgment in favor of Bitumi n ous Casualty Corp. (Bituminous) and de nying
summa ry judgment in favor of J & L in this declar ator y judgment acti on. Bitumi

nous brou

ght this a

ction ag ainst J & L in federa

l districtcourt, se eking a

declar ation tha t it was notrequired to defend or indemnify J & L in a personal injury actionin state

c ourt relating to a logging accident that occurred on Novemb er 13, 19 98, while Phillip Shiel ds, plaintiff in the state action, was preparing to haul a load of tim ber from a J & L logging site. The central issue in the f ederal aJune 29, 2004ction was whether Shields was a n employee of J & L at the tim e of his in

jury and, there fore, excluded from coverage under the terms of J & L’s commercial insurance policies with Bitumino us. For the
reasons that follow, we VACATE the district court’s order granting declaratory

judgment relief to Bituminous andNo. 03-5217 Bituminous Casualty Corp. v. J &L Lumber Co. 3

REMAND the case

to the distr

ict cour t with instr

uctions to dismiss the complaint.

I. Backgro und

A. Facts

J & L i s a sm a ll, family

owned an

d operat ed sawmil l in eastern Kentuck y. B esides f

amily members, the mill

em pl oys approxima

tely ten to fifteen additional workers in either the sawmill or the woods . In November 1998, J & L also owned three t ractor -trailer trucks and two tandems for hauling lumber and employed dr

ivers for these vehicles. Phillip Shields, th e plaintif f i n the underlying

personal injury action against J & L, is a fifty -eight-y ear-old man

who has worked in or around the logging industry most of h i s adult life. At different times, Shields has worked as a trucker, sawmill foreman, independent logge r, an d t im ber buye r. In the past, he worked f

or J & L both as the sawmill foreman and as a truck driver.

Sometime after quitting the sawmill foreman position at J & L, Sh ie ld s f

or me d a tr uc ki ng co mp an y w i th the nam e Phillip Shields or Shields Trucking . He p urchased two eighteen-wheeler

trucks, w hich wer e gara ged at h is house and
were maintained primarily by him. Shields al so employ ed his
owndriver and incurred

other expenses in connec

tion with hi s trucking business, including fuel, contract la

bor, tolls, businesstelephone, and subcontractors. I n 1998, Shields’s trucking business y

ielded a gross income of $91,159.

After Shields sta

rted histruckin g company, he and J & L formed a business relationship. J & L hired Shields’s trucks and drivers when it needed loads hauled and did not have any availab le trucks or

drivers of its own. Although there was no formal contract betwee

n them, J & L used Shields’s trucks on a regular b asis, but not exclusively. I n fact, weather 4 Bituminous Casualty Corp. v. J & L Lumber Co. No. 03-5217

permi ttin g, Shields hauled for J & L at least once

a week and usually more. On occ asion, he even drove a J & L truck.

The payment arr

angement between Shields and J & L was somewhat

comp l icated. Primarily, Shields was paid by the load for his work hauling for J & L . When he drove a J & L truck, though, Shields receiv ed only driver’ s pay

in the same
manner as J & L ’s own dr

ivers. I n addition , from Ma

r ch 1998 through

Decemb er 9, 199 8, Shields was list ed as an employee on th e J & L payrol l regi sters . He received a weekly pay roll che ck of $25 0 from whi ch taxes a nd health insurance premiums were withheld. He also received a check fromthe gene ral a ccount from which no withholdings were taken.

J & L described this unusual p ayment arr

angement as an accountingdevice th at permit ted Shield s to obtain

health insurance coverage. The

deposition testimony indicated that inMarch or

April 1998 , Wilma My ers ( Myers), J & L’s secretary and general office mana ger, and Joel Smith, an owner’s son who had been insured with Blue Cross and

Blue Shield, decided to change insuran ce providers due to an incr easein premiums. To get insurance under a plan w it h MedQues tinsurance company , however, they needed a group of at least t hree. Sh ields, who

also needed insurance, became the third member of the group. Myers place d Shields on the pay roll and began issuing him a weekly

check from which the insurance premiumwas deducted. The amount of the pay roll check was then deducted from the total amount due Shields for his i ndepe ndent hauli ng. Alt hough Joel w as not an employee, his insura

nce pre mium was pa

id directly by

J & L because o f hi s fi lial re lat

ion shi p to Jerr y Smit h, o ne o f J & L’s owners.

Outside of their business relationship, Shields and the
owners of J & L were g ood friends. They had kn own each other for approximately thirty years. I

n fac t, S hields characterized

his relationship with Jerry and Lester Smith asNo. 03-5217 Bituminous Casualty Corp. v. J &L Lumber Co. 5

the “best of friends.” He lived approxima

tely one mile from J & L’s offi c e and wou

ld go to th e J & L

propert y us ually
once a day and sometimes two or three times a day to check for work or just to socialize. Shields was also good fr iends with Myers and the two ha

d a social, dating relationship in the past. In addition, Shields employ ed Myers’ s son, Greg, as a driver for one of his tractor-trailers.

Onthe evening of November 12, 1998, Shields and My ers were in th e J & L o ff

ic e d ri nk in g c of

fe e w he n t he y recei ved word that the woods crew was “blocked o ut” and could not continue working unless the cut timber was hauled away from the logging site. My ers and Sh ields arr anged for Shiel ds to take a truck and haul the timber the next morning. On the morning of November 13, 1998, Shi elds arrived at the J & L lumber yard and pic

ked up a J & L truck, which was lo aded with pulp wood. He delivered the load and proceeded to the site that was “blocked out.” After hauling a couple of loads, Shields was injured

during loading when a log dislodged from th e truck and landed on him. As noted, at the time of th e in ju ry, Shields was operating a J & L tru ck a nd was picking up his third load of the day.

Both Sh ie ld s a nd Mye rs sta

ted th at Sh ields was do ing a favor for J & L at the time of the acc ident and was not going to be compensated for hi s work . Shields testified at deposition that

his work on the morning of November 13 was strictly v ol untary. Moreove

r, Shields, Myers and J & L ’s owners, Jerry and L ester Smith, all insisted at deposition that Shields w as no t an emplo ye e of J & L at the time

of his in ju ry. Procedural History

InJu ly 1999, Shi elds filed a personal injury action in the Ohio County

Circuit Cou

rt of Ken tucky all eg ing negligence
on the part

of J & L or its employ

ees related to his injuries on November

13, 1998. As one of its affirmative defenses, J & L 6 Bituminous Casualty Corp. v. J & L Lumber Co. No. 03-5217

1 Th is fact was cer tif

ied by the Commissioner of the Kentucky De partm ent of W orke rs’ Claim s on N ove mbe r 13 , 200 0. asserted that Shields’s action was barred by the exclusive remedy provision of the Kentucky Worke r s ’ Compensation Act.

J & L did not carry

workers’ compensation

insurance at

the time of th e i nj ur y. 1 J & L did, h owe ver, carry accident
covera ge for its em

ploy ees unde r an Emp loy

ers’ U nderwriters po li cy. It also carried

two commercial insurance policies with Bituminous Casualty Corp., a g eneral liability policy and a commercial au to po li cy. At th e t im e o f i nj ur y, Shields was notcovered under

the Em pl oye rs ’ U nd er wr it er s p ol ic y. Therefore, J & L re quested a defense from Bituminous in the state tort action, which Bituminous provided under reservation of rights.

Onor about October 23, 2000, a few weeks be fo re t he expiration of the two-ye a r s tatute of limitation under the Kentucky Workers’ Compensation Act, Shields filed a c laim, presuma bly a protect i ve filing, with the Kentucky Department of Wor k ers’ Claims, alleging that he was injured on November

13, 1998, while in the course of employ ment. See Ky. Rev. Stat. § 342.185. This claim wa s dismiss ed on January 24, 2003, after an Administrative Law Judge for the Kentucky Department of Wor

ker s’ Claims determined that Shields was an independent contractor and not an

employee. The Admin

istrative Law Judge sta ted that, althoug

h it was a closequ es ti on ba se d u po n t he fa ct s a nd Ke nt uc ky case la w, he found the intent of the p artie s to be par amount in determining that Shields was not an employ ee.
Inthe under

lyin g state per sonal injury action, on or about March 18, 2002, Shiel d s filed a motion for partial summary judgment seeking to strike t

he affi r mative defense raised by J & L that the

Workers’ Compensation Act was his exclusiveNo. 03-5217 Bituminous Casualty Corp. v. J &L Lumber Co. 7

remedy on the grounds that he was not an employ ee of J & L. J & L did not respond to this motion. On March 28, 2002, the Ohio County Circuit Court of Kentucky found that Shields
was notan employee

of J & L at thetime of injury and struck the Workers’ Compensa

tion Act defen se. Specifically, the Kentucky court found that J & L had little, if any , control
over Shields, si

nce Shiel ds w as volunteering on the day of injury and that t

he true i n tent of the parties was that Shields was not an employee

. Inthe meantime, on July 2, 2001, Bituminous filed the instant action in the United States District Court for the WesternDistrict of Kentucky seeking a declaratory

judgment that it had no duty to defen

d or ind emnify

J & L un

der its policies based on exclusions contained in each policy for employ ees. Bituminous argued that Shields was an employ ee of J & L at the time of his injury and wa s, therefore, not covered by th e po li cie s. J & L m ai ntained that Shields was notan employee of J & L at the time of injury. The par ties filed cross motions for summary judg ment.
OnOctober 16, 2002, the d istri ct court granted summary judgment in favor of Bituminous, finding that Shields was an employee as a matter

of law. The district

court found, among other things, that J & L ha d the ultimate right to control Shields’s work, that the method of pay ment indicated employ ment, and that t

he actions of J & L

and Shield s w er e inconsistentwith their assertion that Shields was not an employee. The district

court did not make a finding regarding the testimony

that Shields had

been working as a volunteer on the day of injury. In addition, the district court found that the October 28, 2002, Ken tucky state cour t judgment in the negl ige nce action di d not have preclus ive eff

ect bec ause it determined that the state court decision was not theresult of
anadversarial proceeding, since a finding that

Shields was not
anemployee benefitted both Shi elds and J & L. J & L benefitted by t he fin ding tha t Shields was not an employee because the findin

g entitle d it to indem

nity from Bit uminous. 8 Bituminous Casualty Corp. v. J & L Lumber Co. No. 03-5217

Likewise, the finding benefitted S hi elds because it enabled him to collect any judg

ment awarded in the negligenc e action fromJ & L’s insurer, rather thanJ & L a

nd his clos e frien

ds.

J & L filed a motion to alter, amend or vacat e judgme

nt, whichwas deni ed on Janua ry 6, 2003. J &

L the n filed thi s appeal
, raising four issues: whether the district court misapplied

Ke nt uc ky l aw wh en it used a worke

rs’ compensation

analy sis rather than a common law analy sis to determine whether Shields was an employ ee pursuant

to the insurance contract; whether the district c ourt err ed in holding that Shields w as an employee of J & L as a ma tter of law; whet her the district court erred in failing to consider th e explicit policy definitions; and whether the district court erred inapplying f

ederal preclusion law rather than state preclusion law to determine the effect of a prior state court judg ment in a diversity action.

II. Standards of Review

A. Summ ary Judgm ent
This Court r evi ews a district court’s grant of summary judgment de novo

. H

arts el v. Keys , 87 F.3d 7 95, 799 (6 th Cir. 1996). Summary judgme nt is appropriate “if t

h e pleading s, depositions, ans wers to interrogatories, and admissions on file, to ge th er wi th th e a ff id av it s, if an y, show that there is no genuine issue as to any mater ial fact and that the moving party is e

ntitled to ajudgment

as a matter of law.” Fed. R. Civ. P. 56(c).

B. Declar atory Judg ment A ctions

Exercise of jurisdiction under the Declaratory Judgment Act, 2 8 U.S.C. § 2201(a) is not mandatory. Brillhart v

. Excess Ins. Co

. , 316 U .S. 491, 494 (1942). Therefore, we review the district court’s decision to exercise jurisdiction for abuseof discretion. Wilton v. Seven F alls Co. , 515 U.S. 277,No. 03-5217 Bituminous Casualty Corp. v. J &L Lumber Co. 9

289-90 (1995); Scottsdal

e Ins. Co. v. Roumph , 211 F.3d 964, 967 (6th Cir. 2000). III. Analys is

As noted, J & L raises four is sues on appeal. We do not reach these issues, however, because we concl ude that the districtcour

t shou ld ha ve de cline d to e xe rcis e jurisdiction
over this declaratory

judgment action and should have dismissed the complaint.

A. Decla ratory J

udgment Actions

We have repeatedly

hel d i n insuran

ce cove rage d iversity
cases that “declaratory

judgment actions seeking an advance opinion on indemni

ty is sues are

seld om helpful in resolving
an ongoing action in another court.” Manley, Be nnett , McDonal d & Co. v. St. Paul Fire & Marine Ins. Co

. , 791 F.2d 460, 46 3 (6 th Cir. 1986). Further, “[s]uch actions . . . should normally

be file d, if at a ll, in the court that has jurisdict i on ove r the litigation which gives rise to the in demnity

problem. Otherwi se confu sing pro blems o f sch eduli ng, orderly pre sentation of fact issues and re s judicata are created.” Id. ; see also Scottsdale Ins. Co., 211 F.3d 964; Omaha Property and Cas. Ins. Co. v. Johnson , 923 F.2d 446, 448 ( 6th

Cir. 1991) ; Allstate Ins. Co. v. Mercier , 913 F.2d 273, 278-79 (6 thCir. 1990) ; Grand Trunk W.R. Co.

v. Consol id. Rail Corp. , 746 F.2d 323, 326 (6th Cir. 1984). That is not to say that there

is a per se rule against exercising jurisdiction in act ions invo lvin g insu rance co verage questions

. See Allst

ate Ins. Co . v. G reen , 825 F.2d 1061, 1066 (6th Cir. 1 987); State Farm Fire and Cas. Co. v. Odom
, 799 F.2d 247, 250 (6th Cir. 1986). Nevertheless, the factual and procedural postures of this case make exercise of jurisdiction particularly inappropr iate. 10 Bituminous Casualty Corp. v. J & L Lumber Co. No. 03-5217

B. Propr iety of De clarato ry Judgm ent Relie f in this

Case

This Court generally

considers five factors to determine whether a case i s appropr

iate for declar atory judgmen t: (1) whether the

judgmen t would set

tle the controver sy; (2) whether the declaratory judgment action would serve
a useful purpose in clarify

ing the legal relations at

issue; (3) whether the declaratory remedy is being u sed mere ly for the purpose of “procedural fencing” or “to provide an arena for a race f

or res judicata”; (4) whether the use of a declaratory action w oul d increa se the friction

between our

federa l and state courts and improperly e

ncroach on state jurisdiction; and (5) whether

there is an alternative remedy that is better or more effective.

Scottsdal e 211 F.3d at 968 ( citatio ns omitted). The district court did not consider these criteria; there for e, we review them for the first time on appeal.

1. Whether the judgment would settle the controversy.

The controversy in this ca se is one of insurance coverag e. Bituminous seeks a d

eclara tion that it has no duty to defend
or ind emnify

J & L b ase d on exclusions in its insurance policies for

employees. If Shields was an employee of J & L at the time of his injury, Bituminous would hav e no duty to defend or i ndemnif y J & L in the state court personal injury action. If S hields wa s not an employee, on the othe r hand, Bituminous would be obligat ed under its contracts to defend and ind emnify

J & L. Thus , resolut

ion of the controve rsy hing es solely

on whether S hields was a n employee of J & L at the time of his injury, a f act-b ased, and in this case very close, question of state law.No. 03-5217 Bituminous Casualty Corp. v. J &L Lumber Co. 11

When this declaratory

judgment action was filed, however, Shields’s employment status was alread y be ing con sidered

in two independent

state court proceedings: the state tort action between Shields and

J & L, and Shields’s action befor e the Kentucky Department of Workers’ Claims. In the state tort action, whic h Shiel ds had filed against J & L on neg ligence ground s, J & L defended, in part, on the grounds that Shi elds ’s action was barred by the exclusive remedy provision of the Ke

ntucky Workers’ Compensa

tion Act. This defense was only viable if Shields w as an employee of J & L at the time of the injury. Furth ermor e, alt hough J & L did not have workers’ com

p ensation insurance and the exclusive remedy defense mig ht ha ve been dismissed on this ground alone, a determination of S hields ’s employment status was still necessary

in the tort actionbecause, under Kentucky law, if Shield s was an employ

ee, J & L would not b e allowe d to plead the de fenses o f assumption of the risk or contributory negligence

in the state court. See Ky. Rev. St. § 342.690(2).

Inthe action before the Kentuck y D epartme

nt of Worke

rs’ Claims, Shields’s employment status was a cruc ial issue because, had Shields not been an employe e of J & L, he would notbe eligible to collect

compensa

tion under

the Act. Thus, to rule on the issues presented, all three cou r ts had to address the identical issue of whether Shields was an employee of J & L. The dec larator y ju dgment a ction in federal court

could serve no useful purpose. The federal court could either r each the same con

clusion a s the state

court, in whichcasethe declaration would have been unnecessary and the federal litigation a waste of judicial resourc es, or the federal court could disagree with the state court, resulting in inconsistentjud gm ents. Ultimately, inconsistent rulings on Shields’s employ

ment s tatus did issue from the state and federal courts. B oth state c ourts determined that Shields was notan e mployee of J & L , and the federal court determined that he was. 12 Bituminous Casualty Corp. v. J & L Lumber Co. No. 03-5217

Moreover, a decl a ration of insurance coverag e would not resolv e the controversy . Although a declaratory judgment would settle the controversy

between Bituminous and J & L, Shields was not made a party to the declaratory

judgment action. Th er ef

or e, an y j udgm ent in the

federa l court wo

uld notbe binding

as to him and

could not be res judicata in the tortaction. Re gardle ss of the ju dg ment rendered in the declaratory

judgmen t action, Shields wo

uld be e ntitled to pursue third-party re covery f rom Bituminous in Kentuck y state court if he were successful in his tort action.

A declarator

y judgment would not resolve the insurance
covera ge co nt ro ve rs y he re . O n t he co nt ra ry, as we have seen, the judgmen

t in fede ral cour t declar in g that S hields was an employee was contrary

to two state court findings that Shields
was not an emplo yee, compl icati ng the u nderl ying i ssu es of liab il it y. The state negligence a ction is still proceeding and the effect that will be g iven to the

inconsiste

nt judgme

nts in
a collectionsuit by Sh

ields ag ainst Bit

uminous, if

any , is unclear. Theref

ore, this factor weighs agains t exerci sing jurisdiction.

2. Wh et her the declaratory judgment action would serve a useful purpose in clarifying the legal relations at issue.

Like the first factor, although a declar atory judgmen t would clarify the legal relationship b etw een Bitumin ous and J & L pursuant to the ins urance contracts, the judgment would not clarify the legal relationship between Shields and J & L in the underlying

state action. The q uesti o n of Shields’s employ ment statu s would

notbe resolved by

the declaratory judgmen t. Furth ermor e, an ad verse j udgm ent agai nst J & L inthe state

court actio n could still leave Bituminous subject to liability

in a subse quent col lection su it by Shields ag ainst Bituminous.No. 03-5217 Bituminous Casualty Corp. v. J &L Lumber Co. 13

3. Whet her the declaratory remedy is being used merely for the purpose

of “proced

ural fenc ing” or “to provide an arena for a race for res judicata.”

This case does not present the appearance of a race for res j u dicata. Bituminous filed its action in federal court two years after Shields filed his initial neg li gence action a gainst J & L in sta

te court and nine m

onths aft er Shield s f

iled hi s claim for workers’ compensation b enefi ts. We give Bituminous the benefit of the doubt that no improper motive fueled the filing of this action.

4. Whether the use o

f a declar

atory act ion would inc

rease friction between our federal and state courts and

improper ly encroach upon state jurisdiction.

To de ter mine whet

her the e xercise o f jurisdiction would incre a se friction between federal and state c ourts we have consider ed three additiona l factors: (1) whether the underlying factual issues ar

e importa nt to an infor med reso lution of the case; (2) whether

the state trial cou rt is in a bet ter positi on to evaluat e those factual issues than is the federal court; and (3) whether

there is a close nexus between the underly ing factual a nd le gal issues and sta te law an

d/or publi c po li cy, or whether federal common or statutory law dictates a resolution of the declaratory judgment action.

Scottsdal e , 211 F.3d at 968. First, in this case, two state actions, invo lving the same factual issue t hat i s presented in this declaratory judgment action, were pending when this action was filed. The issue of whe ther Shields was an employee , the key issue in the declaratory

judgment action, w as a necessary component of both Shields’s neglig ence ac

tion aga inst J & L and his cl aim for worker s’ compensation benefits. Thus, the underly ing 14 Bituminous Casualty Corp. v. J & L Lumber Co. No. 03-5217

factual issues are important to an informed re solution of this
case. Second, both the issue of

Shields’s employment status and the issue of the insurance contract interpretation are questions of state law with which th e Kentuc ky state courts ar e more familiar and, ther

efore, better a

ble to res olve. “[S]tates regula te ins uranc e compan

ies for the protection of the ir resi de nts, and state courts are best situated to identify and enforce the pu

bl ic policies that form the foundation of such regulation.” Mercier , 913 F.2d at 279. Furthermore, resolution of the insuranc e controversy inthis
caserequires a ruling on

previously undetermined questions of state law. The insurance c ontract at issue here includes exclu sions for obligat ions arising under workers ’ compensation

laws. Yet, J & L did not ca rry worker s’ compensation

insura nce a t the t ime of

the in jury. Alt hough recent ly a number of courts have held that such exclusions remain applicable despite an employ er’ s l ack of insurance, there is precedent from

at l east two courts supporting an alterna te position. See Johnson v. Marciniak, 231 F. Supp.2d 958, 960 (D.N .D. 2002) ; Weger v. United Fire and Cas. Co.
, 796 P.2d 72, 74 (Colo. Ct. App. 1990); Tri-State Constr., Inc.

v Columbia Ca

s. Co./CNA , 692 P.2d 899, 903 (Was h. Ct. App. 1984). But

see Hunt v. Hosp. Serv. Plan of New Jersey
, 162 A.2 d 56 1 (N .J. 1960); and Rose v . FranklinSur. Co. , 183 N.E. 918, 919 (Mass. 1933 ). Kentu cky has not decided

the issue.

Si mi la rl y, the par

ties di spute whether, if Shields is an employee, he falls within the insurance contracts’ definitions of temporary worker, a

category of worker

that would not be excluded from coverag e. The contracts define a temporar y worker as “a person who is furnished to y outo substitut

e for
a permanent ‘employ

ee’ on leave or to meet seasonal orshorttermworkload conditions.” C o ntract definitions of “temporary

worker”, identical to the defin itions in theNo. 03-5217 Bituminous Casualty Corp. v. J &L Lumber Co. 15

2 It appea rs fr om a non-final Kentucky Court of Appeal s opini on that Kentucky woul d hol d th e wor ker s’ comp en sation e xclusio n app licable and would fol low the int erpretation of “temporar

y worker ” fo und in Tickle

. See Indi ana Ins . Co. v. Brown , _ S.W.3d _, 2003 WL 23008788 (Ky. Ct. Ap p. 2 003 ). Nevert heless , under Kent

ucky ru les a n on-fi nal opini on shall not be cited as authori ty in any of the courts of the Comm onwealth. Bituminous po lic ies, have been interpreted in two jurisdict ions, each giv ing di fferen t mean ing to t he phras e “furnished

to” in the definition. Depending on the interpretation

chosen, Shields could be clas sifi ed as a temporary

worker. See Aye

rs v. C & D Gen. Con tractors , 237 F. Supp.2d 764, 768-69 (W.D. Ky. 2002), and Am. Fa mily Mut. Ins. Co. v

. Tickle , 99 S.W.3d 25 (Mo. Ct. App. 2003). Kentucky cour ts have not yet interpr

eted the controversial language. 2

While a distric t court should n ot neces sarily refuse to
e xercise jurisdiction because a case involves undetermined questions of state law, it is an appropriate consideration when determining the suitab ility of a cas e for

declar atory judgmen t. See Scottsdal

e , 211 F.3d

at 969. Where as here, there are two potential unresolved

qu estions of

state law concer ning sta te regulated insuranc e contra

cts , t his consideration weighs against exercising jurisdiction.

Fi na ll y, this case was brought pursuant to the f eder al courts’ diversity jurisdiction and neither federal common law
nor federal statutory

law apply to the

substantive issues of

the
case. The declara

to ry judgmen

t action in

volved the

same underlying

factual issues that were pending in two state court actions. The state

courts we

re in a better position to

evaluat e the factual issues because they rested solely on state la

w with whichthe state courts are better acquainted. Further more, resolution of the declaratory judgment action r equired consideration

of two undetermined

questions of state lawand did not involve the application of any fede ral law. All three 16 Bituminous Casualty Corp. v. J & L Lumber Co. No. 03-5217

of the Scottsdal

e factor s indicate

that exercise of

jurisdiction inthis case could create friction betwe en the state and federal courts.

A friction between the courts was an actuality , not a mere po ss ib il it y. Inde ed, the di strict co urt’s de cision iscontrar

y to two decisions rendered by the state courts on

the same facts. The district court’s finding that Shields was an

employee wa s made on summar

y ju dgment , indicating the district court’s belief that Sh ields was an employee as a matter of law. See Fed. R. C iv. P. 5 6(c) (Su mmary judgmen t is appro priate “ if the plead ings
, depositions, answers to interrogatories, and admissions on file . . . show that there is no genuine issue as to any materia

l fact and that

the moving party

is entitledto a judgment as a matter of l aw .”). Prior to the district court’s rulin g, however , the state

court fo und, on the

same fa cts, that Shields was not an employ ee . Thus, the district court’s contrary opinion lea ds to t he ultimate conclusion that the districtcourt believed the state cour t erron eously decided a question of state law

. Alth ough the distri ct court did not, indeed could not, know what the state co ur

t would ultimately hold rega rding Shields’s employment

status, it did know that two actions were pending inthe state courts both revolving around the issue of

Shields’s employment

status. Therefore, the district c ourt shoul d have recognized

the possibility that it would render a judgme nt inconsistentwith the state court on that issue. We conclude that consider

ations of comity weigh a

gainst e xe rcising jurisdiction.

5. Whe ther ther

e is an alte

rnative r emedy wh ich is bett

er or more effective. Kentucky does provide a procedure fo r a d eclaration of rights. Ky. Rev . St . § 418.040 (“In any action in a court of record of thi s comm onweal th hav ing g eneral jurisdiction wherein it is made to appear that an actual controve rsy exists,No. 03-5217 Bituminous Casualty Corp. v. J &L Lumber Co. 17

the plaintiff

may ask f

or a declaration of rights . . . and the court may make a bi

nding de clarati on of rig

hts . . . .”). Thus, Bituminous could hav e prese nte d it s case to the same court that will deci de th e underl

y ing tort action. Given that the issues presented involve questions of state law only , the state court is also in a superior position to res o lve the case. See Mercier , 913 F.2d at 278-79. In a ddition, a superior alt ernative remedy e

xists in the form of an indemnity action filed at the conclusion o f the unde rly ing st ate ac tion. See Manley, Bennett, 791 F.2d at 462-63.

There is no rea son to suppo se that the alt ernateremedies availab le in state court would not adequately protect Bituminous’s interests. We “question the need for . . . declaratory

judgments in federal cou r ts when the

only question is one of s ta te law and when there is no sugge stion that the state co

urt is not in

a position

to define its own law in
a fair and impartial manner.” Am. Home Assur. Co. v. Evans , 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 fa ctors ind icate that a federaldeclar

atory judgmen t was inap

propria te in this case. Although i

t does not a

ppear that Bitumin

ous filed this action for the purpose of procedural fe ncing or to win a race for r es judicata, the lack of improper motive in filing alone cannot justify the exercise of jurisdict ion whe n all the other factors weigh on the side of declining. See Mercier , 913 F.2d at 279. A decla

ratory judgmen t in this ca se would n

ot settle the controve

rsy or resol ve all th e underly

ing leg al relat

ions. Any resolution that could be achieved by the declaratory judg ment would come at the cost of increasing the fr ict io n betwee n state a nd feder al court s. Finally, a super ior remedy exists in state court. 18 Bituminous Casualty Corp. v. J & L Lumber Co. No. 03-5217

We are cognizant of the fact that it is e asier in h

indsight to conclude that juris dictio n in declar atory judg ment actions was improvide

ntly granted, especia

lly w hen fac ed with

the tangle of inconsiste

nt judgme nts that i s presen

ted here . Nonethe less, altho ugh the district court cannot be e xpected to foresee the unforeseeable, the district court must be attentive to the potential problems that can arise when there are dual, let alone triple, actions in state an d federa l court a nd should dispose of declaratory

judgment actions accordingly

. Becau se we find that declaratory judgment relief was inappropriately

granted, we do not reach the issues regarding the district court’s order granting summar y judgment.

For the foregoing reasons, we VACATE the district court’s order granting declaratory

judgment relief and REMAND the
caseto the distr

ict cour t with inst

ruct ions to dismiss the complain t.