El Palacio, LLC v. Westchester Surplus Lines Insurance Co., et al.

CourtDistrict Court, M.D. Alabama
DecidedFebruary 4, 2026
Docket1:25-cv-00454
StatusUnknown

This text of El Palacio, LLC v. Westchester Surplus Lines Insurance Co., et al. (El Palacio, LLC v. Westchester Surplus Lines Insurance Co., et al.) is published on Counsel Stack Legal Research, covering District Court, M.D. Alabama primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
El Palacio, LLC v. Westchester Surplus Lines Insurance Co., et al., (M.D. Ala. 2026).

Opinion

IN THE UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF ALABAMA SOUTHERN DIVISION

EL PALACIO, LLC, ) ) Plaintiff, ) ) v. ) CASE NO. 1:25-cv-454-BL-JTA ) (WO) WESTCHESTER SURPLUS LINES ) INSURANCE CO., et al., ) ) Defendants. )

ORDER AND REPORT AND RECOMMENDATION OF THE MAGISTRATE JUDGE

Before the court is Defendant Westchester Surplus Lines Insurance Company’s Notice of Removal, which alleges this court has diversity jurisdiction1 because Plaintiff El Palacio, LLC fraudulently joined Defendants Stephens Engineering Consultants, Inc., John Gilbert Engineering, LLC, and John Donald Gilbert, Jr., P.E. to defeat diversity jurisdiction. (Doc. No. 1.)2 Plaintiff responded to Defendant Westchester’s allegations of fraudulent joinder and requested the court remand the matter to state court for lack of subject matter jurisdiction. (Doc. No. 28.) The undersigned construes Plaintiff’s response as containing a motion to remand.

1 Diversity jurisdiction exists in civil actions filed between the citizens of different states and the amount in controversy exceeds $75,000. 28 U.S.C. § 1332. According to the rule of “complete diversity,” no plaintiff may share the same state citizenship with any defendant. See Riley v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 292 F.3d 1334, 1337 (11th Cir. 2002).

2 Pursuant to 28 U.S.C. § 636, this case was referred to the undersigned for all pretrial proceedings and entry of any orders or recommendations as may be appropriate. (Doc. No. 31.) Also before the court is the motion to dismiss filed by Defendants Stephens Engineering Consultants, Inc., John Gilbert Engineering, LLC, and John Donald Gilbert,

Jr., P.E. (Doc. No. 33.) These defendants seek dismissal of Plaintiff’s claims against them under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief can be granted. (Id.) For the reasons set forth below, the undersigned recommends the motion to remand (Doc. No. 28) be denied, and the motion to dismiss (Doc. No. 33) be granted.

I. JURISDICTION AND VENUE Complete diversity does not exist between Plaintiff and all Defendants. Nevertheless, Defendant Westchester avers jurisdiction is proper under 28 U.S.C. § 1332 because the other Defendants were fraudulently joined. Plaintiff contests Defendant Westchester’s allegations of fraudulent joinder. (See Doc. No. 28.) Venue is proper as Plaintiff filed its complaint in the Circuit Court of Dale County,

Alabama (Doc. No. 1-1), which is within the Middle District of Alabama, Southern Division. II. PROCEDURAL HISTORY AND ALLEGATIONS On May 1, 2025, Plaintiff filed this action in the Circuit Court of Dale County, Alabama. (Doc. No. 1-1.) On June 18, 2025, Defendant Westchester removed this action

to federal court based on diversity jurisdiction. (Doc. No. 1.) Defendant Westchester asserts it is a citizen of both Georgia and Pennsylvania. (Doc. No. 1 at 3; Doc. No. 17 at 3.) Defendants John Gilbert Engineering, LLC, and John Donald Gilbert, Jr., P.E. (“resident Defendants”) are Alabama citizens, as is Plaintiff. (See Doc. No. 1 at 2–3; Doc. No. 17 at 2–4.)3 Defendant Westchester maintains Plaintiff fraudulently joined the resident Defendants and Defendant Stephens4 to defeat diversity jurisdiction. (Doc. No. 1 at 4; Doc.

No. 17 at 4–5.) In its complaint, Plaintiff alleges it had an insurance policy with Defendant Westchester for its real property located in Ozark, Alabama. (Id. at 1–2.) Plaintiff avers heavy rainfall during a storm caused its roof to collapse, causing significant damage. (Id. at 2.) Plaintiff alleges Defendant Westchester retained the resident Defendants and Defendant Stephens to determine “the origin and cause of purported damage, if any, and

determine whether the damage was the result of wind.” (Doc. No. 1-1 at 8.) Plaintiff alleges the resident Defendants were acting as an agent or representative of Defendant Stephens. (Id.) Plaintiff avers the resident Defendants inspected its property and generated a report, which found there was no wind-related damage to the building. (Id.) Plaintiff alleges the report included sections for “Interior Damage Investigation” and “Other Conditions and/or

Damage” which were under a heading titled, “Engineering Recommendations due to Collapsed Roof Structure.” (Id.) Plaintiff also alleges these sections were not a part of the cause of loss determination. (Id.) Defendant Westchester subsequently denied Plaintiff’s

3 Because Defendant Westchester improperly alleged the citizenship of Defendant John Gilbert Engineering, LLC, in its notice of removal, the undersigned ordered Defendant Westchester to file a supplement to its notice of removal that properly alleged the citizenship of each party. (See Doc. No. 14.) Defendant Westchester filed its Supplemental Notice of Removal on July 30, 2025. (Doc. No. 17.)

4 Defendant Westchester contends Defendant Stephens was fraudulently joined, even though Defendant Stephens is a citizen of Texas and cannot destroy diversity jurisdiction. See 28 U.S.C. § 1332; (Doc. No. 1 at 3–4). Accordingly, the undersigned focuses on whether the two resident Defendants were fraudulently joined. claim because it found the damage to the building was not a covered cause of loss. (Id. at 9.)

From these allegations, Plaintiff brings the following state law claims: (1) breach of contract against Defendant Westchester; (2) bad faith refusal to pay policy benefits against Defendant Westchester; (3) bad faith failure to properly investigate claims against Defendant Westchester; and (4) negligence and/or wantonness against the resident Defendants, Defendant Stephens, and fictitious defendants. (Doc. No. 1-1 at 13–16.) Plaintiff did not file a motion to remand nor otherwise respond to Defendant

Westchester’s fraudulent joinder argument in the Notice of Removal. Even so, since federal courts must inquire into subject matter jurisdiction at the earliest possible stage in the proceedings, the undersigned ordered Plaintiff to respond to Defendant Westchester’s assertion of fraudulent joinder and ordered Defendant Westchester to file a reply. (Doc. No. 14.) On August 13, 2025, Plaintiff filed a response and requested the court “remand the

matter for lack of subject matter jurisdiction.” (Doc. No. 28.) On August 20, 2025, Defendant Westchester filed a reply. (Doc. No. 32.) On August 28, 2025, the resident Defendants and Defendant Stephens filed their motion to dismiss, seeking dismissal of all claims against them. (Doc. No. 33.) Plaintiff filed a timely response, and the resident Defendants and Defendant Stephens filed a timely

reply. (Docs. No. 35, 36.) These matters are ripe for disposition. III. STANDARD OF REVIEW A. Fraudulent Joinder

Federal courts are courts of limited jurisdiction. See, e.g., Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994); Burns v. Windsor Ins. Co., 31 F.3d 1092, 1095 (11th Cir. 1994); Wymbs v. Republican State Exec. Comm.

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