From Kaufman v. Allstate N.J. Ins. Co., 2009 U.S. App. LEXIS 6429 (3d Cir. Mar. 26, 2009):

The Class Action Fairness Act of 2005 (CAFA) confers jurisdiction on federal courts over certain class actions in which any defendant and any class member are citizens of different states. 28 U.S.C. § 1332(d)(2). CAFA further enables any defendant to remove a qualifying class action to federal court…. § 1453(b). Under CAFA's "local controversy" exception, however, a federal court must decline jurisdiction if certain conditions are met, including that a super-majority of the members of the putative class and at least one significant defendant are from the state in which the class action was originally filed. 28 U.S.C. § 1332(d)(4)(A). This appeal addresses, as issues of first impression, the meaning of two provisions within CAFA's local controversy exception.

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CAFA … contains two mandatory exceptions from federal jurisdiction, §§ 1332(d)(4)(A) & (B). These two exceptions require a district court to decline jurisdiction when the controversy is uniquely local and does not reach into multiple states. Subsection (A), the "local controversy" exception, may apply when at least one significant defendant and more than two-thirds of the members of the putative classes are local. Subsection (B), the "home-state" exception, may apply when the primary defendants and at least two-thirds of the members of the putative classes are local. Specifically, 28 U.S.C. § 1332(d)(4) provides:

A district court shall decline to exercise jurisdiction under paragraph (2)—

(A)(i) over a class action in which —

(I) greater than two-thirds of the members of all proposed plaintiff classes in the aggregate are citizens of the State in which the action was originally filed;

(II) at least 1 defendant is a defendant—

(aa) from whom significant relief is sought by members of the plaintiff class;

(bb) whose alleged conduct forms a significant basis for the claims asserted by the proposed plaintiff class; and

(cc) who is a citizen of the State in which the action was originally filed; and

(III) principal injuries resulting from the alleged conduct or any related conduct of each defendant were incurred in the State in which the action was originally filed; and

(ii) during the 3-year period preceding the filing of that class action, no other class action has been filed asserting the same or similar factual allegations against any of the defendants on behalf of the same persons; or

(B) two-thirds or more of the members of all proposed plaintiff classes in the aggregate, and the primary defendants, are citizens of the State in which the action was originally filed.

28 U.S.C. § 1332(d)(4).

In this appeal, we consider two questions: first, whether the significant basis provision, § 1332(d)(4)(A)(i)(II)(bb), requires that every class member must assert a claim against the local defendant; and second, whether the principal injuries provision, § 1332(d)(4)(A)(i)(III), requires that principal injuries resulting from the alleged conduct and any related conduct of each defendant must be incurred in the state in which the action was originally filed. No other court of appeals has yet considered these two questions.

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***For the significant basis provision to apply, a local defendant "whose alleged conduct forms a significant basis for the claims asserted by the proposed plaintiff class" must be named. 28 U.S.C. § 1332(d)(4)(A)(i)(II)(bb). The principal injuries provision requires that "principal injuries resulting from the alleged conduct or any related conduct of each defendant were incurred in the State in which the action was originally filed." 28 U.S.C. § 1332(d)(4)(A)(i)(III). The District Court determined these requirements were satisfied. It rejected Defendants' interpretation of each provision. In its analysis, however, the District Court did not focus only on the Defendants presently in the action. It also considered three New Jersey insurers which were named in the original complaint but subsequently dismissed. The District Court erred in that regard. As explained below, the local controversy exception applies only to the Defendants remaining in an action. It is true that under a long-standing rule, federal diversity jurisdiction is generally determined based on the circumstances prevailing at the time the suit was filed. See Mollan v. Torrance, (9 Wheat.) 537, 539 (1824) (Marshall, C.J.) ("[J]urisdiction of the court depends upon the state of things at the time of the action brought, and that, after vesting, it cannot be ousted by subsequent events."). This time-of-filing rule represents a policy decision "that the sufficiency of jurisdiction should be determined once and for all at the threshold and if found to be present then should continue until final disposition of the action." Wright, A. Miller, & E. Cooper, 13E Federal Practice and Procedure § 3608 (2009) (internal quotation marks and citation omitted). The rule serves to increase certainty and minimize repeated challenges to federal jurisdiction that might undermine efficiency….

But the time-of-filing rule admits exceptions in cases where the parties change, in contrast to cases in which the circumstances attendant to those parties change. See Grupo Dataflux v. Atlas Global Group, L.P., 541 U.S. 567, 575 (2004) (recognizing exceptions to the time-of-filing rule in cases where parties change); see also Kabakjian v. United States, 267 F.3d 208, 212 (3d Cir. 2001) (same). Class actions, of course, often involve more parties than traditional bipolar litigation and thus a greater likelihood that some parties will change. In fact, 28 U.S.C. § 1332(d)(7) accounts for this aspect of class actions by explicitly providing that class member citizenship may be determined even after the time-of-filing….

In a similar vein, we conclude that the local controversy exception requires consideration of the defendants presently in the action. Indeed, a key condition of the local controversy exception is the presence in the action of at least one significant local defendant. Applying the exception when no local defendant remains in the action, as could occur under the time-of-filing rule, would not comport with the exception's focus on discerning local controversies based, in part, on the presence of a significant local defendant.

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We also conclude that the District Court correctly assigned to Plaintiffs the burden of establishing that the local controversy exception applies. Although a question of first impression in this Court, other courts of appeals have uniformly concluded that once CAFA jurisdiction has been established, the burden shifts to the party objecting to federal jurisdiction to show that the local controversy exception should apply. [Citations omitted.]

***[T]his burden-shifting approach is justified by analogy to practice under the removal statute, 28 U.S.C. § 1441(a)…. In 1948, the removal statute was amended to its present form, and now states: "Except as otherwise expressly provided by Act of Congress, any civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant or the defendants . . . ." 28 U.S.C. § 1441(a) (emphasis added). Considering this statute, the Supreme Court stated that "[s]ince 1948, therefore, there has been no question that whenever the subject matter of an action qualifies it for removal, the burden is on a plaintiff to find an express exception." Breuer v. Jim's Concrete of Brevard, Inc., 538 U.S. 691, 698 (2003).

Under Breuer, the rule — that a plaintiff bears the burden of demonstrating an exception to removability — follows from the structure of a statute providing for removability absent an express exception. Hart and Serrano extrapolated from Breuer the rule that the party objecting to CAFA jurisdiction has the burden of establishing an exception, once the conditions exist under which "[t]he district courts shall have original jurisdiction" pursuant to § 1332(d)(2)….[T]he structure of § 1332(d) mirrors that of § 1441(a), with the exceptions of §§ 1332(d)(3) & (d)(4) being "express exceptions." … Hart explained, "[t]he case might be different if Congress had put the home-state and local controversy rules directly into the jurisdictional section of the statute, § 1332(d)(2), but it did not."... Although the analogy to removal is not perfect, Breuer's reasoning persuades us to join our sister circuits in concluding that the party seeking remand has the burden of showing that the local controversy exception applies.