Judge Dismisses Complaint Against Vanguard Over Transfer Fees

A federal judge dismissed a complaint challenging Vanguard Marketing Corp.’s $100 fee for customers who close their brokerage accounts and transfer assets to competing investment firms.

U.S. District Judge Kai Scott, presiding in U.S. District Court for the Eastern District of Pennsylvania, ruled that plaintiff Sean Errol Quinn failed to state valid claims against the investment giant, finding that Vanguard acted within its contractual rights when it implemented the transfer fee in July 2024.

Quinn, a Washington state resident who paid the fee in December 2024 when transferring his investments to another firm, argued that the charge violated Vanguard’s marketing promise as a “leader in low-cost investing.” He brought claims on behalf of himself and other affected customers for breach of the implied covenant of good faith and fair dealing; consumer protection violations of the New York General Business Law and Washington Consumer Protection Act; and unjust enrichment.

Court Sides With Contract Language

Scott’s opinion emphasized that Vanguard’s brokerage agreement explicitly reserved the company’s right to “change or waive commissions and fees at its discretion.” The court found this language negated Quinn’s argument that adding the new fee breached an implied promise of good faith.

“Fees cannot be considered ‘unanticipated’ when they were expressly contemplated in the original agreement,” Scott wrote, noting that the incorporated fee schedule made clear that Vanguard could modify charges.

The fee applies to customers who close accounts holding less than $5 million and transfer assets electronically through the Automated Customer Account Transfer Service system used by investment firms.

Vanguard Gave Notice

The court also found that Vanguard provided adequate notice of the change, emailing customers two months before the July 1, 2024, implementation date. Quinn received notification on May 1, 2024, giving him time to close his account before the fee took effect, according to the ruling.

Additionally, Scott dismissed Quinn’s consumer protection claims under New York and Washington state laws, characterizing Vanguard’s marketing statements about “rock-bottom fees” and “low-cost investing” as “inactionable puffery”—exaggerated promotional language that reasonable consumers would not rely upon.

The court ruled Quinn lacked standing to bring claims under New York’s General Business Law, since he is a Washington resident

The dismissal was without prejudice, meaning Quinn could potentially refile an amended complaint addressing the court’s concerns.

KalielGold PLLC and Kopelowitz Ostrow Ferguson Weiselberg Gilbert represented Quinn, and Troutman Pepper Locke LLP represented Vanguard.