Erie Indemnity Company v. Troy Stephenson

PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
____________
No. 24-1443
____________
ERIE INDEMNITY COMPANY
v.
TROY STEPHENSON; CHRISTINA STEPHENSON, and
STEVEN BARNETT, in both their individual capacities and
in any representative capacities they may have relating to
ERIE INSURANCE EXCHANGE,
Appellants
____________
On Appeal from the United States District Court
for the Western District of Pennsylvania
(D.C. No. 1:22-cv-00093)
Magistrate Judge: Honorable Cynthia R. Eddy
____________
Argued: October 29, 2024
Before: HARDIMAN, PHIPPS, and FREEMAN,
Circuit Judges
(Filed: October 14, 2025)

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Kevin J. Abramowicz
Kayla M. Conahan
Stephanie Moore
Helen C. Steiger
Kevin W. Tucker
EAST END TRIAL GROUP
6901 Lynn Way
Suite 503
Pittsburgh, PA 15208
Edwin J. Kilpela, Jr.
WADE KILPELA SLADE
6425 Living Place
Suite 200
Pittsburgh, PA 15206
Nicolas Sansone [ARGUED]
PUBLIC CITIZEN LITIGATION GROUP
1600 20th Street NW
Washington, DC 20009
Counsel for Appellants
Neal R. Devlin
KNOX MCLAUGHLIN GORNALL & SENNETT
120 W Tenth Street
Erie, PA 16501

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Steven B. Feirson
Brian A. Kulp
Michael H. McGinley [ARGUED]
Clare P. Pozos
DECHERT
2929 Arch Street
18th Floor, Cira Centre
Philadelphia, PA 19104
Counsel for Appellee
_______________________
OPINION OF THE COURT
_______________________
PHIPPS, Circuit Judge.
The legal doctrines of res judicata and collateral estoppel
preclude the relitigation of claims and issues, respectively. In
this case, the entity managing a reciprocal insurance exchange
sought to enjoin insurance policyholders from litigating
breach-of-fiduciary-duty claims in state court based on prior
federal-court judgments that it argued had both claim and issue
preclusive effect. The District Court determined that claim
preclusion applied, and then, relying on the All Writs Act and
the relitigation exception to the Anti-Injunction Act, it entered
a preliminary injunction preventing the policyholders from
proceeding with their state-court litigation. In this appeal, the
policyholders challenge that order. Because the prior federal-
court judgments do not have either claim or issue preclusive
effect, we will vacate the preliminary injunction order and
remand this case to the District Court.

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I. FACTUAL BACKGROUND & PROCEDURAL HISTORY
A. Reciprocal Insurance in Pennsylvania
The origin of reciprocal insurance can be traced to a group
of six dry goods merchants in New York City, who, in 1881,
began insuring one another against the risk of fire.1 From that
arrangement, a key feature of reciprocal insurance emerged:
every insured is an insurer, and every insurer is an insured.2 To
operationalize this arrangement in which insurers do not seek
to profit by insuring one another,3 the insureds, referred to as
1 See Dennis F. Reinmuth, The Regulation of Reciprocal
Insurance Exchanges 1–2 (1967).
2 See Robert J. Brennen, Inter-Insurance – Its Legal Aspects
and Business Possibilities, 58 Cent. L.J. 323, 325 (1904) (“In
Lloyds insurance there are underwriters[,] all of whom are
insurers, but not necessarily policy-holders, while in inter-
insurance all policy-holders are insurers and insured.”); see
also Long v. Sakleson, 195 A. 416, 418 (Pa. 1937) (“[T]he
subscribers to an exchange are not merely underwriters, for
they are themselves insured . . . .”); Underwriters’ Exch. v.
Indianapolis St. Ry. Co., 185 N.E. 504, 506–07 (Ind. 1933)
(“But the fact must not be overlooked that reciprocal or
interinsurance contracts are distinguishable from all other
forms of insurance, in that every insured is an interinsurer and
every insurer is insured.”); cf. also 3 Couch on Insurance
§ 39.48 (3d ed. June 2025 update) (identifying the material
differences between reciprocal insurance and other types of
insurance organizations such as Lloyds and mutual insurance).
3 See Michael A. Haskel, The Legal Relationship Among a
Reciprocal Insurer’s Subscribers, Advisory Committee and
Attorney-In-Fact, 6 CUNY L. Rev. 35, 40 (2003) (“The dual
status of subscribers as insurers and insureds eliminates the
layer of profit that would otherwise inure to the benefit of a
separately owned insurer.”); Richard Lima Norgaard,
Reciprocals: A Study of the Evolution of an Insurance
Institution 163 (1962) (Ph.D. dissertation, University of

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‘subscribers,’4 form an ‘exchange’5 – not by mutual agreement
among themselves but by individually assigning an identical,
limited power of attorney to the same third party.6 Through
subscriber’s agreements between the individual subscribers
Minnesota) (explaining that a reciprocal is “designed to spread
the risk of insurable perils at the lowest possible cost”).
4 See Andrew Verstein, Enterprise Without Entities,
116 Mich. L. Rev. 247, 265 (2017) (“Owing to their dual role
as both insured and insurer, the customers are usually called
‘subscribers.’”).
5 See Peace Church Risk Retention Grp. v. Johnson Controls
Fire Prot. LP, 49 F.4th 866, 871 (3d Cir. 2022) (explaining
that the exchange formed by subscribers “is, in general, a
distinct legal entity that can sue or be sued in its own name, but
unlike traditional mutual insurance companies, has no
corporate existence”); Verstein, supra, at 265 (“The term
‘exchange’ is used to refer to the physical or conceptual space
in which subscribers’ risks are swapped.”).
6 See Long, 195 A. at 418 (explaining that each subscriber “by
power of attorney, authorizes the attorney in fact to represent
him individually in exchanging insurance with others, and to
do every act that he could do in relation to suits or other
proceedings”); Norgaard, supra, at 39 (“Subscribers are
distinctively individual in that they sign individual contracts
with the attorney-in-fact, they are accounted for individually,
their surplus is individually marked for them, and when one
subscriber has a loss, every other subscriber has his
proportionate share of that loss and the accompanying expense
deducted from his deposit.”); Verstein, supra, at 265
(explaining that the powers of the attorney-in-fact “are set by
individual contracts with the subscribers”); Reinmuth, supra,
at 12 (“The powers and duties of the attorney-in-fact are
commonly contained in the subscriber’s agreement . . . .”).

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and their common attorney-in-fact,7 the subscribers authorize
the attorney-in-fact to underwrite policies with the subscribers
having liability for loss claims under those policies.8 With that
authorization from every subscriber, the common attorney-in-
fact then issues policies to subscribers on behalf of the
exchange and performs other functions related to the insurance
business such as collecting premiums and settling claims.9 The
7 See Reinmuth, supra, at 16 (“Procedurally, the management
of a reciprocal, that is, the attorney-in-fact, is appointed by
each policyholder through the medium of the subscriber’s
agreement or power of attorney.”).
8 Typically, the subscribers limit their liability to separate and
several liability – not joint liability – for loss claims under
those policies. See Long, 195 A. at 418 (explaining that
reciprocal insurance was “[o]riginally designed as a means of
enabling members of close-knit groups to insure each other
without joint liability”); 3 Couch on Insurance § 39:56 (3d ed.
June 2025 update) (“The liability of the subscribers is several
. . . .”); cf. Wysong v. Auto. Underwriters, 184 N.E. 783, 786
(Ind. 1933) (“The subscribers have the right to . . . fix the limit
of their liability unless there is some law preventing it.”);
Verstein, supra, at 266 (“By the 1960s, reciprocals ordinarily
limited liability to one additional premium deposit or less.”).
But cf. Commonwealth ex rel. Schnader v. Keystone Indem.
Exch., 11 A.2d 887, 891 (Pa. 1940) (allowing subscribers to be
assessed up to the full amount of one additional annual
premium to cover losses associated with liquidation).
9 See Long, 195 A. at 418 (“Each member who is a subscriber,
by power of attorney, authorizes the attorney in fact to
represent him individually in exchanging insurance with
others, and to do every act that he could do in relation to suits
or other proceedings.”); William Penn Motor Indem. Exch. v.
Haddad, 86 Pa. Super. 307, 308–09 (1925) (explaining under
the Act of June 27, 1913, No. 372, 1913 Pa. Laws 634, “[a]s it
would be obviously impracticable for each member of the large
group of subscribers personally to attend to the details essential

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attorney-in-fact receives compensation for performing those
services by individual consent of each subscriber, provided by
his or her subscriber’s agreement.10 In practice, the
compensation for the attorney-in-fact is a percentage of the
premiums from policies issued by the exchange, not a pledge
of the surplus from the insurance business – any surplus is
shared among the subscribers.11 By way of simplified
example:
[If A, B, and C, are all subscribers, then] A and
B separately and severally undertake to
indemnify C; B and C separately and severally
undertake to indemnify A[;] and A and C
separately and severally undertake to indemnify
B. They proceed by appointing D their attorney
to the performance of what was authorized by the statute, it
provided that the reciprocal or inter-insurance contract with
each other might be executed for the subscriber, and that other
things might be done on his behalf, by an attorney, agent, or
other representative, who was designated attorney”);
Reinmuth, supra, at 12 (“In effect the attorney-in-fact is the
management of the reciprocal.”).
10 See 3 Couch on Insurance § 39:55 (3d ed. June 2025 update)
(“The subscribers contribute premiums or membership fees
that are deposited by the attorney-in-fact for the association to
meet expenses and obligations including the compensation of
the attorney-in-fact.”); see also Reinmuth, supra, at 12
(“Perhaps the most important aspects regarding the attorney-
in-fact involve its structure and compensation.”).
11 See 43 Am. Jur. 2d Insurance § 74 (May 2025 update)
(“Generally speaking, the subscribers to a reciprocal or
interinsurance association pay a premium or membership fee
to the exchange, and from the premiums, a fixed percentage is
deducted as the fee of the attorney-in-fact.”). But cf. Norgaard,
supra, at 30 (“In the reciprocal, the surplus is owned by those
who have contributed it . . . .”).

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in fact for that particular purpose and business,
and he takes the place of an insurance company
in every particular. The power of attorney . . .
limits D’s rights and powers, and prescribes his
duties and provides for his compensation.
Robert J. Brennen, Inter-Insurance – Its Legal Aspects and
Business Possibilities, 58 Cent. L.J. 323, 323 (1904).12
In 1913, based on model legislation proposed by the
National Convention of Insurance Commissioners,
Pennsylvania became the first state to provide an express
statutory authorization for reciprocal insurance for all forms of
insurance except life insurance.13 Pennsylvania’s subsequent
12 See generally Haskel, supra, at 35–37 (providing a
description of reciprocal insurance); Norgaard, supra, at 25–
39, 190 (identifying the five attributes of reciprocal insurance
as individual subscribers, the exchange, the attorney-in-fact,
the division of surplus, and separate-and-several liability).
13 Compare Act of June 27, 1913, No. 372, 1913 Pa. Laws 634,
with Reinmuth, supra, at App. A. See also Reinmuth, supra,
at 50–52 (describing the circumstances leading up to the
promulgation of the model law); Verstein, supra, at 267 &
n.108 (explaining that the first statute that “specifically
addressed reciprocals” was enacted in 1913 in Pennsylvania);
Long, 195 A. at 418–19 (recounting that Pennsylvania first
provided for the operation of reciprocal insurance by
legislation in 1913); cf. Haddad, 86 Pa. Super. at 308–09
(explaining that the 1913 Act “provided that the reciprocal or
inter-insurance contract with each other might be executed for
the subscriber, and that other things might be done on his
behalf, by an attorney, agent, or other representative, who was
designated attorney”); In re Minnesota Ins. Underwriters,
36 F.2d 371, 372 (D. Minn. 1929) (“It is a well-known fact that
reciprocal or interinsurance exchanges existed in this country
prior to enactment of laws authorizing them.”).

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Insurance Company Law of 192114 repealed that legislation,15
but it substantially reenacted the authorization for reciprocal
insurance.16
B. The Founding, Structure, and Operation of
Erie Insurance Group
In 1925, H.O. Hirt founded the Erie Insurance Group, a
Pennsylvania insurance holding company, to provide
reciprocal insurance. Erie Insurance Group consists of an
unincorporated association of subscribers, Erie Insurance
Exchange, and their attorney-in-fact, Erie Indemnity
Company, which is a publicly traded Pennsylvania corporation
with a principal place of business in Erie, Pennsylvania. Each
subscriber in the Exchange has individually appointed
Indemnity as his or her attorney-in-fact through a substantively
identical subscriber’s agreement. In addition to conferring
specific powers to Indemnity related to managing the business
14 Insurance Company Law of 1921, Pub. L. No. 682, art. X,
§ 1001 (1921) (currently codified at 40 Pa. Stat. § 961).
15 See Long, 195 A. at 419.
16 In later providing statutory authorizations for reciprocal
insurance, some other states have required a subscribers’
committee to represent the exchange, and potentially to have
the authority to regulate the compensation of the attorney-in-
fact. See, e.g., N.Y. Ins. Law §§ 6101–06 (requiring a
subscribers’ committee elected annually by subscribers with
the power to manage the reciprocal insurer); Cal. Ins. Code
§ 1308 (requiring a subscribers’ committee but not conferring
power to set the compensation for the attorney-in-fact); cf.
Reinmuth, supra, at 16 (“In many instances the subscribers’
committee can be described merely as ‘window dressing.’ Few
states require[d] by statute a subscribers’ committee and, of
those that d[id], most d[id] not stipulate that it be elected by the
subscribers.”). Pennsylvania does not statutorily require a
subscribers’ committee for reciprocal insurance.

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and affairs of the Exchange, the Subscriber’s Agreement
allows Indemnity to “retain up to 25% of all premiums” as
compensation, referred to as the ‘management fee.’
Subscriber’s Agreement ¶ 3 (JA183).
Although Indemnity may set its own compensation, subject
to the 25%-of-premiums cap for the management fee, the
amount that it set for itself was not historically a point of
conflict. During Hirt’s tenure as Chief Executive Officer and
President of Indemnity until 1976 and as one of its Directors
until 1980, there appears to have been no litigation over the
amount of the management fee. Likewise, in the years
immediately following Hirt’s departure and his later passing in
1982, which led to the transfer of voting control of Indemnity
to his descendants, it does not appear that any subscriber sued
Indemnity over the percentage of the management fee that
Indemnity charged.
Beginning in 1991, Indemnity’s Board of Directors voted
for the first time to retain the maximum 25% of premiums for
its compensation. See Erie Indemnity Co., Annual Report 18
(Form 10-K) (Mar. 26, 1998); cf. Vanderklok v. United States,
868 F.3d 189, 205 n.16 (3d Cir. 2017) (explaining that a court
may take judicial notice of “information [that] is publicly
available on government websites”). Over the course of the
next two decades, the Board voted at its annual December
meeting to retain no less than 23.5% of the premiums, and
since 2006, the Board has voted annually to retain 25% of the
premiums as compensation for Indemnity’s services.
Around the same time, there was a change in practice with
respect to other subscribers’ fees. One of those fees related to
installment plans. See Beltz v. Erie Indem. Co., 733 F. App’x
595, 597 (3d Cir. 2018). For a fee, subscribers could pay their
premiums in installments, and before 1997, those fees were
treated as ordinary revenue of the Exchange for the benefit of
subscribers. Id. But in 1997, Indemnity started retaining a

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portion of those fees. Id. And, within two years, Indemnity
began keeping all installment-plan fees for itself. Id. at 598.
In 2008, Indemnity started charging subscribers additional
fees for late premium payments, cancellation notices, and
reinstatement costs. See id. As with the installment-plan fees,
Indemnity retained those fees, collectively referred to herein as
‘late fees,’ instead of treating them as revenue for the benefit
of the subscribers. See id.
C. Suits by Subscribers Against Indemnity
Based on Fee Retention
Indemnity’s changes to its fee practices prompted lawsuits
by subscribers. Three of those are relevant here: the Beltz
litigation, the Ritz case, and the Stephenson cases.17
1. The Beltz Litigation
In the Beltz case that commenced in July 2016,18
subscribers sued Indemnity in the United States District Court
17 There have been several other challenges by subscribers to
Indemnity’s retention of fees. See, e.g., Erie Ins. Exch. v. Erie
Indem. Co., No. GD-12-1712 (Pa. Ct. C.P. Fayette); Erie Ins.
Exch. v. Erie Indem. Co., No. MS14-03-003 (Pa. Ins. Comm’r
Apr. 29, 2015); Erie Ins. Exch. ex rel. Sullivan v. Erie Indem.
Co., 2012 WL 4762203 (W.D. Pa. Oct. 5, 2012), aff’d sub
nom. Erie Ins. Exch. v. Erie Indem. Co., 722 F.3d 154 (3d Cir.
2013); Erie Ins. Exch. by Beltz v. Stover, 2014 WL 546707
(W.D. Pa. Feb. 10, 2014), appeal dismissed sub nom., Erie Ins.
Exch. ex rel. Beltz v. Stover, 619 F. App’x 118 (3d Cir. 2015);
Erie Ins. Exch. ex rel. Sullivan v. Pa. Ins. Dep’t, 133 A.3d 102
(Pa. Commw. Ct. 2016).
18 The Beltz plaintiffs previously sued Indemnity in 2012 in
Pennsylvania state court for breach of contract and breach of
fiduciary duty. Beltz, 279 F. Supp. 3d at 577 (citing Erie Ins.
Exch., No. GD-12-1712 (Pa. Ct. C.P. Fayette)). Indemnity
removed the action to district court, citing the diversity

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for the Western District of Pennsylvania for retaining
installment-plan fees from 1997 to 2016 and late fees from
2008 to 2016. See Beltz v. Erie Indem. Co., 279 F. Supp. 3d
569 (W.D. Pa. 2017), aff’d, 733 F. App’x 595 (3d Cir. 2018).
Based on those allegations, the subscribers brought five claims
under Pennsylvania law: two for breach of fiduciary duty and
one count each for breach of contract, unjust enrichment, and
conversion. To invoke the limited subject-matter jurisdiction
of the district court, the subscribers sued primarily as putative
class members and relied on the diversity provisions of the
Class Action Fairness Act, commonly abbreviated as ‘CAFA.’
See 28 U.S.C. § 1332(d). But they also brought suit as
individuals and derivatively on behalf of the Exchange, and to
proceed with their claims in those capacities, they relied on
supplemental jurisdiction. See id. § 1367(a).
Indemnity successfully moved to dismiss all of those
claims. Beltz, 279 F. Supp. 3d at 585. In particular, the district
court dismissed the breach-of-fiduciary-duty claims as
untimely under the applicable two-year statute of limitations.
Id. at 581–83 (citing 42 Pa. Cons. Stat. § 5524(7)). The district
court reasoned that although Indemnity had been continuously
retaining the installment plan fees since 1997 and the late fees
since 2008, the claims for breaches of fiduciary duty related to
Indemnity’s decisions in 1997 and 2008 to retain those fees,
provisions of CAFA, see 28 U.S.C. § 1332(d), but, on the Beltz
plaintiffs’ motion, the district court determined that it lacked
subject-matter jurisdiction and remanded the case to state
court. Sullivan, 2012 WL 4762203, at *1, *4. This Court
affirmed that ruling on the basis that plaintiffs had not pleaded
a class action. Sullivan, 722 F.3d at 163. In state court,
Indemnity lodged preliminary objections, one of which sought
to refer the matter to the Pennsylvania Insurance Department
based on primary jurisdiction and that objection was sustained.
Beltz, 279 F. Supp. 3d at 577. The Department ruled in favor
of Indemnity, but on appeal the Commonwealth Court vacated
that ruling. Sullivan, 133 A.3d at 107, 112–13.

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and thus claims filed in 2016 to challenge those decisions were
untimely and not subject to a continuing-violation exception or
to equitable tolling. Id.
On appeal, the subscribers unsuccessfully sought to
resuscitate those claims. Beltz, 733 F. App’x at 598. In their
appellate briefing, the subscribers advanced a failure-to-act
theory based on inadequate oversight in an attempt to
overcome the statute of limitations. But that argument was not
presented in district court, and this Court relied on forfeiture
principles to affirm the judgment of the district court. Id. at
599.
2. The Ritz Litigation
In December 2017, after the district court’s dismissal of the
Beltz suit but before resolution of the Beltz appeal, another
subscriber, who was not a named party to the Beltz case,
initiated the Ritz suit in the Western District of Pennsylvania
against Indemnity. Ritz v. Erie Indem. Co., 2019 WL 438086,
at *1 (W.D. Pa. Feb. 4, 2019). That plaintiff sued Indemnity
for two counts of breach of fiduciary duty, one count of breach
of contract, and one count of unjust enrichment. That
subscriber premised her claims not on the installment plan fees
or the late fees, as the Beltz plaintiffs had done, but instead on
the 25% management fee for the upcoming year that Indemnity
set every December between 2006 to 2016. The plaintiff in
Ritz followed the same approach to jurisdiction as the Beltz
plaintiffs: she sued as a putative class member, relying on
CAFA diversity jurisdiction, see 28 U.S.C. § 1332(d), and she
also sued individually and derivatively on the Exchange’s
behalf, relying on supplemental jurisdiction, see id. § 1367(a).
After the parties in Ritz consented to the jurisdiction of a
magistrate judge, see id. § 636(c)(1), Indemnity moved to
dismiss the claims on claim-preclusion grounds. Ritz,
2019 WL 438086, at *1. The magistrate judge granted that
motion and dismissed the case with prejudice. Id. at *6. The
memorandum opinion in support of that ruling identified the

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three elements of federal claim preclusion – a final judgment;
a subsequent suit based on the same cause of action; and the
involvement of the same parties or their privies in both suits –
and determined that they were satisfied. Id. at *3–6. See
generally In re Mullarkey, 536 F.3d 215, 225 (3d Cir. 2008).
In particular, with respect to the requirement for the same cause
of action, the magistrate judge concluded that the Ritz plaintiff
was pursuing the same cause of action as the Beltz plaintiffs
because her claims for charging the 25% management fee were
part of the same transaction or occurrence as the Beltz action
and could have been brought in that suit. Ritz, 2019 WL
438086, at *4–5; id. at *4 (“Both cases allege that this scheme
began at the same time, that it breaches the same provision of
an identical Subscriber’s Agreement and allegedly caused
damages to the same putative class.”). And finally, the
memorandum opinion concluded that although the Ritz
plaintiff was not a party to the Beltz suit, she was in privity with
the Beltz plaintiffs because they had entered into identical
subscriber’s agreements with Indemnity as “cosigners.” Id. at
*6.
Despite that adverse ruling and the privity holding based on
the finding that subscribers were co-signers, the Ritz plaintiff
did not appeal.
3. The Stephenson Cases – Including This
Suit
In August 2021, a separate group of subscribers sued
Indemnity in the Court of Common Pleas, Allegheny County.
As the plaintiff had done in Ritz, these subscribers, the
Stephenson plaintiffs, claimed that Indemnity breached its
fiduciary duty by setting the management fee at the 25%
maximum. But the Stephenson plaintiffs’ claims differed from
the claim in Ritz in two respects: they were limited to the
management fees set in 2019 and 2020, and they included a
failure-to-act theory, specifically the contention that Indemnity
should have, but failed to, establish procedures to resolve
conflicts of interest between subscribers and Indemnity’s

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controlling shareholders in 2019 and 2020. Also, as the Beltz
and Ritz plaintiffs had done, the Stephenson plaintiffs sued as
putative class members and individually, but unlike those prior
cases, the Stephenson plaintiffs did not sue derivatively on
behalf of the Exchange.
With the Stephenson plaintiffs attempting to bring a class
action in state court, Indemnity invoked CAFA to remove the
case to the United States District Court for the Western District
of Pennsylvania. See 28 U.S.C. § 1453 (establishing removal
jurisdiction over CAFA claims to be coextensive with the
original CAFA diversity jurisdiction provision of 28 U.S.C.
§ 1332(d)). Before Indemnity filed an answer, the Stephenson
plaintiffs voluntarily dismissed that case, referred to as
Stephenson I, without prejudice. See Fed. R. Civ.
P. 41(a)(1)(A)(i).
One month later, in December 2021, three of the
Stephenson I plaintiffs, who were all citizens of Pennsylvania,
sued Indemnity again in the Court of Common Pleas,
Allegheny County. Substantively, their claim was the same as
the one in Stephenson I: they alleged that Indemnity breached
its fiduciary duty by setting a 25% management fee in 2019
and 2020 and that Indemnity failed during that same period to
establish procedures to resolve conflicts of interest between the
subscribers and Indemnity’s controlling shareholders. But
unlike in Stephenson I, the plaintiffs in the new suit,
Stephenson II, did not attempt to proceed as a putative class
action but rather sued as trustees ad litem for the Exchange, see
Pa. R. Civ. P. 2152, or, alternatively, derivatively on behalf of
the Exchange, see id. 2177.
Although the Stephenson II plaintiffs were not suing as
putative class members, Indemnity – as it had done in
Stephenson I – invoked CAFA to remove the case to the United
States District Court for the Western District of Pennsylvania.
Erie Ins. Exch. ex rel. Stephenson v. Erie Indem. Co., 2022 WL
4534746, at *1 (W.D. Pa. Sep. 28, 2022), aff’d, 68 F.4th 815

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(3d Cir. 2023). After the parties consented to the jurisdiction
of a magistrate judge, the Stephenson II plaintiffs moved to
remand the case to state court on the ground that the case was
not a class action subject to CAFA. Id. at *2. In that motion,
the Stephenson II plaintiffs indicated that they were prepared
to contest the preclusive effect of the previous judgments in
Indemnity’s favor.
With that indication from the Stephenson II plaintiffs,
Indemnity initiated this suit, Stephenson III, against the
Stephenson II plaintiffs to enjoin them from proceeding with
the Stephenson II case in state court. Although Stephenson II
had been removed to federal court and the briefing on that
motion to remand was pending, Indemnity alleged that
injunctive relief was needed to effectuate the judgments in
Beltz and Ritz because the claims in Stephenson II were barred
by claim preclusion and fatally undermined by issue
preclusion. Rather than wait for resolution of the Stephenson II
plaintiffs’ motion to remand – and address those affirmative
defenses in the state-court proceedings if the motion were
granted or in federal court if it were denied – Indemnity
invoked the All Writs Act, see 28 U.S.C. § 1651, to effectuate
the preclusive effects of the prior federal-court judgments in
Beltz and Ritz in the state court. Relying on the same federal
statute, Indemnity also sought to permanently enjoin the
Stephenson II plaintiffs or their privies from challenging
“Indemnity’s compensation practices pursuant to the
Subscriber’s Agreement that were the subject of the prior
judgments.” Stephenson III Compl. ¶ 109 (JA65). All parties
to Stephenson III consented to the jurisdiction of the same
magistrate judge who was presiding over Stephenson II. See
28 U.S.C. § 636(c)(1). Because Indemnity’s suit sought to
have the federal court that issued the judgments in Beltz and
Ritz determine their preclusive effect, it was within the District
Court’s ancillary enforcement jurisdiction. See Johnson v.
Mazie, 144 F.4th 146, 151 (3d Cir. 2025) (“Ancillary
enforcement jurisdiction is ‘a creature of necessity’ that gives
‘federal courts the power to enforce their judgments and’

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ensure ‘that they are not dependent on state courts to enforce
their decrees.’” (quoting Nat’l City Mortg. Co. v. Stephen,
647 F.3d 78, 85 (3d Cir. 2011), as amended (Sept. 29, 2011)));
Butt v. United Bhd. of Carpenters & Joiners of Am., 999 F.3d
882, 887 (3d Cir. 2021) (“[A]ncillary enforcement jurisdiction
exists ‘to enable a court to function successfully, that is, to
manage its proceedings, vindicate its authority, and effectuate
its decrees.’” (quoting Kokkonen v. Guardian Life Ins. Co. of
Am., 511 U.S. 375, 380 (1994))); United States v. Apple
MacPro Comput., 851 F.3d 238, 244 (3d Cir. 2017) (“[A] court
has subject matter jurisdiction over an application for an All
Writs Act order only when it has subject matter jurisdiction
over the underlying order that the All Writs Act order is
intended to effectuate.”).
Before any adjudication of Indemnity’s requests for
injunctive relief in Stephenson III could take place, the
magistrate judge granted the plaintiffs’ motion to remand in
Stephenson II. Stephenson, 2022 WL 4534746, at *1.
Indemnity filed a timely notice of appeal of that decision, and
that prompted a series of stays, including stays of the remand
order in Stephenson II and the proceedings in Stephenson III.
Stephenson, 68 F.4th at 818.
On May 22, 2023, this Court affirmed the remand order in
Stephenson II. Id. at 817. Indemnity challenged that decision
through a petition to the Supreme Court for a writ of certiorari.
See Petition for Writ of Certiorari, Erie Indem. Co. v. Erie Ins.
Exch. ex rel. Stephenson, 144 S. Ct. 1007 (2024) (No. 23-434).
The magistrate judge then extended the stay in Stephenson II
pending resolution of Indemnity’s petition for certiorari. And
in Stephenson III, the District Court set a briefing schedule for
Indemnity to move for a preliminary injunction to enjoin the
Stephenson II plaintiffs from proceeding with their case in state
court.
In seeking a preliminary injunction, Indemnity argued that
the judgments in Beltz and Ritz had claim preclusive effect, and

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if nothing else, the judgment in Ritz on the claim preclusive
effect of Beltz had issue preclusive effect. The District Court
agreed with Indemnity on the claim preclusive effect of Beltz
and Ritz. Erie Indem. Co. v. Stephenson, 2024 WL 844370, at
*5–9 (W.D. Pa. Feb. 28, 2024). Without the need to address
the issue-preclusion argument, the District Court then
determined that the other relevant considerations – irreparable
harm, the balance of harms, and the public interest – favored a
preliminary injunction. Id. at *5, *9–10. The District Court
entered an order preliminarily enjoining the Stephenson II
litigation. Id. at *1. Through a timely notice of appeal of the
order granting the preliminary injunction, the subscribers
invoked this Court’s appellate jurisdiction. See 28 U.S.C.
§ 1292(a)(1); Fed. R. App. P. 4(a)(1)(A).
II. DISCUSSION
A. Legal Standards for Preliminary Injunctions
A preliminary injunction grants injunctive relief during the
pendency of a lawsuit, and it is “never awarded as of right.”
Winter v. Nat. Res. Def. Council, Inc., 555 U.S. 7, 24 (2008).
Rather, the appropriateness of such relief depends on four
considerations:
1. A reasonable probability of success on the
merits of the claim for which injunctive relief
is sought;
2. An irreparable harm in the absence of
preliminary injunctive relief;
3. A balancing of the equities associated with
the possibilities of harms to other interested
persons resulting from the grant or denial of
injunctive relief; and
4. An assessment of the public interest.

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19
Transcon. Gas Pipe Line Co. v. Pa. Env’t Hearing Bd.,
108 F.4th 144, 150 (3d Cir. 2024).
A party seeking a preliminary injunction bears the burden
of proof, see Winter, 555 U.S. at 20, and a failure by that party
to establish either of the first two considerations – probability
of success on the merits and irreparable harm – forecloses such
relief, see Transcon., 108 F.4th at 150 (explaining that the first
two factors “operate both as essential elements and as factors
that guide the exercise of equitable discretion”); Reilly v. City
of Harrisburg, 858 F.3d 173, 179 (3d Cir. 2017) (describing
the first two factors as “gateway factors” that must be met
before the remaining factors may be weighed). If the moving
party makes sufficient showings for those first two
considerations, then a court evaluates the relative weights of
all four considerations to determine whether preliminary
injunctive relief is appropriate. See Amalgamated Transit
Union Loc. 85 v. Port Auth., 39 F.4th 95, 103 (3d Cir. 2022).
Because a motion for a preliminary injunction seeks
discretionary relief, the grant or denial of such a motion is
reviewed for an abuse of discretion. See Reilly, 858 F.3d at
176. However, when one of the four preliminary-injunction
considerations implicates a question of law, that question is
reviewed de novo. See Amalgamated Transit, 39 F.4th at 102.
And when one of the four considerations involves a factual
finding, that finding is reviewed for clear error. See id.
In addition to these general principles, the remedial powers
of federal courts with respect to enjoining state-court
proceedings are limited by federal statutes, including the Anti-
Injunction Act. See 28 U.S.C. § 2283. That statute generally
prohibits a federal court from granting “an injunction to stay
proceedings in a State court,” but it also contains a relitigation
exception that allows a federal court to issue such an injunction
“to protect or effectuate its judgments.” Id. See generally
Martin H. Redish, The Anti-Injunction Statute Reconsidered,
44 U. Chi. L. Rev. 717, 718 (1977) (explaining that after

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20
Toucey v. New York Life Insurance Co., 314 U.S. 118 (1941),
in which the Supreme Court held that the Anti-Injunction Act
did not contain a relitigation exception, Congress amended the
statute to include such an exception).
B. Likelihood of Success on the Merits
In briefing the likelihood of success on the merits of claim
preclusion and issue preclusion, the parties relied on the federal
standards for both doctrines. Because the Beltz and Ritz
judgments were premised on the exercise of diversity and
supplemental jurisdiction, it was more appropriate to apply
Pennsylvania preclusion law.19 But with neither party
advancing such a contention, they have both forfeited any
argument that Pennsylvania standards should apply. See
Schaffner v. Monsanto Corp., 113 F.4th 364, 377 n.6 (3d Cir.
2024) (declining to apply state-preclusion law where all parties
briefed federal law). Consequently, Indemnity’s claim-
preclusion and issue-preclusion arguments, which present pure
questions of law, are subject to de novo review based on federal
preclusion standards. See Chavez v. Dole Food Co., 836 F.3d
19 Federal common law “governs the claim-preclusive effect of
a dismissal by a federal court sitting in diversity,” meaning that
the Supreme Court is ultimately responsible for “prescrib[ing]”
the proper scope federal judgments. Semtek Int’l Inc. v.
Lockheed Martin Corp., 531 U.S. 497, 507–08 (2001). And in
exercising that prescriptive discretion, the Supreme Court has
instructed that the federal court tasked with enforcing a
judgment from another federal court sitting in diversity must
apply “the [preclusion] law that would be applied by state
courts in the State in which the federal diversity court sits,”
unless “the state law is incompatible with federal interests.” Id.
at 508–09; see also Chavez v. Dole Food Co., 836 F.3d 205,
225 (3d Cir. 2016) (en banc) (recognizing that “Semtek thus
directs [this Court] to evaluate the res judicata effects of the
[rendering] District Court’s timeliness dismissals by looking to
[that forum state’s] law of claim preclusion”).

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21
205, 225 (3d Cir. 2016) (en banc) (“[R]es judicata . . . is, at
bottom, a pure question of law.”); Elkadrawy v. Vanguard
Grp., Inc., 584 F.3d 169, 172 (3d Cir. 2009) (“Our review of
an application of res judicata is plenary.”); cf. also Jean
Alexander Cosms., Inc. v. L’Oreal USA, Inc., 458 F.3d 244,
248 (3d Cir. 2006) (clarifying that the application of collateral
estoppel is reviewed de novo unless it is “offensive” and “non-
mutual”).
1. Claim Preclusion
As articulated by this Court, the federal standard for claim
preclusion consists of three elements:
1. A final judgment on the merits in a prior suit;
2. A subsequent suit based on the same cause of
action; and
3. Involvement of the same parties or their
privies in both suits.
Ndungu v. Att’y Gen., 126 F.4th 150, 165 (3d Cir. 2025).
The parties here dispute only the second element, the
requirement that a subsequent case be based on the same cause
of action. That element encompasses not only claims that were
actually resolved in the prior suit but also claims that could
have been brought in the prior suit. See Cromwell v. County of
Sac, 94 U.S. 351, 358 (1876) (“[Res judicata] applies . . . not
only to the points upon which the court was required by the
parties to form an opinion, and pronounce a judgment, but to
every point which properly belonged to the subject of
litigation, and which the parties, exercising reasonable
diligence, might have brought forward at the time.” (quoting
Henderson v. Henderson, (1843) 67 Eng. Rep. 313, 319;
3 Hare 100, 115 (Ch.))). Even so, the Supreme Court has
explained that “[c]laim preclusion generally ‘does not bar
claims that are predicated on events that postdate the filing of

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22
the initial complaint.’” Lucky Brand Dungarees, Inc. v. Marcel
Fashions Grp., Inc., 590 U.S. 405, 414 (2020) (quoting Whole
Woman’s Health v. Hellerstedt, 579 U.S. 582, 600 (2016)); see
also Morgan v. Covington Township, 648 F.3d 172, 178
(3d Cir. 2011) (holding that “res judicata does not bar claims
that are predicated on events that postdate the filing of the
initial complaint”). Yet, here Indemnity argues for claim
preclusion on precisely that basis. It contends that although the
Beltz and Ritz cases were filed in July 2016 and December
2017 respectively, the judgments in those cases preclude the
Stephenson II plaintiffs’ claims based on Indemnity’s actions
in December 2019 and December 2020 – setting the
management fees at 25% and having conflicted oversight.
Because the Stephenson II plaintiff’s claims are based on
events that occurred after the initial complaints in Beltz and
Ritz, the judgments in those cases do not have claim preclusive
effect over the challenges now presented by the Stephenson II
plaintiffs. Thus, the District Court erred in concluding that
Indemnity had a likelihood of success on claim-preclusion
grounds, and there is no need to separately assess whether the
relitigation exception to the Anti-Injunction Act would permit
Indemnity’s requested injunction.20
2. Issue Preclusion
Indemnity also defends the District Court’s grant of a
preliminary injunction based on collateral estoppel.
Specifically, it advances a preclusion-on-preclusion theory: the
decision in Ritz on the claim preclusive effect of Beltz has issue
preclusive effect for the Stephenson II plaintiffs.
For a prior judgment to have issue preclusive effect, an
issue of fact or law must have been “actually litigated and
20 Cf. generally Smith v. Bayer Corp., 564 U.S. 299, 306–08
(2011) (providing guiding principles regarding the application
of the relitigation exception); Chick Kam Choo v. Exxon Corp.,
486 U.S. 140, 148 (1988) (same).

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resolved in a valid court determination essential to the prior
judgment.” New Hampshire v. Maine, 532 U.S. 742, 748–49
(2001). To meet that requirement, there must be an “identity
of issues” between those decided in the prior case and those for
which preclusion is sought. Raytech Corp. v. White, 54 F.3d
187, 191 (3d Cir. 1995); cf. Smith v. Bayer Corp., 564 U.S.
299, 307 (2011). Here, the two issues for comparison are the
claim preclusive effect of Beltz on the claims brought in Ritz
and the claim preclusive effect of Beltz on the claims brought
by the Stephenson II plaintiffs.
The first issue was decided in Ritz. That decision
determined that the holding in Beltz – that the breach-of-
fiduciary duty claims based on the management fees Indemnity
charged from 1997 to 2016 and the late fees Indemnity charged
from 2008 to 2016 fell outside of the two-year statute of
limitations, Beltz, 279 F. Supp. 3d at 581–83; Beltz,
733 F. App’x at 599 – had claim preclusive effect on the
breach-of-fiduciary duty claims in Ritz, which were based on
the management fees set in December 2006 to 2016 for the next
year. The lynchpin of that holding was that the breach-of-
fiduciary-duty claims in Ritz could have been brought in Beltz.
Ritz, 2019 WL 438086, at *4. Indeed, the Ritz decision made
clear that “Ritz’s complaint does not include any new material
facts that occurred after the filing of the [Beltz] complaint.” Id.
The issue presented here seeks to extend the claim
preclusive effect of Beltz to the Stephenson II plaintiffs’ claims
based on new material facts: Indemnity’s setting of
management fees in 2019 and 2020 as well as its oversight in
those years. The Ritz decision on claim preclusion did not
address that issue, and hence the issues are not identical. See
Raytech, 54 F.3d at 191 (focusing the “precise question or
questions at issue” in the two cases). Without an identity of
issues, Indemnity has not demonstrated a likelihood of success
on issue preclusion, making it unnecessary to address whether

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Indemnity’s requested injunction fits within the relitigation
exception to the Anti-Injunction Act.21
III. CONCLUSION
Because Indemnity did not demonstrate a likelihood of
success on the merits on either claim or issue preclusion, the
District Court abused its discretion in granting Indemnity’s
motion for a preliminary injunction, and it is not necessary to
address the remaining three considerations for preliminary
injunctions. See Transcon., 108 F.4th at 151 (“[I]f there is an
‘insuperable’ barrier to the plaintiff’s ability to succeed on the
merits . . . , then an analysis of the remaining considerations is
unnecessary.” (quoting Munaf v. Geren, 553 U.S. 674, 691
(2008))). We will therefore vacate the order of the District
Court granting such relief.
21 See generally Smith, 564 U.S. at 307-08 (setting forth the
requirements for relying on the relitigation exception to enjoin
a state-court proceeding based on issue preclusion).

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