First Tennessee Bank (03-5521) v. George Dale

*The Honorable Gordon J. Quist, United States District Judge for the
W estern District of Michigan, sitting by designation.
1
RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit Rule 206
ELECTRONIC CITATION: 2004 FED App. 0321P (6th Cir.)
File Name: 04a0321p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
_________________
AMSOUTH BANK (03-5517);
FIRST TENNESSEE BANK
(03-5521),
Plaintiffs-Appellees,
v.
GEORGE DALE et al.,
Defendants-Appellants.
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Nos. 03-5517/5521
Appeal from the United States District Court
for the Middle District of Tennessee at Nashville
Nos. 02-00677; 02-00683—William J. Haynes, Jr.,
District Judge.
Argued: June 9, 2004
Decided and Filed: September 21, 2004
Before: BOGGS, Chief Judge; MOORE, Circuit Judge;
QUIST, District Judge.*
2 AmSouth Bank et al.
v. Dale et al.
Nos. 03-5517/5521
1Mike Pickens is a defendant only in the action brought by First
Tennessee Bank, and not that b rought by AmSo uth Bank, and therefore
is a party only to Appeal No. 03-5521.
_________________
COUNSEL
ARGUED: Robert S. Michaels, ROBINSON, CURLEY &
CLAYTON, Chicago, Illinois, for Appellants. Larry B.
Childs, WALSTON, WELLS, ANDERSON & BAINS,
Birmingham, Alabama, Leo M. Bearman, Jr., BAKER,
DONELSON, BEARMAN, CALDWELL & BERKOWITZ,
Memphis, Tennessee, for Appellees. ON BRIEF: Robert S.
Michaels, Alan F. Curley, Robert L. Margolis, ROBINSON,
CURLEY & CLAYTON, Chicago, Illinois, for Appellants.
Larry B. Childs, Randall D. Quarles, WALSTON, WELLS,
ANDERSON & BAINS, Birmingham, Alabama, Leo M.
Bearman, Jr., R. Mark Glover, BAKER, DONELSON,
BEARMAN, CALDWELL & BERKOWITZ, Memphis,
Tennessee, Samuel T. Bowman, BAKER, DONELSON,
BEARMAN, CALDWELL & BERKOWITZ, Nashville,
Tennessee, Anthony J. McFarland, Catherine A. Colley,
David R. Esquivel, BASS, BERRY & SIMS, Nashville,
Tennessee, for Appellees.
MOORE, J., delivered the opinion of the court, in which
QUIST, D. J., joined. BOGGS, C. J., concurred in the
judgment only.
_________________
OPINION
_________________
KAREN NELSON MOORE, Circuit Judge. Defendants-
Appellants George Dale (“Dale”), Scott B. Lakin, Carroll
Fisher, and Mike Pickens,1 all commissioners of insurance or

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Nos. 03-5517/5521 AmSouth Bank et al.
v. Dale et al.
3
the equivalent for their respective states, who were sued in
their official capacity as receivers for various insolvent
insurance companies (collectively, “Receivers”), appeal from
the district court’s grant of a preliminary injunction barring
them from pursuing their coercive action originally filed in
Mississippi state court in these ongoing declaratory judgment
suits brought by Plaintiffs-Appellees AmSouth Bank
(“AmSouth”) and First Tennessee Bank (“FTB”)
(collectively, “Banks”). The Receivers argue that the district
court improperly entertained this action, because it lacked
jurisdiction or because it should have declined jurisdiction in
its discretion. Because the district court abused its discretion
in entertaining these declaratory actions, we DISSOLVE the
injunction, REVERSE the district court’s decision, and
REMAND the case to the district court with instructions to
dismiss the actions.
I. BACKGROUND
This case concerns the latest effort of the Receivers to
recover some of the funds embezzled from a number of
southern insurance companies by the infamous Martin
Frankel (“Frankel”). See, e.g., Lakin v. Prudential Sec., Inc.,
348 F.3d 704 (8th Cir. 2003); United States v. Peoples Benefit
Life Ins. Co., 271 F.3d 411 (2d Cir. 2001); Dale v. ALA
Acquisitions, Inc., 203 F. Supp. 2d 694 (S.D. Miss. 2002);
Dale v. Frankel, 206 F. Supp. 2d 315 (D. Conn. 2001).
Frankel had purchased seven insurance companies in five
states through various entities, while at the same time
controlling the unregistered brokerage that was supposedly
investing the large cash reserves that insurance companies
typically have on hand. Instead, he was funneling the money
to overseas bank accounts. Dale, insurance commissioner for
Mississippi, became suspicious and placed the Frankel-
controlled insurance companies under state supervision, and
in May 1999, Frankel fled the country as his scheme
dissolved. Frankel was the subject of a four-month, world-
wide manhunt, culminating in his capture in Germany.
4 AmSouth Bank et al.
v. Dale et al.
Nos. 03-5517/5521
Frankel pleaded guilty to numerous charges in the United
States District Court for the District of Connecticut.
Bank accounts used in Frankel’s money-laundering scheme
were held by the insurance companies at both AmSouth, from
1991 to 1999, and FTB, from 1997 to 1999. Essentially, the
Receivers argue that the Banks were negligent in not realizing
the massive fraud that those accounts were being used to
commit. In the course of the receivership proceedings, the
Receivers concluded they might have claims against
AmSouth, and contacted AmSouth to begin settlement
discussions. On June 28, 2001, attorneys for AmSouth and
the Receivers executed on behalf of their clients a tolling
agreement through August 27, 2001. That tolling agreement
was extended six times, through July 31, 2002. During the
pendency of that tolling agreement, negotiations were
ongoing; on September 27, 2001, explicitly “for settlement
purposes,” the Receivers sent draft allegations to AmSouth.
Joint Appendix No. 03-5517 (“J.A. AmS”) at 566. On June
28, 2002, the Receivers’ counsel sent a draft complaint that
they intended to file “on or before July 31, 2002” if that
“effort at compromise [was] unsuccessful,” including a
“written, pre-filing demand” that AmSouth had “asked [the
Receivers] to make,” and indicating that the settlement offer
would expire on July 10. J.A. AmS at 567-68. On July 10,
2002, AmSouth’s counsel sent a letter to the Receivers’
counsel indicating that AmSouth’s counsel had discussed
settlement and litigation options with their client, but
requested 1) a meeting “among the parties and their counsel”;
2) an insurance-company-by-insurance-company breakdown
of damages suffered; and 3) an extension of the time for
response through July 19. J.A. AmS at 570. A phone
conversation between counsel took place on July 15, 2002,
the contents of which are contested, but which likely led to
some sort of agreement that the extension had been approved.
On July 17, 2002, AmSouth’s counsel sent a letter regarding
the Receivers’ ongoing concerns with respect to Federal Rule
of Evidence 408, governing the disclosure of settlement

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v. Dale et al.
5
discussions, in which the last paragraph stated that AmSouth
was “still considering” the Receivers’ demand and
AmSouth’s options, and that counsel would “be in touch in
the near future concerning a written response and a possible
meeting on July 24.” J.A. AmS at 572. On July 18, 2002,
counsel for the Receivers sent a letter formalizing their
approval of the extension to July 19, 2002, for a response to
their settlement offer, indicating their openness to a meeting
on July 24, and including a detailed breakdown of damages
by bank account. Unbeknownst to the Receivers, on July 18,
2002, AmSouth had filed a complaint for declaratory relief in
the U.S. District Court for the Middle District of Tennessee.
On July 19, 2002, AmSouth sent a letter formally rejecting
the settlement offer, but failing to mention the suit they had
filed the previous day. The Receivers learned of the filing
through the call of a newspaper reporter on July 19.
Negotiations with FTB took place in a shorter period of
time, but followed a similar track. In May 2002, the
Receivers’ counsel initiated negotiations with FTB through
phone conversations; to this end, they signed a tolling
agreement that extended from May 3 through May 31, 2002.
This agreement was extended once, on May 24, 2002, through
July 31, 2002 (the same date as the final date of the AmSouth
tolling agreement). In July 2002, FTB requested a formal
settlement demand; while Receivers’ counsel was drafting
this demand, they learned that FTB had filed the instant
declaratory judgment action in the Middle District of
Tennessee.
On July 31, 2002, at the end of the tolling period, the
Receivers filed an action in Mississippi state court against
both AmSouth and FTB (“the Mississippi litigation”).
AmSouth removed the action to the U.S. District Court for the
Southern District of Mississippi with FTB’s consent on
September 5, 2002, based on alleged improper joinder of
FTB, and asserted complete preemption of the Receivers’
claims under Federal Reserve Board Regulation J, 12 C.F.R.
6 AmSouth Bank et al.
v. Dale et al.
Nos. 03-5517/5521
§ 210.25 et seq. (“Regulation J”), governing wire transfers.
FTB then filed a motion to dismiss for improper venue, or in
the alternative to transfer the case, on September 26, 2002.
On October 7, 2002, the Receivers filed a remand motion.
When the Middle District of Tennessee (“district court”)
decided in the instant actions to enjoin the further prosecution
of the Mississippi litigation, the Mississippi litigation was
stayed by the federal district court in Mississippi.
In the instant actions (collectively, “the Tennessee
litigation”), AmSouth and FTB ask for declaratory relief that
they are not liable to the Receivers, relying both on federal
law and state law defenses, and both complaints ask the
district court to enjoin the Receivers from bringing any future
lawsuits and require them instead to bring all claims as
counterclaims in the Tennessee litigation. The Receivers filed
motions to dismiss both FTB’s and AmSouth’s actions on
August 23, 2002. A hearing was held on that motion on
January 13, 2003, and the district court issued its decision and
orders denying the motions to dismiss and enjoining further
prosecution of the Mississippi litigation on March 31, 2003.
A timely notice of appeal was filed in each case on April 4,
2003.
Subsequently, the Mississippi litigation was stayed on
April 16, 2003. In mid-2003, apparently out of concern for
risking mounting legal fees for a limited potential recovery,
Paula Flowers, Commissioner of Commerce and Insurance
for the State of Tennessee, then a defendant in the Tennessee
litigation and a plaintiff in the Mississippi litigation, decided
that Tennessee should withdraw from the Mississippi
litigation, and in response, FTB and AmSouth agreed to
dismiss her from the Tennessee litigation. See Getahn Ward,
Tennessee Pulls Out of Suit Against 2 Banks, THE
TENNESSEAN, July 29, 2003, at 4E. On June 23, 2003,
Flowers filed a motion to dismiss her appeals in this court
which we granted on June 25, 2003; on June 26, 2003,
Flowers’s claims in the Mississippi litigation were dismissed

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Nos. 03-5517/5521 AmSouth Bank et al.
v. Dale et al.
7
with prejudice; on July 18, 2003, FTB and AmSouth’s claims
against Flowers in the Tennessee litigation were dismissed in
the district court. Finally, in the district court below, which
has continued proceedings during this interlocutory appeal,
having denied Receivers’ motions to stay same, FTB and
AmSouth have moved for summary judgment, and oral
argument on the motion was held on May 26, 2004.
II. ANALYSIS
A. Appellate Jurisdiction
1. Whether the Injunction is Appealable under
§ 1292(a)(1)
The Banks argue that this court lacks appellate jurisdiction
over the district court’s order enjoining the Receivers from
further prosecution of the Mississippi litigation. FTB argues
first that the district court’s order was not an “injunction”
within the meaning of the statute, and therefore, as merely an
order with the practical effect of an injunction, subject to the
“serious, perhaps irreparable, consequence” limitation under
Carson v. American Brands, Inc., 450 U.S. 79, 84 (1981)
(internal quotation marks omitted), in order to be appealable
under 28 U.S.C. § 1292(a)(1). FTB next argues that this court
should follow the Third Circuit in holding that an injunction
against litigating in another forum is not an appealable
injunction, as not going to the ultimate relief demanded by the
plaintiff. See Hershey Foods Corp. v. Hershey Creamery Co.,
945 F.2d 1272 (3d Cir. 1991).
“Section 1292(a)(1) . . . provide[s] appellate jurisdiction
over orders that grant or deny injunctions and orders that have
the practical effect of granting or denying injunctions and
have ‘“serious, perhaps irreparable, consequence.”’”
Gulfstream Aerospace Corp. v. Mayacamas Corp., 485 U.S.
271, 287-88 (1988). FTB argues that the injunction below
falls into the second, rather than the first category. This
8 AmSouth Bank et al.
v. Dale et al.
Nos. 03-5517/5521
contention rests on the lack of a motion under Federal Rule of
Civil Procedure 65 in the district court by either FTB or
AmSouth asking for the injunction issued by the district
court. FTB relies on I.A.M. National Pension Fund Benefit
Plan A v. Cooper Industries, Inc., 789 F.2d 21, 24 n.3 (D.C.
Cir.), cert. denied, 479 U.S. 971 (1986), which notes that
“Carson[’s requirement of serious or irreparable
consequence] does not apply to an order clearly granting or
denying a specific request for injunctive relief.” See also MAI
Basic Four, Inc. v. Basis, Inc., 962 F.2d 978, 980 n.3 (10th
Cir. 1992) (noting that while the motion for the injunction
was not pursuant to Rule 65, “this is a Rule 65(a) motion in
all but name,” and relying on that characterization in
distinguishing Hershey). But both FTB’s and AmSouth’s
complaints specifically ask for injunctive relief against the
Receivers’ prosecution of claims in other forums. It is
therefore rather disingenuous of FTB to claim the district
court issued the injunction “sua sponte.” In any case, it is
difficult to see what difference this distinction would make;
if the order would be appealable had a party requested it, that
the district court issued an order sua sponte cannot insulate
the order from review. See Phillips v. Chas. Schreiner Bank,
894 F.2d 127, 129-30 (5th Cir. 1990) (finding appealable an
order granting relief that “[n]either party had moved formally
for,” because the “challenged order prevents [the defendant]
from taking any ‘further action in any state or federal court’”
and was therefore an injunction); FDIC v. Santiago Plaza,
598 F.2d 634, 635-36 (1st Cir. 1979) (district court issued
order sua sponte but circuit court still applied general rule that
injunctions against proceedings in other courts are appealable
under § 1292(a)(1)).
Next, FTB argues that this circuit should go against the
weight of authority and adopt the Third Circuit’s outlier
opinion in Hershey. Hershey held that an injunction, issued
in a coercive trademark action in the Middle District of
Pennsylvania, against prosecution of a “motion for order
construing and enforcing” an earlier consent judgment

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Nos. 03-5517/5521 AmSouth Bank et al.
v. Dale et al.
9
2Coleman v. American R ed Cro ss, 979 F.2d 11 35, 1137 (6th Cir.
1992), cited by the Re ceivers, holds this sort of injunction app ealab le
under the collateral order doctrine, rather than § 1292(a)(1), which
doctrine renders appealable a “preliminary or interim decision . . . when
between the parties in the Southern District of New York, was
not appealable under the earlier Third Circuit en banc
decision in Cohen v. Board of Trustees of the University of
Medicine and Dentistry, 867 F.2d 1455 (3d Cir. 1989).
Hershey, 945 F.2d at 1279. Hershey’s rule has not been
adopted by any other circuit. Instead, courts have held, “An
order that prohibits a party from pursuing litigation in another
forum unquestionably is an injunction for purposes of
§ 1292(a)(1), despite a carefully reasoned rejection of this
proposition by the Third Circuit.” 16 CHARLES ALAN
WRIGHT, ARTHUR R. MILLER & EDWARD H. COOPER,
FEDERAL PRACTICE AND PROCEDURE § 3923, at 123 (2d ed.
1996). See HBE Leasing Corp. v. Frank, 48 F.3d 623, 632
n.6 (2d Cir. 1995) (quoting § 3923); MAI Basic Four, 962
F.2d at 981-82 (same); Phillips, 894 F.2d at 130 (rule in Fifth
Circuit is that orders prohibiting proceedings in other courts
are always appealable as injunctions); Katz v. Lear Siegler,
Inc., 909 F.2d 1459, 1461 (Fed. Cir. 1990) (“[T]he grant of an
injunction against continuing suit in another forum is
appealable as of right [under] 28 U.S.C. § 1292(a).”); Asset
Allocation & Mgmt. Co. v. W. Employers Ins. Co., 892 F.2d
566, 568 (7th Cir. 1989) (injunction against proceeding in
pending litigation in other court was appealable under 28
U.S.C. § 1292(a)(1)); Santiago Plaza, 598 F.2d at 635-36 (An
“injunction against appellant proceeding in state court . . . is
clearly appealable under 28 U.S.C. § 1292(a)(1).”). Most
fatal to FTB’s argument, a prior Sixth Circuit case treated an
injunction against prosecution of other litigation as an
appealable injunction. See Guy v. Citizens Fid. Bank & Trust
Co., 429 F.2d 828, 831 (6th Cir. 1970) (district court’s
injunction restraining parties from prosecuting certain actions
was an appealable order under § 1292(a)(1)).2 Finally, even
10 AmSouth Bank et al.
v. Dale et al.
Nos. 03-5517/5521
it (1) ‘conclusively determine[s] the disputed question,’ (2) ‘resolve[s] an
important issue co mpletely separate from the merits of the action,’ and (3)
is ‘effectively unreviewable o n app eal from a final judgment.’” Sell v.
United States, 539 U.S. 166, 176 (2003) (alterations in original). This
sepa rate basis for review is unnecessary in the face of the explicit
language of § 12 92(a)(1), however. American Motors Corp. v. FTC, 601
F.2d 132 9, 13 31-3 2 (6th Cir.), cert. denied, 444 U.S. 941 (1979), dealt
with a district court’s direction to an administrative agency to cease its
investigations, which was held appealable as an order having the
substance of an injunction.
under the Hershey test, this injunction would be appealable,
as it contains relief sought in the complaint. The whole point
of this litigation is to prevent the Receivers from prosecuting
claims against FTB and AmSouth.
2. The Scope of This Court’s Review
On appeal, the Receivers argue that the reasons given in
their motion to dismiss each independently require dissolution
of the injunction. See infra note 3. The Banks object on the
basis of this court’s limited appellate jurisdiction, arguing that
this court can only narrowly evaluate the propriety of the
injunction, without reference to the Receivers’ arguments.
This seems deliberately to misunderstand the nature of those
arguments: because each of them goes to the power of the
district court to exercise jurisdiction over these actions or its
discretionary responsibility to decline to do so, they all go to
the “merits” of the injunction issued by the district court,
which was premised on the proper assumption of jurisdiction.
The Banks’ admonition that this court should only review the
propriety of the injunction, without examining whether the
case was properly in the district court in the first place, defies
logic. While not all of the Receivers’ arguments are strictly
jurisdictional in the sense of attacking the bare power of the
district court to hear the case, they are all jurisdictional in the
sense that they attack the propriety of the district court’s

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Nos. 03-5517/5521 AmSouth Bank et al.
v. Dale et al.
11
3The Receivers argue a lack of federal question jurisdiction and
McCarran-Ferguson reverse preemption of the Declaratory Judgment Act,
both of which would render the district court’s injunction void for lack of
jurisdiction over these actions, and that Burford abstention was proper and
that these are not proper declaratory actions, which doctrines go to the
discretionary assumption of jurisdiction and would render the injunction
below an abuse of the district court’s discretion.
assumption of jurisdiction.3 The injunction is only proper as
preventing duplicative litigation if the declaratory judgment
action should have been allowed to proceed. The “harm or
effect” of the preliminary injunction that FTB faults the
Receivers for not identifying and arguing is precisely what the
Receivers are in fact arguing: that for a plethora of reasons,
their coercive action, the Mississippi litigation, is the proper
vehicle for this dispute — the litigation which they were
specifically prohibited from pursuing.
The Banks assert that the issues argued by the Receivers
can only be recognized by this court under “pendent appellate
jurisdiction,” which allows unappealable orders to be
reviewed only when they are “inextricably intertwined” with
appealable orders; they then argue that the grant of the
preliminary injunction is not so intertwined with the motion
to dismiss. See Brennan v. Township of Northville, 78 F.3d
1152, 1157-58 (6th Cir. 1996). While the Receivers disclaim
any reliance on the doctrine of pendent appellate jurisdiction,
arguing instead that under any meaningful scheme of review
an appeal from an injunction necessarily sweeps up any issues
that bear on the district court’s power to issue the injunction,
they do correctly note that in order to reverse the district
court’s denial of their motion to dismiss, this court would
have to find that it had pendent appellate jurisdiction over that
denial. Because we conclude that the district court abused its
discretion in entertaining this declaratory action, we
necessarily decide that the denial of the Receivers’ motion
was improper, satisfying the “inextricably intertwined” rule.
See id. at 1158 (“Our finding on the first issue necessarily and
12 AmSouth Bank et al.
v. Dale et al.
Nos. 03-5517/5521
unavoidably decides the second.”). We will therefore remand
with orders to dismiss the actions in their entirety.
B. Subject Matter Jurisdiction in the District Court
The district court’s jurisdiction over AmSouth’s action was
premised on both federal question and diversity jurisdiction,
whereas its jurisdiction over FTB’s action was premised
solely on federal question jurisdiction. In determining
whether federal question jurisdiction was properly determined
to exist in the district court, we look to the Receivers’
threatened coercive action. Because the Banks’ actions are
declaratory judgment actions “seek[ing] in essence to assert
a defense to an impending or threatened state court action, it
is the character of the threatened action, and not of the
defense, which will determine whether there is federal-
question jurisdiction in the District Court.” Pub. Serv.
Comm’n v. Wycoff Co., 344 U.S. 237, 248 (1952). “Federal
courts will not seize litigations from state courts merely
because one, normally a defendant, goes to federal court to
begin his federal-law defense before the state court begins the
case under state law.” Id.; see also Franchise Tax Bd. v.
Constr. Laborers Vacation Trust, 463 U.S. 1, 15-16 (1983)
(reaffirming rule of Skelly Oil Co. v. Phillips Petroleum Co.,
339 U.S. 667 (1950), that “if, but for the availability of the
declaratory judgment procedure, the federal claim would arise
only as a defense to a state created action, jurisdiction is
lacking” (quoting 10A CHARLES ALAN WRIGHT, ARTHUR R.
MILLER & MARY KAY KANE, FEDERAL PRACTICE AND
PROCEDURE § 2767 (2d ed. 1983)); Heydon v. Mediaone of
S.E. Mich., Inc., 327 F.3d 466, 470 (6th Cir. 2003) (relying on
Skelly Oil in finding no subject matter jurisdiction over
declaratory judgment action). The Receivers suggest that
therefore the district court should have looked to their
subsequently-filed state complaint in the Mississippi litigation
in determining whether, under the well-pleaded complaint
rule, their causes of action arose under federal law. At least
one case from another circuit, however, suggests that the

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v. Dale et al.
13
4The district co urt specifically stated, “Thus, clearly federal questions
are present here and the Court concludes that a federal scenario is
presented in which Defendants’ state law claims could be co mpletely
preempted by Re gulation J.” First Tenn. B ank v. Da le, No. 3:02-0683,
slip op. at 28 (M.D. Tenn. Mar. 31, 2003), Joint Appendix No. 03-5521
proper inquiry is not into the complaint as subsequently filed,
but instead whether the declaratory plaintiff “could
reasonably have anticipated” a federal cause of action from
the conduct of the other party. PHC, Inc. v. Pioneer
Healthcare, Inc., 75 F.3d 75, 78-79 (1st Cir. 1996). Under
that formulation, the appropriate place to look is the
correspondence and conversations between the Banks and the
Receivers. Neither party addresses this point, however, and
the record is relatively silent as to the character of the claims
made on FTB by the Receivers, as opposed to their claims on
AmSouth, who received a draft complaint.
Instead, FTB defends the district court’s finding of subject
matter jurisdiction entirely on the basis of the so-called
“complete preemption” of Regulation J. Complete
preemption is a narrow exception to the well-pleaded
complaint rule, whereby plaintiff is master of his complaint
and can choose to assert only state law claims, in situations
where Congress has indicated an intent to occupy the field so
completely that any ostensibly state law claim is in fact a
federal claim for purposes of arising-under jurisdiction. See
Beneficial Nat’l Bank v. Anderson, 539 U.S. 1, 6-9 (2003).
The Supreme Court has only found three statutes that evince
this sort of Congressional intent: § 301 of the LMRA, see
Avco Corp. v. Aero Lodge No. 735, Int’l Ass’n of Machinists,
390 U.S. 557, 560 (1968), § 502(a)(1)(B) of ERISA, see
Metro. Life Ins. Co. v. Taylor, 481 U.S. 58, 63-66 (1987), and
§§ 85 and 86 of the National Bank Act, see Beneficial Nat’l
Bank, 539 U.S. at 10-11. The district court, in finding that
Regulation J might completely preempt the Receivers’ state
law claims,4 characterized two Fourth Circuit opinions as
14 AmSouth Bank et al.
v. Dale et al.
Nos. 03-5517/5521
(“J.A. FT B”) at 76. As the Receivers note, this formulation
misunderstands the narrowly drawn nature of complete preemption and
the necessity of looking to the character of the threatened actio n on its
face in determining federal question jurisdiction in a declaratory action.
deciding the question in favor of complete preemption,
namely Eisenberg v. Wachovia Bank, N.A., 301 F.3d 220,
223-24 (4th Cir. 2002), and Donmar Enterprises, Inc. v.
Southern National Bank, 64 F.3d 944, 948-50 (4th Cir. 1995).
These decisions, however, clearly deal with ordinary
preemption, rather than the complete preemption that would
justify original arising-under jurisdiction.
The district court erred in holding that Regulation J, a
federal regulation promulgated by the Federal Reserve Board,
a federal agency, could completely preempt the Receivers’
state law claims; only Congress can completely preempt a
state cause of action. See Beneficial Nat’l Bank, 539 U.S. at
8, 9 & n.5 (describing doctrine of complete preemption as
when a “federal statute completely pre-empts the state-law
cause of action”; “Only if Congress intended [the statute at
issue] to provide the exclusive cause of action . . . would the
statute” completely preempt state law claims; “[T]he proper
inquiry focuses on whether Congress intended the federal
cause of action to be exclusive.” (emphases added)); Metro.
Life Ins., 481 U.S. at 66 (the touchstone of complete
preemption is “the intent of Congress” (emphasis added));
Peters v. Lincoln Elec. Co., 285 F.3d 456, 468 n.11 (6th Cir.
2002)) (“Without evidence of Congress’s intent to transfer
jurisdiction to federal courts, there is no basis for invoking
federal judicial power.” (emphasis added)); Hyzer v. Cigna
Prop. Cas. Ins. Co., 884 F. Supp. 1146, 1152 (E.D. Mich.
1995) (no support for contention that agency regulations
could completely preempt area). This conclusion fits in more
generally with the balance struck between an agency’s ability
to promulgate regulations with the force of federal law — and
therefore its ability to preempt state causes of action through

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v. Dale et al.
15
ordinary preemption — and its inability to create a right of
action where Congress has not intended it do so. See
generally Alexander v. Sandoval, 532 U.S. 275, 291 (2001)
(“Language in a regulation may invoke a private right of
action that Congress through statutory text created, but it may
not create a right that Congress has not.”); Marx v. Centran
Corp., 747 F.2d 1536, 1544 (6th Cir. 1984) (“It is plain that
the [agency] is without authority [to create an implied cause
of action]. The true question is whether Congress, in enacting
[the enabling statute], intended to create a remedy for
violations of [the regulation].”), cert. denied, 471 U.S. 1125
(1985). While the agency can create federal law, it cannot
expand federal jurisdiction.
Therefore, the proper inquiry in determining complete
preemption is directed to the enabling statute, here the Federal
Reserve Act, ch. 6, 38 Stat. 251 (1913) (codified as amended
at 12 U.S.C. § 221 et seq.). The regulations in question
govern wire transfers on Fedwire, the wire transfer system of
the Federal Reserve Banks. The regulations were
promulgated pursuant to the authority granted by four
different sections of the Act: § 11(i) and (j) (12 U.S.C
§ 248(i) and (j)); § 13 (12 U.S.C. § 342); paragraph fourteen
of § 16 (12 U.S.C. § 248(o)); and § 19(f) (12 U.S.C. § 464).
None of these sections provide specific authority for the
Fedwire system — instead, they are general provisions — and
none of them reference causes of action having to do with the
Federal Reserve system, or any of the markers associated with
complete preemption. This argument is unavailing.
The district court also relied upon the Bank Secrecy Act
(“BSA”) in determining that federal jurisdiction existed,
reasoning that “Defendants’ factual allegations and claim
implicate the BSA,” and therefore, since the BSA did not
create a private right of action, “FTB’s complaint raises a
federal question, if FTB’s [presumably, should be Receivers’]
claims are, in effect, asserting an implied right of action under
the Bank Secrecy Act.” First Tenn. Bank v. Dale, No. 3:02-
16 AmSouth Bank et al.
v. Dale et al.
Nos. 03-5517/5521
0683, slip op. at 28 (M.D. Tenn. Mar. 21, 2003), Joint
Appendix No. 03-5521 (“J.A. FTB”) at 76. The court then
stated, “To the extent that Plaintiff’s complaint raises this
issue, clearly this is a legal question that gives rise to federal
jurisdiction.” J.A. FTB at 76 (Mem. Op. at 28). These
statements mischaracterize the nature of the inquiry under the
well-pleaded complaint rule and the Skelly Oil rule: the
question to be asked is whether, under the hypothetical state-
law action of the Receivers, a well-pleaded federal question
would appear on the face of the complaint. This question
must be answered in the negative under Merrell Dow
Pharmaceuticals, Inc. v. Thompson, 478 U.S. 804, 807-12
(1986), in which the Court held that where a federal statute
does not create a private right of action, mere incorporation of
federal statutory standards into a state-law tort action cannot
create federal question jurisdiction. Because the Bank
Secrecy Act does not create a private right of action, the
Receivers’ incorporation of its standards into a state-law
cause of action cannot transform their complaint into one that
raises a federal question.
FTB argues on appeal that as Flowers, the only non-diverse
defendant, has been dismissed from the case, diversity subject
matter jurisdiction now exists. Although normally
jurisdiction depends upon the facts as they are at the time of
filing, curing a jurisdictional defect through dismissal of a
party that destroys diversity “ha[s] long been an exception to
the time-of-filing rule.” Grupo Dataflux v. Atlas Global
Group, L.P., No. 02-1689, 541 U.S. ___, slip op. at 3-4, 5
(2004). This dismissal can be effected by the district court,
even subsequent to adjudication on the merits, and even by an
appellate court. See Newman-Green, Inc. v. Alfonzo-Larrain,
490 U.S. 826, 836-38 (1989).
The Receivers make three arguments in an attempt to
distinguish the instant case from this clear precedent. They
first argue that under the authority of United States Fidelity &
Guaranty Co. v. Thomas Solvent Co., 955 F.2d 1085, 1087

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17
5Faysound Ltd. v. United Coconut Chemicals, Inc., 878 F.2d 290,
296 (9th Cir. 1989), cited by the Receivers for the proposition that a post-
filing dismissal of parties cannot confe r diversity jurisdiction, is
something of an outlier. It can perhaps be best explained by a rule that
once the district court properly decides it has no jurisdiction at a time
when all non-diverse parties are indispensable, actions subsequent to that
decision aimed at making those parties dismissable cannot confer
jurisdiction.
(6th Cir. 1992), the district court never had jurisdiction over
the case, and therefore its order dismissing Flowers is void.
This argument is unavailing; the court in United States
Fidelity came to the ultimate conclusion that jurisdiction was
lacking, whereas in cases where a post-filing jurisdiction cure
is allowed, all intermediate decisions are rendered not void
for lack of jurisdiction. See Caterpillar Inc. v. Lewis, 519
U.S. 61, 73-77 (1996). Next, the Receivers attempt to
distinguish the clear holdings of Caterpillar and Newman-
Green.5 With respect to Newman-Green, they emphasize that
Newman-Green was a Rule 21 case, and that Flowers was
dismissed pursuant to Rule 41. The Receivers further argue
that Rule 21 permits dismissal only of non-indispensable
parties, and that because Flowers was a plaintiff in the
Mississippi litigation, she was therefore indispensable. While
it is unclear from the record pursuant to which Rule Flowers
was dismissed, although we note that we have in the past
indicated that dismissal of a party, rather than of an entire
action, is more proper pursuant to Rule 21, see Letherer v.
Alger Group, L.L.C., 328 F.3d 262, 265-66 (6th Cir. 2003),
we conclude that the particular rule used is immaterial in
assessing whether jurisdiction was created by a party’s
dismissal. See Safeco Ins. Co. v. City of White House, Tenn.,
36 F.3d 540, 546 (6th Cir. 1994) (either Rule 15 or Rule 21
can provide mechanism for post-filing jurisdiction cure). The
Receivers then note that the Court in Newman-Green and
Caterpillar relied on practical considerations of less weight
here: “considerations of finality, efficiency, and economy,”
18 AmSouth Bank et al.
v. Dale et al.
Nos. 03-5517/5521
Caterpillar, 519 U.S. at 75, that arise only after trial is
completed.
We are reluctant to expand this narrow exception to the
time-of-filing rule (the post-filing jurisdiction cure through
dismissal of a party) in light of Grupo Dataflux’s rejection of
an expansion of the exception to a change in citizenship of a
partnership based on individuals leaving the association.
However, we also take note of the Grupo Dataflux Court’s
characterization of the dismissal of a non-diverse party as an
“established exception” to the time-of-filing rule. Slip op. at
6. What is most disturbing in this case is not the particular
rule pursuant to which Flowers was dismissed, or the extent
of the litigation activity which has transpired before the
jurisdictional defect is noticed and/or corrected, but instead
that jurisdiction in the district court was alleged to be federal
question jurisdiction. The more difficult question is not
whether Flowers’s dismissal is the equivalent of those in
Caterpillar or Newman-Green but whether the original
defective allegation of federal question can be corrected by a
subsequent happenstance creation of diversity jurisdiction.
In Grupo Dataflux and Caterpillar, the Court indicated that
the cure of jurisdiction accomplished by the dismissal of a
nondiverse party can also serve to cure the statutory defect
existing where a case is removed at a time when it is not in
the original jurisdiction of the district courts of the United
States within the meaning of 28 U.S.C. § 1441(a). Grupo
Dataflux, slip op. at 7. The district court now has jurisdiction
over FTB’s action based on diversity of citizenship; the
question is whether the prior defects are the sort that are
remedied by the post-filing jurisdiction cures of Caterpillar
and Newman-Green. Two distinctions may serve to oust
jurisdiction here: first, the prior defect is different in kind, as
jurisdiction was not originally alleged on the basis of
diversity, and second, the jurisdictional defect was noticed
early (and often) and the action had not proceeded to
judgment at the time of this appeal.

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Title 28 U.S.C. § 1653 provides, “Defective allegations of
jurisdiction may be amended, upon terms, in the trial or
appellate courts.” Relying upon this section, courts have
often reached beyond the specific statutory sections cited by
the complaint to reach a different basis for jurisdiction —
albeit one that exists on the face of that complaint. See, e.g.,
LeBlanc v. Salem (In re Mailman Steam Carpet Cleaning
Corp.) 196 F.3d 1, 5 (1st Cir. 1999) (“Affirmative pleading of
the precise statutory basis for federal subject matter
jurisdiction is not required as long as a complaint alleges
sufficient facts to establish jurisdiction.”), cert. denied, 530
U.S. 1230 (2000); Gerritsen v. de la Madrid Hurtado, 819
F.2d 1511, 1515 (9th Cir. 1987) (“[I]n determining the
existence of subject matter jurisdiction, we are not limited to
the jurisdictional statutes identified in the complaint.”);
Vukonich v. Civil Serv. Comm’n, 589 F.2d 494, 496 n.1 (10th
Cir. 1978) (“The failure to alleged this alternate basis for
jurisdiction is not fatal where the complaint revealed a basis
for § 1331 jurisdiction.”); Rohler v. TRW, Inc., 576 F.2d
1260, 1264 (7th Cir. 1978) (“[I]t is not essential that a
complainant set forth the statutory basis for the court’s
jurisdiction in order for the court to assume jurisdiction, if the
facts alleged provide a basis for the assumption of
jurisdiction.”). Of particular interest in this line are two Sixth
Circuit cases allowing amendment of a complaint to change
the asserted basis of jurisdiction from federal question to
diversity and vice versa. In Miller v. Davis, 507 F.2d 308,
311 (6th Cir. 1974), although the complaint’s allegation of
federal question jurisdiction was deficient, “It appears,
however, that [diversity] jurisdiction could have been alleged
. . . . Appellants are most probably citizens of Kentucky . . . ,
Appellees are not Kentucky citizens, and the Fund is situated
in the District of Columbia.” Relying on 28 U.S.C. § 1653,
the court proceeded to the merits of the appeal but directed
the appellants to “file, within ten days of this decision, a
proper amendment in this Court alleging diversity
jurisdiction.” 507 F.2d at 311 (emphasis added). Two
aspects of Miller stand out: first, diversity jurisdiction was
20 AmSouth Bank et al.
v. Dale et al.
Nos. 03-5517/5521
not “apparent” on the face of the complaint, as evidenced by
this court’s hesitant language (“could have been alleged,”
“most probably”); second, we allowed an amended complaint
to be filed in the Sixth Circuit itself, suggesting that the
Newman-Green rule should extend to reach a case like this
one. In an earlier case, Blanchard v. Terry & Wright, Inc.,
331 F.2d 467, 468-69 (6th Cir.), cert. denied, 379 U.S. 831
(1964), this court held that although the diversity jurisdiction
alleged on the face of the complaint was not present, the
factual allegations in the complaint were sufficient to confer
federal question jurisdiction. “Even though the allegations of
the original complaint with respect to jurisdiction of the court
were defective, the trial or appellate court had full power to
correct them.” Id. at 469. In the case at bar, the district court
has jurisdiction over the case under Caterpillar and Newman-
Green, as all parties are now diverse. The antecedent
defective allegations of jurisdiction should not serve,
following these cases, to defeat this general rule.
Because we decide that this action should be dismissed
because it is an inappropriate declaratory action, we do not
need to decide whether, when such a jurisdictional defect is
raised in an interlocutory appeal, we have discretion to
disallow a post-filing jurisdiction cure, or, if we do have such
discretion, if we should exercise it in such a situation.
Instead, we hold subject matter jurisdiction exists and
exercise it for the limited purpose of remanding this action for
dismissal with prejudice.
C. McCarran-Ferguson Act and Burford Abstention
In their AmSouth appeal, the Receivers argue that
McCarran-Ferguson Act reverse preemption and Burford
abstention form independent grounds for the district court to
have found it lacked jurisdiction. The district court did not
address the McCarran-Ferguson Act argument, but it was
raised by the Receivers below. Reviewing the lines of cases
cited by the parties, it becomes clear that often when faced

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21
with suit in the federal courts, a state commissioner of
insurance as receiver or liquidator of an insurance company
placed under the state’s care will rely on one or both of these
doctrines to attempt to defeat federal court jurisdiction.
Because state liquidation proceedings of insolvent insurers are
exactly the sort of intricate state regulation on behalf of state-
resident policyholders that these doctrines are intended to
protect, these arguments have some force when angry
creditors attempt to sue insolvent insurance companies in
federal court to jump ahead in the queue of claims, but they
have less force here, where the insurance companies are
themselves the natural plaintiffs, as Receivers vociferously
argue. This dispute involves the Receivers’ attempt to
recover money in an ordinary common-law-damages suit; the
Banks do not here attempt to disrupt a coherent state scheme
in favor of enriching their own pockets.
First, the Receivers claim that the McCarran-Ferguson Act,
15 U.S.C. § 1012(b), which provides that “[n]o Act of
Congress shall be construed to invalidate, impair, or
supersede any law enacted by any State for the purpose of
regulating the business of insurance . . . unless such Act
specifically relates to the business of insurance,” reverse-
preempts the Declaratory Judgment Act in this case. They
argue that if the Declaratory Judgment Act allows this action
against them, it impairs the operation of state laws providing
for the liquidation of insurance companies, including those
providing for antisuit injunctions. Antisuit injunctions were
issued as part of the liquidation proceedings for each of the
insolvent insurance companies controlled by the Receivers.
See, e.g.,Tenn. ex rel. Sizemore v. Franklin Am. Life Ins. Co.,
No. 99-1326-II (Tenn. Ch. Oct. 25, 1999) (Consent Final
Order of Liquidation; Finding of Insolvency; and Permanent
Injunction, at 4) (“[N]o action at law or equity or in
arbitration shall be brought against the insurer or liquidator.”),
J.A. FTB at 812, 815. Those injunctions bar suits against the
insurance companies in any court; both parties agree on
appeal that the injunctions of their own force cannot limit
22 AmSouth Bank et al.
v. Dale et al.
Nos. 03-5517/5521
federal judicial power, but the Receivers argue that
McCarran-Ferguson gives them that power.
McCarran-Ferguson reverse preemption depends upon the
policies that undergird state law. Where a state law protects
state insurance-policyholders, it is a “law enacted . . . for the
purpose of regulating the business of insurance”; when it
protects other interests, for instance, those of stockholders in
those insurance companies, it is not such a law within the
meaning of the Act. See SEC v. Nat’l Sec. Inc., 393 U.S. 453,
457 (1969). The connection to the protection of policyholders
cannot be too attenuated; in United States Department of the
Treasury v. Fabe, 508 U.S. 491, 508 (1993), in the course of
finding that an Ohio insurer-liquidation statute providing for
a creditor-preference order contrary to general federal law
reverse-preempted the federal law to the extent it privileged
policyholders and the administration of the system in
furtherance of the privilege of policyholders, the Court noted
the difficulty.
Of course, every preference accorded to the creditors of
an insolvent insurer ultimately may redound to the
benefit of policyholders by enhancing the reliability of
the insurance company. This argument, however, goes
too far: “But in that sense, every business decision made
by an insurance company has some impact on its
reliability . . . and its status as a reliable insurer.” [Group
Life & Health Ins. Co. v. Royal Drug Co., 440 U.S. 205,
216-17 (1979)]. Royal Drug rejected the notion that such
indirect effects are sufficient for a state law to avoid pre-
emption under the McCarran-Ferguson Act.
Fabe, 508 U.S. at 508-09. Finally, when assessing whether
a general federal statute that creates a cause of action
“impairs” the operation of a state law, the proper inquiry is
whether the particular suit being brought would impair state
law. See Humana Inc. v. Forsyth, 525 U.S. 299, 311, 313
(1999) (analyzing effect of McCarran-Ferguson Act on RICO

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23
suit with respect to particular suit, rather than only general
operation of statute).
This court has previously rejected a claim that an Ohio law,
Ohio Rev. Code § 3927.05, requiring the insurance
commissioner to revoke the license of any foreign insurance
company that removes an action initiated by a citizen of Ohio
to federal court, was saved from its otherwise conceded
unconstitutionality by the operation of the McCarran-
Ferguson Act. See Int’l Ins. Co. v. Duryee, 96 F.3d 837, 838-
40 (6th Cir. 1996). The question in that case boiled down to
whether the statute was “aimed at protecting or regulating the
performance of an insurance contract,” the standard
announced in Fabe, 508 U.S. at 505 (internal quotation marks
omitted). We held it was not, noting that whether litigation
itself could be integral to that performance, the choice of
forum was not; that unlike the statute at issue in Fabe,
§ 3927.05 did not increase the substantive rights of
policyholders, but was in fact not limited to policyholders;
and that the reach of the statute was not confined to policy
disputes. Finding the statute “not enacted so much ‘for the
purpose of regulating the business of insurance’ as for the
parochial purpose of regulating a foreign insurer’s choice of
forum,” Duryee, 96 F.3d at 840, we concluded that the statute
was not within McCarran-Ferguson’s sweep.
Two cases cited by the Receivers concluded that McCarran-
Ferguson reverse preemption protects state insurer-liquidation
courts’ antisuit injunctions. In Munich American Reinsurance
Co. v. Crawford, 141 F.3d 585, 590-96 (5th Cir.), cert.
denied, 525 U.S. 1016 (1998), the Fifth Circuit faced the
question of whether Oklahoma’s antisuit injunctions, part of
its Uniform Insurers Liquidation Act (the “OUILA”), were
protected by McCarran-Ferguson such that they preempted
the Federal Arbitration Act and the insolvent insurance
company could not be compelled to enter arbitration.
Deciding that the OUILA as a whole and its antisuit
provisions in particular were enacted for the purpose of
24 AmSouth Bank et al.
v. Dale et al.
Nos. 03-5517/5521
regulating the business of insurance, the court went on to
conclude that ordering the reinsurers’ action “resolved in a
forum other than the receivership court nevertheless conflicts
with the Oklahoma law giving the state court the power to
enjoin any action interfering with the delinquency
proceedings.” Id. at 595. The court did note that “the precise
degree to which a state statute may be impaired so as to
trigger the McCarran-Ferguson Act is not well-settled,” but
found “impairment sufficient to trigger it” there. Id.
Following Munich American, the Tenth Circuit in Davister
Corp. v. United Republic Life Insurance Co., 152 F.3d 1277,
1280-82 (10th Cir. 1998), cert. denied, 525 U.S. 1177 (1999),
held similarly that the Federal Arbitration Act was reverse-
preempted by the Utah statute “consolidating all claims
against a liquidating insurer.” An earlier Second Circuit case,
not cited by the Receivers, reaches a similar conclusion with
respect to the effect on the Federal Arbitration Act of the
Kentucky Insurers Rehabilitation and Liquidation Law, which
contains an anti-arbitration clause. See Stephens v. Am. Int’l
Ins. Co., 66 F.3d 41, 43-45 (2d Cir. 1995). Finally, the
Receivers cite Covington v. Sun Life of Canada (U.S.)
Holdings, Inc., No. C-2-00-069, 2000 WL 33964592, *3-*10
(S.D. Ohio May 17, 2000), which held that the federal
removal and diversity jurisdiction provisions were reverse-
preempted by Ohio law granting exclusive jurisdiction in
liquidation-related legal matters to the Franklin County Court
of Common Pleas.
On the other side is a different line of cases refusing to find
reverse preemption. In Gross v. Weingarten, 217 F.3d 208,
222-23 (4th Cir. 2000), the court rested its holding, after
treating critically Munich American and its progeny, on the
conclusion that “concurrent federal jurisdiction over the
defendants’ counterclaims [does not] threaten[] to ‘invalidate,
impair, or supersede’. . . . Virginia’s efforts to establish a
single equitable proceeding to liquidate or rehabilitate
insolvent insurers.” Id. at 222 (citing Humana, 525 U.S. at
307-10). This conclusion was dependent on the facts of the

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particular case before it, but the court also indicated that the
sort of interference contemplated by the parties in that case
could be dealt with through abstention doctrines. In Suter v.
Munich Reinsurance Co., 223 F.3d 150, 160-62 (3d Cir.
2000), the court, assuming the “enacted for the purpose”
prong, found no impairment on the facts of the case, where
the proceeding was “a suit instituted by the Liquidator against
a reinsurer to enforce contract rights for an insolvent insurer,
which, if meritorious, will benefit the insurer’s estate.” In
Grode v. Mutual Fire, Marine and Inland Insurance Co.,
8 F.3d 953, 960 (3d Cir. 1993), the court tersely rejected the
McCarran-Ferguson Act argument made by the Insurance
Commissioner, noting that the “action instituted by the
Commissioner in this case has nothing to do with
Pennsylvania’s regulation of insurance.” And in Nichols v.
Vesta Fire Insurance Corp., 56 F. Supp. 2d 778, 780 (E.D.
Ky. 1999), the court concluded that under the Kentucky law
the action it had before it — “a common law breach of
contract action which merely happens to involve an insolvent
insurer” — was not subject to the exclusive jurisdiction of the
liquidation court.
Where the insolvent insurer is itself a plaintiff in an
ordinary contract or tort action, courts tend to look
unfavorably on claims of McCarran-Ferguson preemption of
the FAA or the removal statutes so as to insulate that action
from the federal courts. That seems to be motivated as much
by frustration over the attempts by parties to evade federal
jurisdiction as by reasoned doctrinal analysis, but one way to
cast it in a favorable doctrinal light is to extend the rule of
Humana — that impairment must be defined with respect to
the particular cause of action — to the question of purpose.
That is, an ordinary suit against a tortfeasor by an insolvent
insurance company implicates a “regulation of the business of
insurance” only in the attenuated fashion rejected in Fabe; an
antisuit injunction would only be a regulation of the business
of insurance to the extent it protected the assets of the
insurance company from suit. Here, of course, the Banks
26 AmSouth Bank et al.
v. Dale et al.
Nos. 03-5517/5521
seek only declaratory judgment, based in turn on a threatened
ordinary common-law action against them, and the assets of
the insurance companies are up for grabs only in that
attenuated fashion. A second wrinkle is the narrow or broad
definition of “impair”: in Munich American, impairment was
defined ultimately quite broadly, in that any suit which was
in violation of the antisuit provision would have impaired that
provision. The Gross court, looking to the purpose of the
antisuit provision, held that impairment does not occur unless
the integrity of the core liquidation proceedings is attacked.
Here those core proceedings are not implicated. Ultimately,
we conclude that it would be an overly expansive reading of
the case law and the purposes of the doctrine to find
McCarran-Ferguson reverse preemption here. The threatened
declaratory judgment actions against insolvent insurance
companies for the purpose of evading liability in a threatened
common-law coercive action by the insurance companies
have only an attenuated connection to regulating the business
of insurance.
Burford abstention is similarly inapplicable here. First
invoked in Burford v. Sun Oil Co., 319 U.S. 315 (1943),
Burford abstention requires a federal court to abstain from
jurisdiction where to assume jurisdiction would “be disruptive
of state efforts to establish a coherent policy with respect to
a matter of substantial public concern.” Colo. River Water
Conservation Dist. v. United States, 424 U.S. 800, 814
(1976). But Burford “does not require abstention whenever
there exists [a complex state administrative process], or even
in all cases where there is a ‘potential for conflict’ with state
regulatory law or policy.” New Orleans Pub. Serv., Inc. v.
Council of New Orleans, 491 U.S. 350, 362 (1989) (quoting
Colo. River, 424 U.S. at 815-16). Instead, “This balance only
rarely favors abstention, and the power to dismiss recognized
in Burford represents an extraordinary and narrow exception
to the duty of the District Court to adjudicate a controversy
properly before it.” Quackenbush v. Allstate Ins. Co., 517
U.S. 706, 728 (1996) (quotation omitted). State liquidation

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proceedings seem like an excellent candidate for Burford
abstention, but it is difficult to see how a federal court’s
pronouncement on issues of common-law liability having
nothing to do with insurance could be disruptive of those
proceedings. Like under the McCarran-Ferguson analysis,
that Receivers are covered by the antisuit provisions of the
various liquidation laws seems mere coincidence, and
abstention seems inappropriate. The cases cited by the
Receivers are all distinguishable.
Gonzalez v. Media Elements, Inc., 946 F.2d 157, 157 (1st
Cir. 1991), involved a dispute over coverage with a solvent
insurer that apparently became insolvent on appeal. A
coverage claim against a now-insolvent insurer that arose
prior to the insolvency is of course exactly the sort of claim
that must be heard in the liquidation proceedings; although
dismissal under Burford abstention is no longer appropriate
under Quackenbush in damages actions, presumably
McCarran-Ferguson protection would extend to this kind of
claim. The court in Martin Insurance Agency, Inc. v.
Prudential Reinsurance Co., 910 F.2d 249, 254-55 (5th Cir.
1990), predicated its decision that Burford abstention was
appropriate where the “claims involve what are, on their face,
assets of [the insolvent insurance company] owned solely by
the receiver.” And while Grimes v. Crown Life Insurance
Co., 857 F.2d 699 (10th Cir. 1988), does involve a receiver-
instituted suit, the subject matter of the suit was recovering
money damages from another insurance company based on a
coverage dispute. The “appeal center[ed] on the
interpretation of certain provisions contained in the
[reinsurance] Agreement [and] the effect of the interpretation
of the Agreement by the Oklahoma Commissioner of
Insurance.” Id. at 700. Because Burford abstention is
concerned with potential disruption of a state administrative
scheme, rather than the mere existence of such a scheme,
looking behind the action to determine whether it implicates
the concerns of Burford is necessary, and the issues in this
litigation, concerning the liability of the Banks for various
28 AmSouth Bank et al.
v. Dale et al.
Nos. 03-5517/5521
non-insurance-related activities, federal law defenses, and
state tort law, do not warrant Burford abstention. The district
court thus did not abuse its discretion in refusing to abstain
under Burford.
D. Appropriateness of Declaratory Relief
“This court reviews the district court’s exercise of
discretion under the Declaratory Judgment Act, 28 U.S.C.
§ 2201(a), for abuse of discretion.” Scottsdale Ins. Co. v.
Roumph, 211 F.3d 964, 967 (6th Cir. 2000). “[D]istrict courts
possess discretion in determining whether and when to
entertain an action under the Declaratory Judgment Act, even
when the suit otherwise satisfies subject matter jurisdictional
prerequisites.” Wilton v. Seven Falls Co., 515 U.S. 277, 282
(1995). The Declaratory Judgment Act is “‘an enabling Act,
which confers a discretion on the courts rather than an
absolute right upon the litigant.’” Id. at 287 (quoting Wycoff,
344 U.S. at 241). “‘[T]he propriety of declaratory relief in a
particular case will depend upon a circumspect sense of its
fitness informed by the teachings and experience concerning
the functions and extent of federal judicial power.’” Id.
(quoting Wycoff, 344 U.S. at 243). These concerns are
heightened where, as in Wilton, there are pending state-court
proceedings representing the same issues of state law; “a
district court might be indulging in ‘gratuitous interference’
if it permitted the federal declaratory action to proceed.” Id.
at 283 (quoting Brillhart v. Excess Ins. Co. of Am., 316 U.S.
491, 495 (1942)) (alteration in original) (citations omitted).
This case represents an interesting conundrum in that at the
time the motion to dismiss was filed, the Mississippi litigation
was in state court; when the Tennessee district court’s
injunctive order was entered, the Mississippi litigation had
been, possibly incorrectly, removed to the federal district
court for the Southern District of Mississippi; but now, the
Mississippi litigation is likely correctly in federal court under
Caterpillar, as the incorrect removal can be cured by the
subsequent creation of jurisdiction. Had the Tennessee

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district court ruled immediately on the Receivers’ motion, the
district court would also have been bound by the Anti-
Injunction Act, 28 U.S.C. § 2283, and cases interpreting it to
dismiss the Banks’ complaint, as the Banks pray for
injunctive relief against the prosecution of state-court
proceedings (the Mississippi litigation) instituted before
decision in the Tennessee district court and seek a declaratory
judgment which will have the same practical effect. See
Martingale LLC v. City of Louisville, 361 F.3d 297, 303 (6th
Cir. 2004); Tropf v. Fidelity Nat’l Title Ins. Co., 289 F.3d
929, 941-42 (6th Cir. 2002), cert. denied, 537 U.S. 1118
(2003). While the Anti-Injunction Act does not by its terms
apply now, where the Mississippi litigation will likely take
place in federal court, that it did apply at the time the motion
to dismiss the Tennessee litigation was filed, and would have
applied at the time of the district court’s decision below but
for a potentially erroneous removal of the Mississippi
litigation by AmSouth, is extremely disturbing. In
determining the propriety of entertaining a declaratory
judgment action, competing state and federal interests weigh
in the balance, with courts particularly reluctant to entertain
federal declaratory judgment actions premised on diversity
jurisdiction in the face of a subsequently-filed state-court
coercive action. These background concerns — that even if
the Banks acted in good faith, the ultimate outcome of their
procedural behavior has been to wrest this case away from the
state courts — should come into play in assessing the
appropriateness of assuming jurisdiction over these claims.
This court has adopted a five-factor test to determine when
a district court should exercise jurisdiction over a 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;
30 AmSouth Bank et al.
v. Dale et al.
Nos. 03-5517/5521
(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 Ins. Co., 211 F.3d at 968. The district court noted
this test, but did not apply each factor, instead deciding that
the pendency of a related state action did not necessarily bar
a federal declaratory-judgment action, finding that the Banks
had not engaged in procedural fencing, and finding that
“Tennessee is a logical forum for this dispute.” J.A. FTB at
64 (Mem. Op. at 16). Because we find clear error in certain
of the district court’s factual findings, and misapplication of
legal standards, we conclude that the district court abused its
discretion in assuming jurisdiction over these declaratory
actions.
1. Whether the Judgment Would Settle the
Controversy?
The district court did not consider this factor in its analysis,
but the parties dispute on appeal whether it weighs in favor of
entertaining the actions or dismissing them. The crux of the
argument between the parties is whether or not the ability of
the Receivers to file counterclaims that will dispose of all
issues in the declaratory-judgment actions can be considered
in determining whether the judgments would settle the
controversy. Each side argues that the rule the other proposes
will swallow this factor, as counterclaims will so often be
possible or even compulsory that all declaratory judgments
will either be able to or not be able to settle the controversy.
We conclude only that in this case, this first factor does not
weigh heavily in favor of or against allowing these actions.

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v. Dale et al.
31
2. Whether the Declaratory Judgment Action Would
Serve a Useful Purpose in Clarifying the Legal
Relations at Issue?
This factor weighs heavily in favor of dismissing the
declaratory judgment suit. The only “useful purpose” these
declaratory-judgment actions could serve is an ultimate
determination of liability on an already-accrued damages
claim. Its usefulness is therefore severely undercut by the
presence of the Mississippi litigation. This is not a situation
in which a declaratory plaintiff will suffer injury unless legal
relations are clarified; the Banks do not currently “act at their
peril.” See Tempco Elec. Heater Corp. v. Omega Eng’g, Inc.,
819 F.2d 746, 749-50 (7th Cir. 1987) (where declaratory
defendant “promptly filed suit to enforce its [underlying]
claim . . . a declaratory judgment would serve no useful
purpose and was properly denied”).
Normally, when a putative tortfeasor sues an injured party
for a declaration of nonliability, courts will decline to hear the
action in favor of a subsequently-filed coercive action by the
“natural plaintiff.” See 10B WRIGHT, MILLER & KANE § 2765
at 638 (3d ed. 1998) (“The courts have also held that it is not
one of the purposes of the declaratory judgments act to enable
a prospective negligence action defendant to obtain a
declaration of nonliability.”). This general rule is subject to
exception when some additional harm, not merely waiting for
the natural plaintiff to sue, will befall the declaratory plaintiff
in the meantime. That is, a party who wants, for example, to
embark on a marketing campaign, but has been threatened
with suit over trademark infringement, can go to court under
the Declaratory Judgment Act and seek a judgment that it is
not infringing that trademark, thereby allowing it to proceed
without the fear of incurring further loss. Similarly, a party
with an ongoing contractual relationship who has been
accused of breach can go to court and have the contract
definitively interpreted, thus allowing it to conform its
behavior to the law and stop the potential accrual of damages.
32 AmSouth Bank et al.
v. Dale et al.
Nos. 03-5517/5521
The “useful purpose” served by the declaratory judgment
action is the clarification of legal duties for the future, rather
than the past harm a coercive tort action is aimed at
redressing. Here, the Banks incurred no further loss while
settlement negotiations continued, and at the time they filed,
even the “uncertainty” of awaiting suit on past behavior
would have extended less than two weeks, from the filing
dates of July 18 and 19 to the end of the tolling period on July
31. While AmSouth describes the two-year settlement
negotiations as a “danse macabre” in which a “Damoclean
sword hung over its head,” all AmSouth ever had to do to
stop this “danse macabre” was to refuse to renew the tolling
agreement or to cease settlement negotiations, at which time,
if the Receivers did not file suit promptly, a declaratory suit
may have been appropriate. See Hyatt Int’l Corp. v. Coco,
302 F.3d 707, 712 (7th Cir. 2002) (“[T]he threat of suit,
however immediate, is not by itself sufficient for the
invocation of the federal power to issue a declaratory
judgment.”); Int’l Ass’n of Entrepreneurs v. Angoff, 58 F.3d
1266, 1270 (8th Cir. 1995) (“[T]he Declaratory Judgment Act
is not to be used to bring to the federal courts an affirmative
defense which can be asserted in a pending state action.”),
cert. denied, 516 U.S. 1072 (1996); Morrison v. Parker, 90 F.
Supp. 2d 876, 881 (W.D. Mich. 2000) (“Viewed from the
perspective of [the Sixth Circuit’s five] standards, an action
by a putative tortfeasor fares poorly as a declaratory judgment
action.”); Plough, Inc. v. Allergan, Inc., 741 F. Supp. 144,
147-48 (W.D. Tenn. 1990) (in Lanham Act case, where
declaratory plaintiff was under threat of suit for ongoing
marketing activities, declaratory judgment appropriate).
The district court characterized the settlement negotiations
engaged in by FTB and the Receivers as “‘continuous[]
accus[ations]’” for “at least several months before FTB
brought this suit ‘to secure an adjudication of its rights.’”
J.A. FTB at 63 (Mem. Op. at 15). The district court relied on
Eli’s Chicago Finest, Inc. v. Cheesecake Factory, Inc., 23 F.
Supp. 2d 906, 908 (N.D. Ill. 1998), for the point that

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v. Dale et al.
33
continuous accusations without adjudication of rights can
justify entertaining a declaratory judgment suit. But as
demonstrated by Eli’s Chicago Finest, in which a single
cease-and-desist letter was held not to constitute continuous
accusations, the factual circumstances surrounding those
accusations are dispositive. First, as the Receivers point out,
it is unclear what “two demands” the district court was
referring to in finding “continuous accusations”; the
Receivers made no formal demands to FTB, only an oral
indication that they intended to assert claims if they could not
be resolved through negotiation. FTB had signed a tolling
agreement, indicating some willingness to negotiate a
settlement rather than forcing a legal action, had engaged in
preliminary negotiations, and had in fact asked for a formal
settlement demand that was being prepared as it filed suit.
This is clearly not the case of the plaintiff who accuses
continuously but does not file, but instead the case of the
defendant who races to the courthouse while at the same time
assuring the plaintiff that the defendant is still interested in at
least discussing settlement options. The district court clearly
erred in these historical findings of fact.
FTB also argues on appeal that many of the claims
advanced by the Receivers are not torts, but instead contract
claims, and therefore, FTB does not fit into the category of
“putative tortfeasor.” At most, this can only undermine
reliance on those cases that rely on that particular formulation
of the type of declaratory plaintiff at issue here. In any case,
it is irrelevant to the policy considerations that underly the
doctrine: Where a pending coercive action, filed by the
natural plaintiff, would encompass all the issues in the
declaratory judgment action, the policy reasons underlying
the creation of the extraordinary remedy of declaratory
judgment are not present, and the use of that remedy is
unjustified. This is true whatever the nature of the coercive
action underlying the declaratory action — the important
distinction in the case law is between situations where some
uncertainty beyond the possibility of litigation exists (i.e.,
34 AmSouth Bank et al.
v. Dale et al.
Nos. 03-5517/5521
trademark infringement) and those where the injury is already
complete. Contract claims can sometimes fall into the first
category because of the ongoing nature of a contractual
relationship, whereas tort claims will often fall into the
second because they are dependent on historical occurrences
rather than ongoing conditions. All of the claims extended by
the Receivers fall into the second category, in that they allege
no present or continual wrongdoing on the part of the Banks
that would require immediate clarification of the parties’
respective rights. While the Banks might have a continuing
contractual relationship with the insurance companies and the
Receivers, the historical incidents giving rise to liability are
finished. Ultimately, this factor weighs heavily against the
exercise of jurisdiction over these declaratory actions, where
a pending coercive action exists.
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?
Courts take a dim view of declaratory plaintiffs who file
their suits mere days or weeks before the coercive suits filed
by a “natural plaintiff” and who seem to have done so for the
purpose of acquiring a favorable forum. Allowing declaratory
actions in these situations can deter settlement negotiations
and encourage races to the courthouse, as potential plaintiffs
must file before approaching defendants for settlement
negotiations, under pain of a declaratory suit. This also
dovetails with the previous factor: where a putative defendant
files a declaratory action whose only purpose is to defeat
liability in a subsequent coercive suit, no real value is served
by the declaratory judgment except to guarantee to the
declaratory plaintiff her choice of forum — a guarantee that
cannot be given consonant with the policy underlying the
Declaratory Judgment Act. See Hyatt Int’l, 302 F.3d at 712
(the Act “is not a tactical device whereby a party who would
be a defendant in a coercive action may choose to be a
plaintiff by winning the proverbial race to the courthouse.”

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v. Dale et al.
35
6The district court issued a memorandum decision in FTB’s action
against the receivers m aking find ings only as to FT B’s action, but then
denied the Receivers’ motion to dismiss in the AmSouth action “[f]or the
reasons stated in the First Tennessee action.” Am Sou th Ba nk v. D ale, No.
3:02-0677 (M.D . Tenn. Mar. 31, 20 03) (order denying motion to d ismiss
(internal quotation marks omitted)); NGS Am., Inc. v.
Jefferson, 218 F.3d 519, 523 (6th Cir. 2000) (“[A] rule
permitting [this sort of declaratory] action could frustrate a
plaintiff’s choice of forum and encourage forum shopping,
races to the courthouse, needless litigation occasioning waste
of judicial resources, delay in the resolution of controversies,
and misuse of judicial process to harass an opponent in
litigation,” irrespective of the actual motives of the
declaratory plaintiff); BASF Corp. v. Symington, 50 F.3d 555,
558-59 (8th Cir. 1995) (“declaratory actions founded
exclusively on a defense to a state law claim should be
dismissed as a tactical maneuver calculated to deny potential
plaintiffs of their traditional right to choose the forum and
time of suit”; “the natural plaintiff’s choice of forum and law
will be disturbed only in exceptional circumstances”);
Tempco, 819 F.2d at 750 (“[T]he federal declaratory
judgment is not a prize to the winner of the race to the
courthouse.” (internal quotation marks omitted)); UAW v.
Dana Corp., No. 3:99CV7603, 1999 WL 33237054, *5-*6
(N. D. Ohio Dec. 6, 1999) (where declaratory plaintiff filed
suit in order to “preempt the choice of forum that otherwise
would be for the union to make,” declaratory judgment
inappropriate; noting “a presumption that a first filed
declaratory judgment action should be dismissed or stayed in
favor of the substantive suit,” and that at the least, “the
declaratory judgment plaintiff should have the burden or
showing persuasive cause why its suit should not be
enjoined”).
The district court found “that this declaratory judgment
action6 was not filed in Tennessee for procedural fencing.”
36 AmSouth Bank et al.
v. Dale et al.
Nos. 03-5517/5521
and granting injunction), Joint App endix No. 03-5517 (“J.A. AmSouth”)
at 42. We find it to be clear o n the rec ord that Am South engaged in
procedural fencing, and therefore we d o not need to remand for separate
factual findings to evaluate the pro priety of each of these ac tions.
7It is unclear whether the propriety of Tennessee as a forum was
weighed by the district court as part of the “proced ural fencing” analysis,
or as a separate factor in determining whether the declaratory judgment
was appropriate. The parties vigorously contest whether the district court
app ropriately considered the logic of the forum. The Receivers cite Essex
Group, Inc. v. Cobra Wire & Cable, Inc., 100 F. Supp. 2d 912, 916 (N.D.
Ind. 200 0) (“[R ]egardless o f whether Indiana is the more appropriate
venue . . . it is inappropriate for the Plaintiffs to file for a declaratory
judgment for the purposes of forum-shopping.”) and UAW v. Dana Corp.,
No. 3:99CV7603, 1999 WL 33237054, *4 (N. D. Ohio Dec. 6, 1999)
(differentiating proper forum selection, where a “plaintiff seeking redress
for a co gnizab le injury is entitled” to choose among appro priate forums,
from improper forum shopping, where a party “manipulate[s] procedural
devices to secure an advantage which, were those de vices not available,
it could not employ to defeat its opp onent’s choice of forum”). AmSouth
relies on United States Fire Insurance Co. v. Goodyear Tire & Rubber
J.A. FTB at 65 (Mem. Op. at 17). We conclude that the
factual determination underlying this finding was clearly
erroneous, as were the legal standards used to reach this
conclusion. The district court first found that the Receivers
had continuously accused FTB for several months before
FTB’s action was brought to secure an adjudication of its
rights; then that Tennessee was a logical forum for this
dispute; and finally that a controversy was presented by the
Receivers’ threat of suit. Taking up this last conclusion first,
we note that the presence of a controversy is a prerequisite for
the district court’s initial power to hear a declaratory
judgment action; its absence strips the district court of
jurisdiction, and its presence therefore should have no weight
in determining whether a declaratory-judgment action is
appropriate. Next, whether the forum chosen by the
declaratory plaintiff is “logical” can have only a minimal
value in determining whether procedural fencing has
occurred.7 The question is not which party has chosen the

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v. Dale et al.
37
Co., 920 F.2d 487, 489 n.7 (8th Cir. 1990) (footnote remarking as an
aside to rejecting the declaratory defendant’s claims of procedural fencing
that the disp ute was one over a Minnesota judgment and involved a
Minneso ta accident); Telephonics Corp. v. Lindly & Co., 291 F.2d 445,
446-47 (2d Cir. 1961) (in weighing propriety of an antisuit injunction
entered by district court in declaratory action, noting that New York was
a more appropriate venue for the suit); and DP-Tek, Inc. v. Villalobos, 809
F. Supp. 811, 813 (D. Kan. 1992) (using traditional forum selection
factors in weighing appropriateness of declaratory action). Whether or not
the district court’s consideration of this factor was incorrect, given that
both parties have a reasonable claim to their respective forum, this factor
is something of a wash, and we decline to decide whether a district court
is always precluded from considering it. To the extent it may weigh in
favor of the declaratory action, the other factors — explicitly required by
prior circuit case law — still weigh heavily in favor of the Mississippi
litigation.
better forum, but whether the declaratory plaintiff has filed in
an attempt to get her choice of forum by filing first. That a
particular forum is better or worse is irrelevant in answering
that factual question.
Instead, we conclude that a review of the factual record
leads to the unavoidable conclusion that procedural fencing
has occurred. The Receivers, alerted to the possibility of
claims against the Banks in the course of litigation against
other parties, notified the Banks of their exploration of those
claims and initiated settlement negotiations. The Banks
indicated their willingness to consider settlement, most
notably by signing a number of tolling agreements, and in
AmSouth’s case, through correspondence indicating that
those negotiations were ongoing. FTB requested a settlement
demand, and while that demand was being prepared, filed this
action. Just one day before filing its declaratory action,
AmSouth’s counsel sent a letter stating that AmSouth was
“still considering” the Receivers’ demand and its options, and
that counsel would “be in touch in the near future concerning
a written response and a possible meeting on July 24.” J.A.
AmS at 572. It seems clear that the Banks filed declaratory
38 AmSouth Bank et al.
v. Dale et al.
Nos. 03-5517/5521
actions not to resolve issues of liability that were hindering
their normal behavior, but instead to gain procedural
advantage. See Zide Sport Shop of Ohio, Inc. v. Ed Tobergte
Assocs., Inc., No. 00-3183, 2001 WL 897452, *4 (6th Cir.
July 31, 2001) (where declaratory plaintiffs filed suit after
requesting extension to respond to settlement demand, one
day before extension’s expiration, a “finding of bad faith is
overwhelmingly supported in the record”); Nortek, Inc. v.
Molnar, 36 F. Supp. 2d 63, 70 (D.R.I. 1999) (where
declaratory plaintiff asked for letter outlining legal reasoning
and promised to respond, then filed action prior to responding
to letter, party “certainly shopped for a forum,” and court
therefore declined jurisdiction over first-filed action);
Columbia Pictures Indus., Inc. v. Schneider, 435 F. Supp.
742, 747-48 (S.D.N.Y. 1977) (allowing six-days-earlier
declaratory action to proceed “would create disincentives to
responsible litigation,” and instead, “Potential plaintiffs
should be encouraged to attempt settlement discussions (in
good faith and with dispatch) prior to filing lawsuits without
fear that the defendant will be permitted to take advantage of
the opportunity to institute litigation in a district of its own
choosing before plaintiff files an already drafted complaint.”).
Cf. N. Shore Gas Co. v. Salomon Inc., 152 F.3d 642, 647 (7th
Cir. 1998) (where settlement negotiations had reached
acknowledged impasse, declaratory judgment filed one month
after last contact between parties was not “racing to the
courthouse”); Kmart Corp. v. Key Indus., Inc., 877 F. Supp.
1048, 1052-55 (E.D. Mich. 1994) (finding declaratory
judgment appropriate; key consideration is whether the
declaratory plaintiff “misled the defendant into believing that
their dispute could be resolved amicably so that the plaintiff
could win the race to the courthouse”).
We conclude that the practical effect of FTB’s and
AmSouth’s participation in settlement negotiations and
affirmative representations of that participation was to lull the
Receivers into believing that amicable negotiation was still
possible, and that the filing of these declaratory actions was

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v. Dale et al.
39
an effort to engage in procedural fencing to secure the Banks’
choice of forum. The district court clearly erred in
concluding otherwise. This factor weighs heavily against
entertaining these actions under the Declaratory Judgment
Act.
4. Whether allowing the action would cause friction
between state and federal courts?
This is a factor that, as noted above, would have at the
outset of this litigation been dispositive under the Anti-
Injunction Act, and before the dismissal of Flowers from the
suit weighed heavily against entertaining this action in favor
of allowing the Mississippi litigation to proceed. It seems
unfortunate that happenstance and procedural maneuvering by
the Banks should serve to undercut this particularly important
factor in the balance, but at this point it is difficult to say that
requiring the district court to dismiss the action will decrease
the friction between the state and federal courts.
5. Whether there is an alternative remedy that is
better or more effective?
The Receivers argue that the Mississippi litigation presents
a better remedy, because a coercive action is an inherently
more effective litigation vehicle, because the Receivers
proceed in one action in the Mississippi litigation, rather than
the two actions in the district court and this court, and because
the parties are naturally aligned in the Mississippi litigation,
noting with respect to this last point the evident misstatements
in the district court’s opinion switching the two sets of
parties. AmSouth notes that the material witnesses reside in
Tennessee, the underlying events occurred in that state,
relevant documents are located in Tennessee, and Tennessee
law will likely govern. The Receivers reply that Tennessee
and Mississippi are adjacent, reducing the burden of travel,
that two-thirds of the total loss suffered was by Mississippi
40 AmSouth Bank et al.
v. Dale et al.
Nos. 03-5517/5521
insurance companies, and that the scheme was nationwide,
with documents in numerous fora.
The existence of a coercive action is important to our
determination that this declaratory action would serve no
useful purpose. See, e.g., Albie’s Foods, Inc. v. Menusaver,
Inc., 170 F. Supp. 2d 736, 740 (E.D. Mich. 2001) (relying on
Tempco in deferring to a subsequently-filed coercive action,
noting that invocation of coercive remedy will “help sharpen
and refine the issues to be decided”); Pakideh v. Ahadi, 99 F.
Supp. 2d 805, 807-09 (E.D. Mich. 2000) (dismissing
declaratory judgment action in favor of coercive action
pending in other federal district court after removal); Essex
Group, Inc. v. Cobra Wire & Cable, Inc., 100 F. Supp. 2d
912, 915-17 (N.D. Ind. 2000) (dismissing first-filed
declaratory judgment in favor of coercive action in other
federal court because to do otherwise would discourage
settlement and encourage costly duplicate litigation). Beyond
recognizing that an alternative remedy exists, we are unsure
that this factor weighs heavily in favor of or against
entertaining these declaratory actions.
Ultimately, then, two factors, that the declaratory
judgments would serve no useful purpose and that FTB and
AmSouth are using these actions for the purpose of
procedural fencing, weigh heavily in favor of declining
jurisdiction over these declaratory actions, with no factors
weighing in favor of proceeding with the declaratory-

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v. Dale et al.
41
8The district court also relied on the first-filed rule in denying the
Receivers’ motio n to dismiss, which was likely improper, in that the first-
filed rule only applies to two cases filed in separate federal co urts, see
Zide Sport Shop of Ohio, Inc. v. Ed Tobergte Assocs., Inc., No. 00-3183,
200 1 W L 89 745 2, *3 (6th Cir. July 31, 2001) (“T he first-to-file rule is a
well-established doctrine that encourages comity among federal courts of
equal rank.” (emphasis added)) Hea lthcare Capital, LLC v. Healthmed,
Inc., 213 F. Supp. 2d 850, 856 (S.D. Ohio 2002), and the Mississippi
litigation was filed in state court. In any case, the first-filed rule is not a
strict rule and much more often than no t gives way in the context of a
coercive action filed subsequent to a declaratory action. See, e.g., Zide,
2001 W L 89 745 2 at *3 (“A plaintiff, even one who files first, does not
have a right to bring a declaratory judgment action in the forum of his
choosing”.); Essex, 100 F. Supp. 2d at 915-17 (dismissing first-filed
declaratory judgment in favor of subsequent coercive action in other
federal court); UAW, 1999 W L 3323 7054 at *6 (“Cases construing the
interplay between declaratory judgment actions and suits based on the
merits of underlying substantive claims create, in practical effect, a
presumption that a first filed declaratory judgment action should be
dismissed or stayed in favor o f the substantive suit.”); Nortek, Inc. v.
Molnar, 36 F. Supp. 2d 6 3, 70 (D.R.I. 1999) (dismissing first-filed
declaratory judgment in favor of subsequent coercive action).
judgment action.8 The district court therefore abused its
discretion in entertaining these actions.
III. CONCLUSION
For the foregoing reasons, we DISSOLVE the injunction,
REVERSE the district court’s decision, and REMAND the
case to the district court with instructions to dismiss the
actions.

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