A federal judge in Pennsylvania on Monday granted preliminary approval to a $25 million settlement that would end a class action accusing Vanguard of triggering a massive asset sell-off that left investors with hefty tax bills. The ruling comes months after the court rejected a $40 million deal, citing conflicts with a parallel settlement brokered by the U.S. Securities and Exchange Commission.
U.S. District Judge John Murphy said the revised settlement, covering 12 investors who first brought the case, appeared to be negotiated in good faith and was “fair, reasonable and adequate.” A final approval hearing is scheduled for Jan. 6.
From $40M Rejection to $25M Reset
The settlement is a scaled-down version of the earlier $40 million agreement, which Judge Murphy tossed out in May. At the time, the SEC had already secured a $135 million settlement with Vanguard, a deal that overlapped with the investors’ claims.
The SEC resolution—engineered by a coalition of states led by Connecticut, New Jersey, and New York—included a requirement that Vanguard pay $133 million directly to affected investors. That raised questions about whether the federal class action settlement was reasonable, leading Murphy to strike it down.
This new pact sidesteps the problem. Plaintiffs’ lawyers said the $25 million offer recognizes the SEC’s payout while still delivering immediate relief to class members.
