On September 26, 2014, the US Court of Appeals for the Fifth Circuit held in Cedar Lodge Plantation, LLC et al. v. CSHV Fairway View I, LLC et al. that the applicability of the local controversy exception to federal jurisdiction under CAFA must be determined at the time of removal, rather than at the time of a later-filed amended complaint (No. 14-30735, (5th Cir. Sept. 26, 2014)).

The plaintiffs initially brought a proposed class action suit in Louisiana state court against a group of apartment-owning and managing entities alleging harm caused by underground sewage leaks. The initial defendants removed the case to federal court under CAFA. After removal, the plaintiffs amended their complaint to add the sewage treatment specialists hired by the initial defendants as a defendant. The new defendant, Sewage Treatment Specialists, LLC (STS), was a Louisiana citizen. Arguing that STS was a "significant local defendant," the plaintiffs moved to remand the case to state court based on the local controversy exception to CAFA jurisdiction. The district court remanded the case, and the Fifth Circuit granted the initial defendants permission to appeal the remand order.

Under CAFA, federal courts have jurisdiction over class actions alleged under federal or state law with minimal diversity of citizenship and at least $5,000,000 in controversy. However, an exception to federal jurisdiction under CAFA exists in the case of a local controversy. A district court must remand a case if, inter alia, the alleged conduct of at least one local defendant "from whom significant relief is sought" "forms a significant basis for the claims asserted by the proposed plaintiff class" (28 U.S.C. § 1332(d)(4)(A)(i)). The Fifth Circuit held in State of Louisiana v. American National Property & Casualty Co. that CAFA defines a class action as "any civil action filed under [Federal Rule of Civil Procedure] Rule 23 or a state class action statute" (746 F.3d 633, 639 (2014)). Because the statute focuses on the time of filing, post-removal actions cannot defeat CAFA jurisdiction. Similarly, here, the court had to focus on the action as it was initially filed, not on the amended complaint. The addition of a local defendant could not defeat federal jurisdiction after the case was removed. In support of this holding, the Fifth Circuit cited the Senate Judiciary Committee Report relating to CAFA, which demonstrated a congressional intent that a complaint not be ousted from federal court after it is properly removed. The court further explained that the local controversy exception is a narrow exception that should not be used as a jurisdictional loophole.

Counsel in the Fifth Circuit should be aware that the post-removal amendment of a complaint to add a local defendant will not create a basis for remand under the local controversy exception to federal jurisdiction under CAFA. Jurisdiction is determined at the time of removal.