A federal judge has dismissed a proposed class-action lawsuit challenging Vanguard's $100 fee for transferring brokerage accounts to other investment firms but left the door open for a follow-up complaint.
Sean Errol Quinn filed the lawsuit last year in U.S. District Court for the Eastern District of Pennsylvania in Philadelphia, alleging breach of implied covenant of good faith and fair dealing and unjust enrichment under Vanguard's brokerage agreement, as well as business law and consumer protection violations under New York and Washington state laws, respectively.
Quinn alleged in his original complaint that Vanguard's fee, implemented in 2024 after the firm notified clients of the change, is an "unlawful, fraudulent and unfair assessment."
He contended in an amended version that Vanguard over the years "promised consumers who entered into a brokerage contract with it the promise of rock bottom fees, causing consumers to choose Vanguard over a myriad of other financial investment companies. If consumers no longer wished to use Vanguard, they could always transfer their investment funds to another provider, free of penalty."
Then the company unilaterally imposed the exit fee for accounts under $5 million in assets, his complaint notes.
U.S. District Judge Kai N. Scott, in a memorandum last week, granted Vanguard's motion to dismiss the case but did so without prejudice, giving Quinn a chance to amend the complaint and resubmit it.
The judge found that Quinn, who paid the $100 fee when he closed his Vanguard account, didn't state claims for implied covenant of good faith and fair dealing violations, for deception or for unjust enrichment. The judge's order gives Quinn until March 3 to file a second amended complaint that cures the defects cited in the memorandum.
A Vanguard spokesperson and an attorney for Quinn didn't immediately respond to emails seeking comment Tuesday.
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