*

The Honorable David M. Lawson, United States District Judge for

the Eastern District of Michigan, sitting by designation. 

1

RECOMMENDED FOR FULL-TEXT PUBLICATION

Pursuant to Sixth Circuit Rule 206

ELECTRONIC CITATION: 2004 FED App. 0199P (6th Cir.)

File Name: 04a0199p.06

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

_________________

BITUMINOUS CASUALTY

CORPORATION,

Plaintiff-Appellee,

v.

J & L LUMBER COMPANY,

INC.,

Defendant-Appellant.

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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 

Before: SUHRHEINRICH and GIBBONS, Circuit Judges;

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 LAW, Louisville, Kentucky, for Appellant.

Robert E. Maclin III, McBRAYER, McGINNIS, LESLIE &

KIRKLAND, Lexington, Kentucky, for Appellee.

ON BRIEF: Jeffrey L. Freeman, JEFFREY L. FREEMAN

ATTORNEY AT LAW, Louisville, Kentucky, for Appellant.

Robert E. Maclin III, Pamela A. Chesnut, McBRAYER,

McGINNIS, LESLIE & KIRKLAND, Lexington, Kentucky,

for Appellee.

_________________

OPINION

_________________

SUHRHEINRICH, Circuit Judge. Defendant-Appellant

J & L Lumber Company, Inc. (J & L) appeals from the order

of the district court granting summary judgment in favor of

Bituminous Casualty Corp. (Bituminous) and denying

summary judgment in favor of J & L in this declaratory

judgment action. Bituminous brought this action against

J & L in federal district court, seeking a declaration that it was

not required to defend or indemnify J & L in a personal injury

action in state court relating to a logging accident that

occurred on November 13, 1998, while Phillip Shields,

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
No. 03-5217 Bituminous Casualty Corp. v.

J & L Lumber Co.

3

REMAND the case to the district court with instructions to

dismiss the complaint. 

I. Background

A. Facts

J & L is a small, family owned and operated sawmill in

eastern Kentucky. Besides family members, the mill employs

approximately ten to fifteen additional workers in either the

sawmill or the woods. In November 1998, J & L also owned

three tractor-trailer trucks and two tandems for hauling

lumber and employed drivers for these vehicles. 

Phillip Shields, the plaintiff in the underlying personal

injury action against J & L, is a fifty-eight-year-old man who

has worked in or around the logging industry most of his

adult life. At different times, Shields has worked as a trucker,

sawmill foreman, independent logger, and timber buyer. In

the past, he worked for J & L both as the sawmill foreman

and as a truck driver. 

Sometime after quitting the sawmill foreman position at

J & L, Shields formed a trucking company with the name

Phillip Shields or Shields Trucking. He purchased two

eighteen-wheeler trucks, which were garaged at his house and

were maintained primarily by him. Shields also employed his

own driver and incurred other expenses in connection with his

trucking business, including fuel, contract labor, tolls,

business telephone, and subcontractors. In 1998, Shields’s

trucking business yielded a gross income of $91,159.

After Shields started his trucking 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

available trucks or drivers of its own. Although there was no

formal contract between them, J & L used Shields’s trucks on

a regular basis, but not exclusively. In fact, weather

4 Bituminous Casualty Corp.

v. J & L Lumber Co.

No. 03-5217

permitting, Shields hauled for J & L at least once a week and

usually more. On occasion, he even drove a J & L truck. 

The payment arrangement between Shields and J & L was

somewhat complicated. Primarily, Shields was paid by the

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

manner as J & L’s own drivers. In addition, from March

1998 through December 9, 1998, Shields was listed as an

employee on the J & L payroll registers. He received a

weekly payroll check of $250 from which taxes and health

insurance premiums were withheld. He also received a check

from the general account from which no withholdings were

taken. 

J & L described this unusual payment arrangement as an

accounting device that permitted Shields to obtain health

insurance coverage. The deposition testimony indicated that

in March or April 1998, Wilma Myers (Myers), J & L’s

secretary and general office manager, and Joel Smith, an

owner’s son who had been insured with Blue Cross and Blue

Shield, decided to change insurance providers due to an

increase in premiums. To get insurance under a plan with

MedQuest insurance company, however, they needed a group

of at least three. Shields, who also needed insurance, became

the third member of the group. Myers placed Shields on the

payroll and began issuing him a weekly check from which the

insurance premium was deducted. The amount of the payroll

check was then deducted from the total amount due Shields

for his independent hauling. Although Joel was not an

employee, his insurance premium was paid directly by J & L

because of his filial relationship to Jerry Smith, one of J &

L’s owners. 

Outside of their business relationship, Shields and the

owners of J & L were good friends. They had known each

other for approximately thirty years. In fact, Shields

characterized his relationship with Jerry and Lester Smith as
No. 03-5217 Bituminous Casualty Corp. v.

J & L Lumber Co.

5

the “best of friends.” He lived approximately one mile from

J & L’s office and would go to the J & L property usually

once a day and sometimes two or three times a day to check

for work or just to socialize. Shields was also good friends

with Myers and the two had a social, dating relationship in the

past. In addition, Shields employed Myers’s son, Greg, as a

driver for one of his tractor-trailers. 

On the evening of November 12, 1998, Shields and Myers

were in the J & L office drinking coffee when they received

word that the woods crew was “blocked out” and could not

continue working unless the cut timber was hauled away from

the logging site. Myers and Shields arranged for Shields to

take a truck and haul the timber the next morning. On the

morning of November 13, 1998, Shields arrived at the J & L

lumber yard and picked up a J & L truck, which was loaded

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

the truck and landed on him. As noted, at the time of the

injury, Shields was operating a J & L truck and was picking

up his third load of the day. 

Both Shields and Myers stated that Shields was doing a

favor for J & L at the time of the accident and was not going

to be compensated for his work. Shields testified at

deposition that his work on the morning of November 13 was

strictly voluntary. Moreover, Shields, Myers and J & L’s

owners, Jerry and Lester Smith, all insisted at deposition that

Shields was not an employee of J & L at the time of his

injury.

Procedural History

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

November 13, 1998. As one of its affirmative defenses, J & L

6 Bituminous Casualty Corp.

v. J & L Lumber Co.

No. 03-5217

1

This fact was certified by the Commissioner of the Kentucky

Department of Workers’ Claims on November 13, 2000. 

asserted that Shields’s action was barred by the exclusive

remedy provision of the Kentucky Workers’ Compensation

Act. 

J & L did not carry workers’ compensation insurance at the

time of the injury.

1

 J & L did, however, carry accident

coverage for its employees under an Employers’Underwriters

policy. It also carried two commercial insurance policies with

Bituminous Casualty Corp., a general liability policy and a

commercial auto policy. At the time of injury, Shields was

not covered under the Employers’ Underwriters policy.

Therefore, J & L requested a defense from Bituminous in the

state tort action, which Bituminous provided under

reservation of rights. 

On or about October 23, 2000, a few weeks before the

expiration of the two-year statute of limitation under the

Kentucky Workers’ Compensation Act, Shields filed a claim,

presumably a protective filing, with the Kentucky Department

of Workers’ Claims, alleging that he was injured on

November 13, 1998, while in the course of employment. See

Ky. Rev. Stat. § 342.185. This claim was dismissed on

January 24, 2003, after an Administrative Law Judge for the

Kentucky Department of Workers’ Claims determined that

Shields was an independent contractor and not an employee.

The Administrative Law Judge stated that, although it was a

close question based upon the facts and Kentucky case law,

he found the intent of the parties to be paramount in

determining that Shields was not an employee. 

In the underlying state personal injury action, on or about

March 18, 2002, Shields filed a motion for partial summary

judgment seeking to strike the affirmative defense raised by

J & L that the Workers’ Compensation Act was his exclusive
No. 03-5217 Bituminous Casualty Corp. v.

J & L Lumber Co.

7

remedy on the grounds that he was not an employee 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 not an employee of J & L at the time of injury and struck

the Workers’ Compensation Act defense. Specifically, the

Kentucky court found that J & L had little, if any, control

over Shields, since Shields was volunteering on the day of

injury and that the true intent of the parties was that Shields

was not an employee. 

In the meantime, on July 2, 2001, Bituminous filed the

instant action in the United States District Court for the

Western District of Kentucky seeking a declaratory judgment

that it had no duty to defend or indemnify J & L under its

policies based on exclusions contained in each policy for

employees. Bituminous argued that Shields was an employee

of J & L at the time of his injury and was, therefore, not

covered by the policies. J & L maintained that Shields was

not an employee of J & L at the time of injury. The parties

filed cross motions for summary judgment. 

On October 16, 2002, the district 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 had the ultimate right to control

Shields’s work, that the method of payment indicated

employment, and that the actions of J & L and Shields were

inconsistent with 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, Kentucky state court judgment in the

negligence action did not have preclusive effect because it

determined that the state court decision was not the result of

an adversarial proceeding, since a finding that Shields was not

an employee benefitted both Shields and J & L. J & L

benefitted by the finding that Shields was not an employee

because the finding entitled it to indemnity from Bituminous.

8 Bituminous Casualty Corp.

v. J & L Lumber Co.

No. 03-5217

Likewise, the finding benefitted Shields because it enabled

him to collect any judgment awarded in the negligence action

from J & L’s insurer, rather than J & L and his close friends.

J & L filed a motion to alter, amend or vacate judgment,

which was denied on January 6, 2003. J & L then filed this

appeal, raising four issues: whether the district court

misapplied Kentucky law when it used a workers’

compensation analysis rather than a common law analysis to

determine whether Shields was an employee pursuant to the

insurance contract; whether the district court erred in holding

that Shields was an employee of J & L as a matter of law;

whether the district court erred in failing to consider the

explicit policy definitions; and whether the district court erred

in applying federal preclusion law rather than state preclusion

law to determine the effect of a prior state court judgment in

a diversity action. 

II. Standards of Review

A. Summary Judgment

This Court reviews a district court’s grant of summary

judgment de novo. Hartsel v. Keys, 87 F.3d 795, 799 (6th

Cir. 1996). Summary judgment is appropriate “if the

pleadings, depositions, answers to interrogatories, and

admissions on file, together with the affidavits, if any, show

that there is no genuine issue as to any material fact and that

the moving party is entitled to a judgment as a matter of law.”

Fed. R. Civ. P. 56(c).

B. Declaratory Judgment Actions

Exercise of jurisdiction under the Declaratory Judgment

Act, 28 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

abuse of discretion. Wilton v. Seven Falls Co., 515 U.S. 277,
No. 03-5217 Bituminous Casualty Corp. v.

J & L Lumber Co.

9

289-90 (1995); Scottsdale Ins. Co. v. Roumph, 211 F.3d 964,

967 (6th Cir. 2000).

III. Analysis

As noted, J & L raises four issues on appeal. We do not

reach these issues, however, because we conclude that the

district court should have declined to exercise jurisdiction

over this declaratory judgment action and should have

dismissed the complaint. 

A. Declaratory Judgment Actions

We have repeatedly held in insurance coverage diversity

cases that “declaratory judgment actions seeking an advance

opinion on indemnity issues are seldom helpful in resolving

an ongoing action in another court.” Manley, Bennett,

McDonald & Co. v. St. Paul Fire & Marine Ins. Co., 791

F.2d 460, 463 (6th Cir. 1986). Further, “[s]uch actions . . .

should normally be filed, if at all, in the court that has

jurisdiction over the litigation which gives rise to the

indemnity problem. Otherwise confusing problems of

scheduling, orderly presentation of fact issues and res

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 (6th Cir. 1990); Grand Trunk W.R. Co.

v. Consolid. 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 actions involving insurance coverage

questions. See Allstate Ins. Co. v. Green, 825 F.2d 1061,

1066 (6th Cir. 1987); 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 inappropriate. 

10 Bituminous Casualty Corp.

v. J & L Lumber Co.

No. 03-5217

B. Propriety of Declaratory Judgment Relief in this

Case

This Court generally considers five factors to determine

whether a case is appropriate for declaratory judgment:

(1) whether the judgment would settle the controversy;

(2) whether the declaratory judgment action would serve

a useful purpose in clarifying the legal relations at issue;

(3) whether the declaratory remedy is being used merely

for the purpose of “procedural fencing” or “to provide an

arena for a race for res judicata”;

(4) whether the use of a declaratory action would

increase the friction between our federal and state courts

and improperly encroach on state jurisdiction; and 

(5) whether there is an alternative remedy that is better or

more effective. 

Scottsdale 211 F.3d at 968 (citations omitted). The district

court did not consider these criteria; therefore, we review

them for the first time on appeal. 

1. Whether the judgment would settle the controversy. 

The controversy in this case is one of insurance coverage.

Bituminous seeks a declaration that it has no duty to defend

or indemnify J & L based on exclusions in its insurance

policies for employees. If Shields was an employee of J & L

at the time of his injury, Bituminous would have no duty to

defend or indemnify J & L in the state court personal injury

action. If Shields was not an employee, on the other hand,

Bituminous would be obligated under its contracts to defend

and indemnify J & L. Thus, resolution of the controversy

hinges solely on whether Shields was an employee of J & L

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.

J & L Lumber Co.

11

When this declaratory judgment action was filed, however,

Shields’s employment status was already being considered in

two independent state court proceedings: the state tort action

between Shields and J & L, and Shields’s action before the

Kentucky Department of Workers’ Claims. In the state tort

action, which Shields had filed against J & L on negligence

grounds, J & L defended, in part, on the grounds that

Shields’s action was barred by the exclusive remedy

provision of the Kentucky Workers’ Compensation Act. This

defense was only viable if Shields was an employee of J & L

at the time of the injury. Furthermore, although J & L did not

have workers’ compensation insurance and the exclusive

remedy defense might have been dismissed on this ground

alone, a determination of Shields’s employment status was

still necessary in the tort action because, under Kentucky law,

if Shields was an employee, J & L would not be allowed to

plead the defenses of assumption of the risk or contributory

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

In the action before the Kentucky Department of Workers’

Claims, Shields’s employment status was a crucial issue

because, had Shields not been an employee of J & L, he

would not be eligible to collect compensation under the Act.

Thus, to rule on the issues presented, all three courts had to

address the identical issue of whether Shields was an

employee of J & L. The declaratory judgment action in

federal court could serve no useful purpose. The federal court

could either reach the same conclusion as the state court, in

which case the declaration would have been unnecessary and

the federal litigation a waste of judicial resources, or the

federal court could disagree with the state court, resulting in

inconsistent judgments. Ultimately, inconsistent rulings on

Shields’s employment status did issue from the state and

federal courts. Both state courts determined that Shields was

not an employee 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 declaration of insurance coverage would not

resolve 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. Therefore, any judgment in the federal court would

not be binding as to him and could not be res judicata in the

tort action. Regardless of the judgment rendered in the

declaratory judgment action, Shields would be entitled to

pursue third-party recovery from Bituminous in Kentucky

state court if he were successful in his tort action. 

A declaratory judgment would not resolve the insurance

coverage controversy here. On the contrary, as we have seen,

the judgment in federal court declaring that Shields was an

employee was contrary to two state court findings that Shields

was not an employee, complicating the underlying issues of

liability. The state negligence action is still proceeding and

the effect that will be given to the inconsistent judgments in

a collection suit by Shields against Bituminous, if any, is

unclear. Therefore, this factor weighs against exercising

jurisdiction. 

2. Whether the declaratory judgment action would serve a

useful purpose in clarifying the legal relations at issue.

Like the first factor, although a declaratory judgment would

clarify the legal relationship between Bituminous and J & L

pursuant to the insurance contracts, the judgment would not

clarify the legal relationship between Shields and J & L in the

underlying state action. The question of Shields’s

employment status would not be resolved by the declaratory

judgment. Furthermore, an adverse judgment against J & L

in the state court action could still leave Bituminous subject

to liability in a subsequent collection suit by Shields against

Bituminous. 
No. 03-5217 Bituminous Casualty Corp. v.

J & L Lumber Co.

13

3. Whether the declaratory remedy is being used merely for

the purpose of “procedural fencing” or “to provide an arena

for a race for res judicata.”

This case does not present the appearance of a race for res

judicata. Bituminous filed its action in federal court two

years after Shields filed his initial negligence action against

J & L in state court and nine months after Shields filed his

claim for workers’ compensation benefits. We give

Bituminous the benefit of the doubt that no improper motive

fueled the filing of this action.

4. Whether the use of a declaratory action would increase

friction between our federal and state courts and improperly

encroach upon state jurisdiction. 

To determine whether the exercise of jurisdiction would

increase friction between federal and state courts we have

considered three additional factors:

(1) whether the underlying factual issues are important to

an informed resolution of the case;

(2) whether the state trial court is in a better position to

evaluate those factual issues than is the federal court; and

(3) whether there is a close nexus between the underlying

factual and legal issues and state law and/or public

policy, or whether federal common or statutory law

dictates a resolution of the declaratory judgment action.

Scottsdale, 211 F.3d at 968.

First, in this case, two state actions, involving the same

factual issue that is presented in this declaratory judgment

action, were pending when this action was filed. The issue of

whether Shields was an employee, the key issue in the

declaratory judgment action, was a necessary component of

both Shields’s negligence action against J & L and his claim

for workers’ compensation benefits. Thus, the underlying

14 Bituminous Casualty Corp.

v. J & L Lumber Co.

No. 03-5217

factual issues are important to an informed resolution 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 the Kentucky state courts are more

familiar and, therefore, better able to resolve. “[S]tates

regulate insurance companies for the protection of their

residents, and state courts are best situated to identify and

enforce the public policies that form the foundation of such

regulation.” Mercier, 913 F.2d at 279. 

Furthermore, resolution of the insurance controversy in this

case requires a ruling on previously undetermined questions

of state law. The insurance contract at issue here includes

exclusions for obligations arising under workers’

compensation laws. Yet, J & L did not carry workers’

compensation insurance at the time of the injury. Although

recently a number of courts have held that such exclusions

remain applicable despite an employer’s lack of insurance,

there is precedent from at least two courts supporting an

alternate 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 Cas. Co./CNA, 692 P.2d 899, 903 (Wash. Ct.

App. 1984). But see Hunt v. Hosp. Serv. Plan of New Jersey,

162 A.2d 561 (N.J. 1960); and Rose v. Franklin Sur. Co., 183

N.E. 918, 919 (Mass. 1933). Kentucky has not decided the

issue.

Similarly, the parties dispute 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 coverage. The contracts define a temporary

worker as “a person who is furnished to you to substitute for

a permanent ‘employee’ on leave or to meet seasonal or shortterm workload conditions.” Contract definitions of

“temporary worker”, identical to the definitions in the
No. 03-5217 Bituminous Casualty Corp. v.

J & L Lumber Co.

15

2

It appears from a non-final Kentucky Court of Appeals opinion that

Kentucky would hold the workers’ compensation exclusion applicable

and would follow the interpretation of “temporary worker” found in

Tickle. See Indiana Ins. Co. v. Brown, _ S.W.3d _, 2003 WL 23008788

(Ky. Ct. App. 2003). Nevertheless, under Kentucky rules a non-final

opinion shall not be cited as authority in any of the courts of the

Commonwealth.

Bituminous policies, have been interpreted in two

jurisdictions, each giving different meaning to the phrase

“furnished to” in the definition. Depending on the

interpretation chosen, Shields could be classified as a

temporary worker. See Ayers v. C & D Gen. Contractors, 237

F. Supp.2d 764, 768-69 (W.D. Ky. 2002), and Am. Family

Mut. Ins. Co. v. Tickle, 99 S.W.3d 25 (Mo. Ct. App. 2003).

Kentucky courts have not yet interpreted the controversial

language.2

While a district court should not necessarily refuse to

exercise jurisdiction because a case involves undetermined

questions of state law, it is an appropriate consideration when

determining the suitability of a case for declaratory judgment.

See Scottsdale, 211 F.3d at 969. Where as here, there are two

potential unresolved questions of state law concerning state

regulated insurance contracts, this consideration weighs

against exercising jurisdiction. 

Finally, this case was brought pursuant to the federal

courts’ diversity jurisdiction and neither federal common law

nor federal statutory law apply to the substantive issues of the

case. The declaratory judgment action involved the same

underlying factual issues that were pending in two state court

actions. The state courts were in a better position to evaluate

the factual issues because they rested solely on state law with

which the state courts are better acquainted. Furthermore,

resolution of the declaratory judgment action required

consideration of two undetermined questions of state law and

did not involve the application of any federal law. All three

16 Bituminous Casualty Corp.

v. J & L Lumber Co.

No. 03-5217

of the Scottsdale factors indicate that exercise of jurisdiction

in this case could create friction between the state and federal

courts.

A friction between the courts was an actuality, not a mere

possibility. Indeed, the district court’s decision is contrary to

two decisions rendered by the state courts on the same facts.

The district court’s finding that Shields was an employee was

made on summary judgment, indicating the district court’s

belief that Shields was an employee as a matter of law. See

Fed. R. Civ. P. 56(c) (Summary judgment is appropriate “if

the pleadings, depositions, answers to interrogatories, and

admissions on file . . . show that there is no genuine issue as

to any material fact and that the moving party is entitled to a

judgment as a matter of law.”). Prior to the district court’s

ruling, however, the state court found, on the same facts, that

Shields was not an employee. Thus, the district court’s

contrary opinion leads to the ultimate conclusion that the

district court believed the state court erroneously decided a

question of state law. 

Although the district court did not, indeed could not, know

what the state court would ultimately hold regarding Shields’s

employment status, it did know that two actions were pending

in the state courts both revolving around the issue of Shields’s

employment status. Therefore, the district court should have

recognized the possibility that it would render a judgment

inconsistent with the state court on that issue. We conclude

that considerations of comity weigh against exercising

jurisdiction. 

5. Whether there is an alternative remedy which is better or

more effective. 

Kentucky does provide a procedure for a declaration of

rights. Ky. Rev. St. § 418.040 (“In any action in a court of

record of this commonwealth having general jurisdiction

wherein it is made to appear that an actual controversy exists,
No. 03-5217 Bituminous Casualty Corp. v.

J & L Lumber Co.

17

the plaintiff may ask for a declaration of rights . . . and the

court may make a binding declaration of rights . . . .”). Thus,

Bituminous could have presented its case to the same court

that will decide the underlying tort action. Given that the

issues presented involve questions of state law only, the state

court is also in a superior position to resolve the case. See

Mercier, 913 F.2d at 278-79. In addition, a superior

alternative remedy exists in the form of an indemnity action

filed at the conclusion of the underlying state action. See

Manley, Bennett, 791 F.2d at 462-63. 

There is no reason to suppose that the alternate remedies

available in state court would not adequately protect

Bituminous’s interests. We “question the need for . . .

declaratory judgments in federal courts when the only

question is one of state law and when there is no suggestion

that the state court 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 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. 

18 Bituminous Casualty Corp.

v. J & L Lumber Co.

No. 03-5217

We are cognizant of the fact that it is easier in hindsight to

conclude that jurisdiction in declaratory judgment actions was

improvidently granted, especially when faced with the tangle

of inconsistent judgments that is presented here. Nonetheless,

although the district court cannot be expected 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 and federal court and should

dispose of declaratory judgment actions accordingly. 

Because we find that declaratory judgment relief was

inappropriately granted, we do not reach the issues regarding

the district court’s order granting summary judgment. 

For the foregoing reasons, weVACATEthe district court’s

order granting declaratory judgment relief and REMAND the

case to the district court with instructions to dismiss the

complaint.