In December 2020, Vanguard made some changes to its Target Date Funds. The changes benefits large, institutional investors by lowering costs. But it hurt small, retail investors who held target funds in taxable accounts. The result was that in 2021, these small investors got hit with massive capital gains.

In response, a class action lawsuit was filed against Vanguard and related parties. The defendants moved to dismiss the case. They argued that the plaintiffs didn't have standing to sue, meaning they hadn't been harmed. Vanguard even went so far as to claim that the capital gains hit benefited the small investors because, theoretically, they may have to pay even more at some point in the future.

Vanguard also moved to dismiss the case, arguing that it hadn't breached any duties of care or loyalty to the investors.

The judge in the case has ruled largely in favor of the plaintiffs. The case will be forward to the next phase--discovery.

Here's a copy of the judge's ruling: https://www.bloomberglaw.com/public/d...

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RBS 136: Vanguard Class Action Lawsuit Over Target Date Funds to Move Forward

The Rob Berger Show