On August 18, 2026, the U.S. Court of Appeals for the District of Columbia Circuit issued its decision in Chamber of Commerce, et al. v. EPA, No. 24-1193, denying industry petitions to overturn EPA’s 2024 designation of perfluorooctanesulfonic acid (PFOS) and perfluorooctanoic acid (PFOA) as hazardous substances under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). PFOS and PFOA are two prevalent per- and polyfluoroalkyl substances (PFAS), synthetic compounds known colloquially as “forever chemicals” because their chemical composition is highly resistant to breaking down in the environment. The rule designating the compounds as hazardous substances has been effective since July 2024, but the D.C. Circuit’s landmark ruling confirms EPA’s broad statutory authority to expand the universe of CERCLA hazardous substances, cements PFAS as a significant potential liability, and promises to increase scrutiny on entities that have used PFAS in their operations, own legacy operations involving PFAS, or engage in transactions involving legacy use and impacts.
CERCLA in Brief
CERCLA, commonly known as the “Superfund” law, imposes liability on parties responsible for the presence of hazardous substances at a contaminated site. Pub. L. No. 96-510, 94 Stat. 2767 (1980) (codified as amended at 42 U.S.C. §§ 9601–9675). There are four categories of potentially responsible parties (PRPs): (1) current owners and operators of a contaminated facility; (2) past owners and operators at the time hazardous substances were disposed of; (3) generators and persons who arranged for the disposal or transport of hazardous substances; and (4) transporters of hazardous substances that selected the disposal site. 42 U.S.C. § 9607(a)(1)–(4). CERCLA liability is strict, joint and several, and retroactive, and defenses to liability are narrow and difficult to establish.
The designation of PFOS and PFOA as “hazardous substances” under the statute has several key implications. The rule further empowered EPA enforcement actions to force cleanups at contaminated sites. It also confirmed that parties—including government or private entities—who perform response actions to clean up PFOS and PFOA can seek cost recovery from PRPs. From an ongoing compliance perspective, the rule also required reporting for releases of PFOA or PFOS that exceed one pound. It created additional environmental due diligence implications on the front end of property transactions. And finally, the D.C. Circuit decision closes the door, absent U.S. Supreme Court review, on skepticism that the PFOS and PFOA designation would be rolled back by the courts.
Although the Petitioners raised several issues, the central question before the court in Chamber of Commerce was whether EPA had statutory authority under CERCLA section 102(a), 42 U.S.C. § 9602(a), to designate PFOS and PFOA as hazardous substances. That statutory section authorizes EPA to promulgate regulations that designate “elements, compounds, mixtures, solutions, and substances which, when released into the environment may present substantial danger to the public health or welfare or the environment” as hazardous substances under CERCLA. EPA used that authority to promulgate just such a rule in 2024. The 2024 rulemaking represented a novel regulatory approach because it was the first time EPA had exercised its standalone Section 102(a) designation authority in the more than four decades since CERCLA’s enactment.
Petitioners, led by the Chamber of Commerce and several industry trade groups, argued that EPA had to demonstrate that substantial danger will occur upon a release to the environment of PFOS or PFOA, not merely that it may occur. The court rejected that argument, holding that “may” carries its ordinary meaning of possibility and contingency, and that Congress deliberately chose probabilistic language suited to a regulatory framework built on evolving scientific evidence. The court also held that the “substantial danger” qualifier provides meaningful limits in that the risk must be “serious and real, not hypothesized,” but that PFOS and PFOA clearly satisfy that standard given the volume of peer-reviewed research linking them to serious health harms.
The bottom line is unambiguous: EPA’s designation of PFOS and PFOA as hazardous substances under CERCLA stands. The court also paved the way for future exercise of EPA’s Section 102(a) authority to add other emerging contaminants (including other PFAS compounds) to the list of CERCLA hazardous substances.
High-Risk Sectors: When to Pay Attention
Under the now-confirmed rule, PFOS and PFOA must be approached with the same gravity and care as other conventional legacy contamination issues. There is no one-size-fits-all approach and a broad cross-section of industries are potentially impacted by the regulatory listing.
Real estate and commercial lending professionals across all sectors should understand and adapt standard protocols for evaluating PFAS because the hazardous substance designation may change the environmental risk profile of commercial and industrial properties and could require updated environmental site assessments.
Parties to real estate and corporate transactions should consult with knowledgeable environmental counsel on how best to evaluate and address PFOS and PFOA in the transactional context. Potential considerations include:
Due diligence: Updating due diligence protocols, including Phase I environmental site assessment practices, to include PFAS-specific evaluations as warranted by the context
Contracting: Addressing PFAS liability through various means including indemnification provisions, environmental representations and warranties, and purchase price adjustment mechanisms
Insurance: Evaluating existing and available insurance coverage to address historical liabilities and protect against potential future claims
Releases of PFOS or PFOA may trigger regulatory obligations with federal, state, and local implications.
Parties should proceed carefully to evaluate whether or how to elevate potential liabilities associated with the broader set of PFAS, but especially PFOS and PFOA. Because PFAS are ubiquitous in the environment from decades of use and intentional or inadvertent disposal, if you go looking for them, you may just find them—and not every context will warrant, for example, intrusive sampling such as in a Phase II environmental site assessment.
While the list of impacted sites and potential contributors of PFAS in the environment is ever-growing, the following sectors and business contexts may carry elevated risk and may therefore warrant heightened attention:
Properties near airports, military bases, and fire training facilities where aqueous film-forming foam (AFFF) has historically been used in firefighting and emergency response training
Companies that have manufactured, used, or stored AFFF, including industrial facilities, petroleum terminals, and chemical plants
Wastewater treatment facilities and landfills that have received PFAS-laden influent or accepted PFAS-containing waste streams (EPA did acknowledge in the rulemaking process that existing liability limitations, including protections for de minimis and de micromis contributors, may temper exposure for passive receivers)
Winter sporting facilities where PFAS compounds may be present through wax, fabric treatments, and onsite AFFF systems
Properties where AFFF has been used for conventional firefighting
Car washes
Land application of biosolids
Building fire suppression systems containing AFFF
The Patchwork of State PFAS Restrictions
The D.C. Circuit’s decision upholding the PFOS and PFOA CERCLA designation does not exist in a vacuum. A growing number of states have enacted their own bans or restrictions on PFAS in consumer products, firefighting foam, and industrial applications. Colorado, for example, has prohibited the sale of products containing intentionally added PFAS across a wide range of categories, including food packaging, carpets, cosmetics, cookware, ski wax, and textile furnishings, with additional product categories phasing in through 2028. Colo. Rev. Stat. §§ 25-15-601 to -606. Maine’s near-total ban on intentionally added PFAS in consumer products takes effect January 1, 2030. Me. Rev. Stat. Ann. tit. 38, § 1614. Minnesota’s “Amara’s Law” extends to all products by January 1, 2032, unless the use is deemed “currently unavoidable.” Minn. Stat. § 116.943. Several other states have adopted or are considering similar restrictions, and most states have banned or restricted PFAS-containing Class B firefighting foam.
However, there is no uniform federal ban on PFAS in products, and many states have no restrictions at all. The result is a patchwork in which PFAS-containing products remain widely available in commerce even as the CERCLA designation imposes potential cleanup liability for the most prevalent of those substances. The gap between permissible product use and environmental liability exposure is narrowing.
Looking Ahead
Following the D.C. Circuit’s decision, there will be an increase in EPA enforcement and private cost-recovery actions related to PFOS and PFOA. Companies across affected sectors should not wait for site-specific enforcement or other legal action to begin evaluating potential exposure. Proactive steps, including environmental audits, contractual protections in transactions, and insurance coverage review may be advisable to help manage evolving PFAS liabilities.
Parties should contact experienced environmental legal advisors and consultants knowledgeable about PFAS to determine the proper path for addressing sites that are suspected of potential contamination. Anyone with questions about how this new ruling affects their operations or pending transactions is welcome to contact the authors.
On June 23, 2026, in In re Arrowhead Colorado Metropolitan District v. Roxborough Park Foundation, 2026 CO 54, the Colorado Supreme Court held that trial courts have discretion to order discovery before immediate possession hearings in eminent domain proceedings.
Eminent domain proceedings generally require resolution of three questions:
whether the condemnor has the right to take the property;
how much just compensation the condemnor must pay for the taking; and
if necessary, how to apportion the just compensation award among those who own interests in the property being condemned.
When a condemnor requests immediate possession, the court must resolve all issues bearing on the right to condemn before granting that request—requiring a full evidentiary hearing early in the case, much like a proceeding on a preliminary injunction.
In In re Arrowhead Colorado Metropolitan District v. Roxborough Park Foundation, Arrowhead Colorado Metropolitan District (“Arrowhead”), a quasi-municipal corporation and political subdivision, filed a petition to condemn easements over private roads owned by the Roxborough Park Foundation (the “Foundation”) in Roxborough Park, Douglas County. Upon filing the Petition, Arrowhead moved to set a hearing on its request for immediate possession under section 38-1-105(6)(a), C.R.S., and the trial court set the hearing as required by statute and Colorado case law.
With an immediate possession hearing set, the Foundation moved for limited, expedited discovery, arguing it was necessary to prepare for issues it planned to raise at the hearing. The trial court denied the motion, concluding that neither Colorado’s eminent domain statutes (sections 38-1-101 to -122, C.R.S.) nor the Colorado Rules of Civil Procedure permitted such discovery. The trial court reasoned that the Rules allow discovery only after entry of a case management order, which itself requires the case to be “at issue” under C.R.C.P. 16(b)(1). Because condemnation proceedings do not require responsive pleadings, the court concluded such cases can never be “at issue,” making discovery categorically unavailable. The Foundation sought relief under C.A.R. 21, and the Colorado Supreme Court granted the petition.
In its decision, the Colorado Supreme Court acknowledged that the condemnation statutes (sections 38-1-101 to -122, C.R.S.) are silent on discovery but held that this silence does not eliminate discovery rights. Citing section 38-1-121(3), C.R.S., which expressly preserves “the discovery rights of parties to eminent domain proceedings,” the Court found that the legislature intended to maintain those rights. Because the statutes are silent on procedure, however, the Court then turned to the Rules of Civil Procedure.
First, the Court noted that Rule 26(d)’s statement that “a party may not seek discovery from any source before [] service of the Case Management Order pursuant to C.R.C.P. 16(b)” is preceded by the qualifier “[e]xcept when authorized by these Rules, by order, or by agreement of the parties.” Under this plain language, the Court held that a trial court may allow discovery before a case management order is served—and that the trial court here could have authorized discovery on that basis alone.
Second, the Court held that trial courts’ discretion under Rule 26(b)(2) to limit discovery for “good cause shown,” based on the factors in C.R.C.P. 26(b)(2)(F), also allows a court to permit discovery before an immediate possession hearing in a condemnation proceeding where good cause exists.
Third, the Court determined that Rule 16(b)(1) establishes two alternative paths for deeming a case “at issue”: (1) when all parties have been served and all required pleadings have been filed, or (2) “at such other time as the court may direct.” The Court reasoned that the second path allows trial courts to order prehearing discovery in condemnation proceedings by deeming the case “at issue” despite the absence of responsive pleadings.
Arrowhead clarifies that although condemnation cases are strict statutory proceedings, trial courts retain flexibility to apply the Colorado Rules of Civil Procedure to discovery requests just as they would in any other civil proceeding. Specifically, upon a showing of good cause, either party may ask the court for leave to conduct discovery that may not otherwise be automatic.
Because courts may grant possession as early as thirty days after service of a condemnation petition, a party who believes there is good cause for expedited discovery ahead of an immediate possession hearing should seek leave from the court to conduct such discovery early in the proceedings.
The Court reversed and remanded for the trial court to exercise its discretion on the discovery motion.
The unanimous opinion was authored by Justice Blanco.
On July 24, 2026, the Advisory Council on Historic Preservation (“ACHP”) voted to advance a draft Notice of Proposed Rulemaking (“NPRM”) that would make sweeping amendments to its regulations implementing Section 106 of the National Historic Preservation Act (“NHPA”). If finalized, they would be the most significant rewrite of the Section 106 process since ACHP’s last major revisions in 2000. Framed as implementing Executive Order 14192’s deregulatory mandate and responding to Section 106 reviews that can stretch nearly seven years, the proposal touches nearly every stage of the process: what counts as a historic property, what effects agencies must weigh, who has a seat at the table, and how fast a project can move.
The draft NPRM has not yet been published in the Federal Register. It must first undergo review by the Office of Information and Regulatory Affairs (“OIRA”) within the White House Office of Management and Budget. OIRA review and Federal Register publication could occur as early as August or September 2026, with the 30-day comment period closing roughly 30 days thereafter. Given the scope of the changes and ACHP’s explicit invitation for data-driven feedback, project proponents would benefit by beginning to prepare comments now so they are ready to submit as soon as the comment window opens.
Background: The Leaked Draft & How We Got Here
The path to the July 24 vote was unusually compressed—and controversial. In January 2026, ACHP Vice Chairman Travis Voyles announced an intent to revisit the Section 106 regulations, emphasizing collaboration with Council members and the broader preservation community. In February 2026, ACHP established a working group and invited member participation. On June 4, 2026, the full Council adopted a resolution directing staff to develop a regulatory timeline within 30 days and providing members 60 days to submit additional comments before any proposed rule was formulated.
That timeline never materialized. Instead, on July 17, 2026, Vice Chairman Voyles circulated a nearly complete draft rewrite of 36 C.F.R. part 800 to Council members and called for an unassembled (email) vote within one week—bypassing the previously outlined deliberative process. Although the draft was stamped “Not Public,” it leaked almost immediately and was widely shared on social media and among preservation and industry stakeholders. Several Council members and organizations—including the National Conference of State Historic Preservation Officers and the National Association of Tribal Historic Preservation Officers—voted no or publicly objected to the truncated process, arguing that Tribal Nations and other stakeholders were denied a meaningful opportunity to review changes of this magnitude. Nonetheless, on July 24 the draft NPRM was approved by a vote of 16 in favor, 5 opposed, and 2 abstentions.
The draft NPRM has now proceeded to OIRA for interagency review, a required step before Federal Register publication. ACHP has not published a confirmed schedule for any step after OIRA review. On an accelerated timeline, project Federal Register publication could occur in August 2026, with the 30-day comment period closing in September 2026, a final rule potentially published by late 2026 or early 2027, and the rule taking effect 30 days after that. Under a more standard timeline, a final, effective rule would more realistically be expected in mid-to-late 2027 or later. Legal challenges after a final rule is published could further extend the period before the rule is settled.
The following summarizes the key substantive changes in the leaked draft. Given the scope of the changes and ACHP’s explicit invitation for data-driven feedback, the leaked NPRM presents a real opportunity for project proponents to shape the final rule—not just react to it. Because the public comment window may be short and open on relatively brief notice, proponents can use the time before publication to prepare. Importantly, however, because the draft NPRM could be revised during OIRA review, the draft described below should not be assumed to reflect the published version if and when it is released.
Narrower Definitions Shrink What Counts as a “Historic Property” or an “Effect”
The draft NPRM would sharply narrow the effects agencies must consider. Most notably, it would revise the criteria for “adverse effect” by removing references to indirect and cumulative effects, instead limiting “adverse effects” to “only those reasonably foreseeable effects that have a reasonably close causal relationship to the undertaking.” These potential modifications track recent changes to federal environmental reviews that stem from the Supreme Court’s decision in Seven County Infrastructure Coalition v. Eagle County, 605 U.S. 168 (2025) and corresponding changes to National Environmental Policy Act (“NEPA”) guidance.
The draft would also delete two current examples of adverse effects: “[c]hange of the character of the property’s use or of physical features within the property’s setting that contribute to its historic significance,” and “[i]ntroduction of visual, atmospheric or audible elements that diminish the integrity of the property’s significant historic features.” In parallel, the draft NPRM would narrow the definition of “area of potential effects” to encompass only direct effects. Those potential deletions would walk back a 2019 ACHP memo that clarified that direct effects could also include visual, auditory, or atmospheric impacts.
The proposed definition of “historic property” would also be narrower. It would require a property, including a Tribal historic property, to include or have included tangible human improvements, or to have been the location of specific human activities, and to be geographically compact. Read literally, that could exclude the broad traditional cultural properties (“TCPs”), sacred landscapes, mountains, and rivers that many Tribes rely on Section 106 to protect.
The Agency Official Gets the Pen, Public & Tribal Participation Become Discretionary, and Applicants Become Consulting Parties
The draft NPRM would strip out most of the regulatory detail on Tribal consultation, leaving the agency’s underlying statutory duty intact but far less defined in the text agencies actually follow day to day. Specifically, Tribal Historic Preservation Officers (“THPOs”) and State Historic Preservation Officers (“SHPOs”) would no longer play a role in identifying historic properties, assessing impacts, and recommending avoidance or mitigation measures as an initial matter. Instead, the agency official would prepare a “Section 106 report” that identifies historic properties, assesses impacts, and makes a determination on next steps. This Section 106 report would then be circulated to SHPOs, THPOs, and all relevant consulting parties—including project proponents—who would have an opportunity to comment on the findings. The agency official must review those comments but has no obligation to respond to or incorporate any before issuing the final memorandum of decision (“MOD”). That MOD would largely replace today’s negotiated “memorandum of agreement” (“MOA”) process, shifting Section 106 from a consensus-seeking exercise to one where the agency official simply decides. Notably, in the draft NPRM, the ACHP proposes to ask the public whether the MOA process should survive as an alternative path—a question that may prompt significant public response.
Similarly, public comment would shift from mandatory to optional, on the theory that Section 106 itself only guarantees comment rights to the ACHP, not the public at large. That said, ACHP would ask potential commenters whether public participation may still be useful where it can surface community concerns early and reduce litigation risk.
And finally, applicants for federal funding or permits subject to Section 106 consultation would now be invited to become consulting parties.
More Off-Ramps, Exemptions & NEPA Alignment
The proposal would also borrow from the NEPA playbook. It would encourage procedures that function like NEPA categorical exclusions, create clearer on- and off-ramps for Section 106 review, and provide an expedited path where no historic properties are present. The draft would also narrow the definition of “undertaking” to exclude state, Tribal, and local permits issued under delegated federal authority—potentially removing a meaningful category of projects from Section 106 review entirely. Program alternatives are narrowed as well, dropping underused options (like “standard treatments”) while streamlining the ones that remain.
Other Notable Changes
Economic impacts and cost considerations would be added to the calculus for avoidance, minimization, and mitigation measures.
A new “address adverse effects” definition would introduce a term of art for avoidance, minimization, and mitigation measures.
ACHP May Ask Pointed Questions – Worth Answering
Beyond the standard request for comment, ACHP would pose specific questions that signal where the rule could still move: whether the MOA process should remain available alongside the new MOD; whether public comment should stay optional or be restored as a requirement; whether more (not less) Tribal consultation detail belongs in the regulatory text; and—notably—for data and statistics quantifying how the current process delays projects. Proponents with real timeline and cost data have a genuine chance to influence the final rule on this last point.
Bottom Line for Energy and Mining Projects
If finalized, the draft NPRM would affect projects on federal public lands, projects receiving federal funding such as Department of Energy grants, and projects requiring federal permits such as Army Corps of Engineers Section 404 permits. The upside for project proponents is real: narrower definitions, expanded exemptions, and a decision-maker no longer bound to negotiate an MOA could mean faster, more predictable reviews.
The trade-off is added litigation risk. Narrower “historic property” and “effect” definitions, along with discretionary Tribal and public consultation, may draw legal challenges from Tribes and environmental groups once a final rule is published or as applied to individual projects. Several organizations have already issued statements and advocacy alerts, signaling that they are monitoring developments closely and may be considering legal challenges. A strong administrative record—and continued voluntary engagement with affected Tribes regardless of what the regulations require—remains the best hedge against that risk. Additionally, the draft NPRM indicates that ACHP may request project-level data from commenters, and while the formal 30-day comment window has not started to run, that window will move fast once it does. Accordingly, project proponents should start developing their comments and supporting timeline and cost data now, so they are ready to submit as soon as the draft NPRM is published.
Colorado employers will face new requirements under a law that affects how they handle government-issued identification documents during the hiring and employment eligibility verification process. HB26-1283, which goes into effect on August 12, 2026, restricts how employers handle workers’ and applicants’ identification documents and creates new notice and acknowledgment requirements that employers must incorporate into their onboarding procedures.
The law will have particular significance for multi-state employers. Processes that employers previously standardized across their workforces will now require a Colorado-specific component.
New Requirements in the Form I-9 Process
The law generally prohibits employers and their agents from requiring workers or applicants to surrender government-issued identification documents or from confiscating or retaining those documents, subject to limited exceptions. Employers may continue to examine identification documents for Form I-9 purposes and make copies when permitted, but they may not retain the documents for more than ten hours.
Employers also must provide individuals with written notice describing the law’s protections and obtain an acknowledgment during the I-9 process. Employers must retain the acknowledgment in their employment records.
The Operational Challenge
Employers often use a combination of electronic Form I-9 providers, HRIS systems, and applicant tracking platforms. These systems may not currently accommodate a Colorado-specific notice and acknowledgment requirement. Employers should evaluate whether their existing technology can incorporate the new requirements or whether they need to implement another process.
Consequences for Noncompliance
The law provides criminal penalties for knowing violations of the prohibition against confiscating identification documents, including Class 2 misdemeanor treatment and enhanced penalties for certain bias-motivated conduct.
The law does not appear to establish a specific criminal penalty for failing to provide the required notice or obtain an acknowledgment. Nevertheless, the absence of a specified penalty does not eliminate potential enforcement or litigation risks if an employer’s document-handling practices later come under scrutiny.
Action Items for Employers
Employers with employees in Colorado should begin preparing for the new requirements by:
Reviewing onboarding procedures. Identify where to incorporate the required notice and acknowledgment into the hiring process.
Evaluating technology. Determine whether existing Form I-9, HRIS, applicant tracking, or onboarding systems can deliver the notice, and capture the acknowledgment, and retain the same.
Establishing recordkeeping procedures. Determine where to store acknowledgments and ensure that employers can readily locate them to demonstrate compliance.
Training responsible personnel. Ensure that HR and onboarding personnel understand the new requirements and the distinction between reviewing identification documents and retaining original documents.
Reviewing vendor capabilities. Employers that rely on third-party Form I-9 or onboarding providers should determine whether those providers will offer functionality that addresses the new Colorado requirements.
Employers should work with their HR teams and technology providers now to establish a practical process that documents compliance with HB26-1283.
For questions about this legal alert, please contact a member of Davis Graham’s Employment Group.
Effective August 12, 2026, Colorado’s new retainage bond law (HB26-1311) will significantly change payment dynamics on private construction projects. The law allows contractors on projects exceeding $150,000 to tender a retainage bond in place of cash retainage and requires property owners to accept any bond meeting the statutory standards. This change carries important implications for lenders, property owners, developers, contractors, and subcontractors – all of whom should review their construction documentation, agreements, and procedures. Below is a breakdown of the new law’s requirements, what it means for your organization, and steps you can take now to prepare.
Background
HB26-1311 represents the latest reform to Colorado’s payment and retainage framework in C.R.S. § 38-46-101, et seq. In 2021, the state enacted legislation capping retainage withholdings at 5% of the contract price. With competitive bidding and slim profit margins, contractors have often relied on loans or lines of credit to cover expenses until final payment is released.
Even with the 5% ceiling, property owners and developers can withhold millions on larger projects through the retainage mechanism. HB26-1311 allows contractors to eliminate retainage withholding at their option by tendering a retainage bond, while still providing owners with security through surety bond coverage.
Changes to the Payment Process
Under the new law, tendering a retainage bond is optional for contractors. However, when a general contractor tenders a qualifying retainage bond in lieu of retainage, the property owner must accept it and release the retainage covered by the bond. The general contractor must then accept qualifying like bonds from all subcontractors and release the retainage those bonds cover. For projects exceeding $150,000 where the general contractor has tendered a qualifying bond, general contractors must accept like bonds from downstream subcontractors and suppliers regardless of the subcontract value. These bond acceptance requirements do not apply to contracts for individual single-family homes, multi-family dwellings of four units or fewer, or property owned by a public entity (including contracts resulting from public-private partnerships).
To qualify, a bond must secure both (1) faithful and complete contract performance and (2) full payment to all subcontractors, suppliers, and laborers. Property owners and principal contractors may require the surety to carry a minimum A.M. Best rating, but that minimum cannot exceed “A-.” The surety must also be licensed to issue bonds in Colorado. If a contractor must obtain a bond to secure the release of funds for a subcontractor who has tendered a bond, the contractor may deduct the proportional bond premium from that subcontractor’s final payment. Importantly, the law does not affect an upstream party’s ability to withhold funds or deduct from any payment for backcharges or other amounts authorized by contract.
Considerations
Property owners, developers, lenders, and contractors will need to adjust their contracts and processes to comply with HB26-1311 and to understand the implications of shifting from traditional retainage to bond-based security. The law does not affect existing contracts, but any contract entered into after August 12, 2026, must account for the possibility that a contractor may tender a retainage bond in lieu of cash retainage.
The law leaves several enforcement mechanisms unaddressed, including the claims process and cure procedures. Interparty agreements will need to fill these gaps. Until courts have an opportunity to interpret the statute, questions remain about implementation and whether parties can waive or contract around the right to substitute a retainage bond for traditional retainage.
For questions about HB26-1311, please contact a member of the Davis Graham Real Estate Group.
On July 9, 2026, a division of the Colorado Court of Appeals issued its opinion in Dreifus v. Glenarm Dining Services, Inc., 2026 COA 59, holding that the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 (EFAA), 9 U.S.C. §§ 401–402, applies to an entire “case” rather than to discrete claims, and that retaliation claims arising from the filing of a sexual harassment lawsuit are “related to” the underlying sexual harassment dispute within the meaning of the statute and, therefore, not arbitrable.
The division also held that an employer seeking to compel arbitration under Colorado Rule of Civil Procedure 12(b)(1) must identify specific disputed facts and request an evidentiary hearing—arguments of counsel alone do not create a factual dispute.
Background
Plaintiff signed a broad arbitration agreement as a condition of her employment. After allegedly receiving harassing social media messages from one of her supervisors, she sued her employer, asserting claims under the Colorado Anti-Discrimination Act for sexual harassment, sex discrimination, and retaliation as well as several common-law tort claims.
Her employer did not seek to compel arbitration of the original complaint, conceding those claims involved sexual harassment allegations excused from arbitration under the EFAA. The EFAA provides,
at the election of the person alleging conduct constituting a sexual harassment dispute or sexual assault dispute . . . no predispute arbitration agreement . . . shall be valid or enforceable with respect to a case filed under Federal, Tribal, or State law and relates to the sexual assault dispute or the sexual harassment dispute.
Mid-suit, Plaintiff amended her complaint to add allegations that, after she filed the original complaint, she was placed on administrative leave and terminated in retaliation for filing the sexual harassment lawsuit and for participating as a witness in an unrelated wage-theft investigation. The amended complaint did not add any new claims or alter the original claims.
The employer moved under C.R.C.P. 12(b)(1) to dismiss those claims and compel arbitration of those claims. The employer argued the new allegations were not sufficiently “related to” the sexual harassment claim and therefore fell outside the EFAA’s protections. The district court denied the motion, concluding the EFAA applied to the entire case. The employer filed this interlocutory appeal.
The Division’s Analysis
The EFAA Applies to the Entire “Case,” Where Some, But Not All, of the Allegations Underlying the Claims InvolveSexual Harassment.
The primary issue on appeal was whether the EFAA applies to a case where some, but not all, of a plaintiff’s allegations underlying the claims involve sexual harassment. The division determined, yes, “the EFAA applies to an entire case, rather than to individual claims, provided the claims are ‘relate[d] to’ allegations of sexual harassment.”
The division found the reasoning of Johnson v. Everyrealm, Inc., 657 F. Supp. 3d 535 (S.D.N.Y. 2023), and Olivieri v. Stifel, Nicolaus & Co., 112 F.4th 74 (2d Cir. 2024), persuasive. Johnson held that the EFAA’s reference to “a case” in 9 U.S.C. § 402(a) “captures the legal proceeding as an undivided whole” and “does not differentiate among causes of action within it.” The division agreed, holding that under the EFAA, “a case” “encompasses all of the claims brought in a single action rather than individual allegations or claims.”
Plaintiff’s post-filing termination allegations were “related to” her sexual harassment claims because she alleged her termination was based, at least in part, on having filed the sexual harassment lawsuit.
The division distinguished these facts from a different case where a wage-and-hour claim resting on an “entirely independent basis” was held outside the EFAA’s scope because it had “nothing to do with the alleged sexual harassment.” Here, Plaintiff expressly alleged her termination was based in part on filing the sexual harassment lawsuit, linking those claims to the underlying harassment dispute.
2. Acknowledged but Undefined “Outer Limit” of Relatedness
The division acknowledged that there may be some “outer limit” at which a claim becomes so attenuated from the sexual harassment allegations that it falls outside the EFAA’s “related to” requirement. However, the division concluded that boundary “was not approached—much less crossed” on these facts and therefore declined to define it.
3. Rule 12(b)(1) Procedural Standard
The employer argued the district court erred by applying the Rule 12(b)(5) “failure to state a claim” standard (accepting allegations as true and viewing them in the light most favorable to the plaintiff) rather than the Rule 12(b)(1) subject-matter-jurisdiction standard, and that disputed facts regarding the arbitrability of plaintiff’s claims required an evidentiary hearing. The division found no reversible error: the employer never requested an evidentiary hearing below, never identified specific disputed facts through affidavits, deposition testimony, or other evidence, and attached only the arbitration agreement and the plaintiff’s sworn discrimination charge, which supported the plaintiff’s position.
Because no genuinely disputed jurisdictional facts existed, the district court was entitled to accept the complaint’s well-pleaded facts as true and rule without a hearing. The division held that arguments of counsel alone do not create a factual dispute.
Practical Implications
This ruling is the first published appellate opinion in Colorado to interpret the scope of the EFAA. Under the division’s holding, the EFAA applies to “a case” “relates to . . . the sexual harassment dispute.” 9 U.S.C. § 402(a). And a claim of retaliation that is based at least in part on the assertion of a claim of sexual harassment is “relate[d] to” a sexual harassment dispute sufficient for the EFAA to apply, even if the claim is also based on other allegations that do not involve sexual harassment. Therefore, an otherwise valid arbitration clause is not enforceable against a claim based on multiple factual allegations if one of the allegations relates to sexual harassment.
Retaliation and termination claims arising after a sexual harassment lawsuit is filed are particularly likely to be treated as “related to” the underlying dispute and therefore also exempt from arbitration, even if the retaliation is also nominally tied to a separate investigation (here, a wage-theft investigation).
There may be an outer limit where an unrelated claim is genuinely independent of the sexual harassment allegations (e.g., where a wage-and-hour claim arising from an entirely separate factual basis was sent to arbitration), but Colorado courts have not yet defined precisely where the line falls. Parties seeking to enforce an arbitration provision should expect a fact-intensive, case-by-case inquiry into “relatedness” going forward.
In the employment context, employers should consult with their lawyers about the potential benefits and drawbacks of requiring employees to sign arbitration agreements and whether the employers’ goals can be achieved through alternate approaches.
The division of the Court of Appeals affirmed the district court’s order denying the motion to dismiss and compel arbitration.
The opinion was authored by Judge Schutz, with Judges Lipinsky and Yun concurring.
Under the Mining Law of 1872 (the “Mining Law”)[2] lode claimants may, in certain circumstances, follow a vein’s downward course beneath neighboring claims.[3] This is known as the “Apex Rule” (herein, the “Rule”) and the rights it bestows upon a claimant are powerful since it (i) entitles miners to extract minerals that stray onto adjoining claims or other public land (and in some cases onto patented mining claims) that the miner does not own and (ii) provides a potential avenue to invalidate a rival claimant’s adjoining locations. However, the Rule’s applicability is also very narrow since many currently exploited and newly discovered deposits are widely diffused and lack an apex, and proving that extralateral rights exist—or have been violated—is a highly fact-dependent and technical exercise, making it costly to litigate disputes arising under the Rule.
What are Extralateral Rights and the Apex Rule?
At its most basic, the Apex Rule provides the holder of a valid lode claim with “extralateral rights” if the uppermost edge or point of the mineral vein (known as the “apex”) is located within his claim (whether at or below the surface). These extralateral rights then generally permit the miner to follow the vein onto all mining lands, whether unpatented or patented (including land previously located by others under the Mining Law) outside of his claim’s borders.[4] These extralateral rights are “purely statutory”—there is no supporting common law—and may also be referred to as the “right of lateral pursuit.”[5]
Establishing Extralateral Rights
The party claiming extralateral rights has the burden of proof to establish certain required elements, which typically requires having or developing extensive geological information about the claim(s) from which the claiming party argues the extralateral rights flow, as well as with respect to the adjacent claims:
Valid Lode Location: The claim must be a properly located lode mining claim (extralateral rights do not attach to placer, mill site, or tunnel site claims), patented or unpatented.[6]
Apex Within Claim Boundaries: The vein must have an apex that lies within the claim. While limited “legal/judicial apex” doctrines exist, they provide limited exceptions to this requirement.[7]
Downward Course (Dip) Into Certain Categories of Adjacent Lands: The vein must dip downward from the apex (i.e., there are no extralateral rights in a horizontal vein because it has no downward course) into land not previously appropriated or patented as non-mining land and not conflict with a prior apex right.[8]
Continuity of Vein: The vein must be continuous between the apex and the portion of the vein being pursued extralaterally; since veins frequently twist and turn, continuity can be difficult to prove without detailed mapping, drilling, expert analysis, and sometimes workings along the vein.[9]
Parallel End Lines: Since a vein cannot be pursued on its strike beyond the ends of its location (i.e., it can only be pursued beyond the side lines—not the end lines, see Diagrams 1 and 2 below), generally, the claim must have parallel end lines defining the lateral limits of the extralateral right; courts may recharacterize lines for the discovery vein, but parallelism still governs.[10]
The Practical Limits of the Apex Rule
Surface Use Not Included. Extralateral rights do not authorize entry on a neighboring property; any underground pursuit of the vein must originate from workings within your own surface estate or be obtained by separate access rights under applicable state law.[11]
Geological Realities Can Be Limiting. Because the extent of a claimant’s right to exercise his extralateral rights is limited to the length of the apex that lies within his claim, factors such as the location of the vein within the location, the length of the apex, and the point of entry and exit of the vein within the location can operate to limit a claimant’s extralateral rights.[12]
Deposit Type Matters. “Blanket veins” or broadly horizontal mineralized zones typically do not have a qualifying apex and therefore do not support extralateral rights.[13]
Modern Mining Realities. The Mining Law was enacted at a time when the only known method of locating lode deposits was by surface, visual geological observation. Because early miners did not recognize at that time that veins could be susceptible to folding or faulting or that several apexes might represent one vein, it was logical that surface discoveries would form the basis for locating claims. Notably, the United States is the only mining jurisdiction that still adheres to the rule and modern courts and commentators have questioned the rule’s fit with geological reality as now understood as well as modern mining methods.[14]
High Burden / Lack of Modern Precedent. The burden of proof on establishing extralateral rights (and the extent thereof) lies with the extralateral claimant. Courts have not established a uniform evidentiary standard, but the burden is typically “substantial”—requiring things such as geological mapping, expert opinion, and drilling results. Further, Apex Rule litigation has been very uncommon since the first part of the 21st century as modern operators instead frequently seek to avoid such costly, fact-intensive, and uncertain litigation by negotiating joint development or boundary agreements or purchasing adjacent claims.[15]
Competitive Positioning and Inter-Claim Conflict Considerations
The Role of Seniority. The exercise of extralateral rights does not depend upon seniority. However, when two or more veins intersect, the senior locator takes the ore within the space of intersection, while junior claimants retain rights to their claim and a right of way for convenient working. And when two veins unite, the older or prior location takes the combined vein below the point of union, including all forks and splits below that junction.[16]
Challenging Junior Locations. Historic Interior Department decisions support arguments that a junior claimant’s location based solely on a vein already validly appropriated (i.e., based on a vein whose apex lies within a senior locator’s claim) may be invalid for lack of discovery. While context-specific, this line of authority remains cited.[17]
Action Items for Claimants Seeking to Exercise Extralateral Rights
Assess the Deposit. Confirm whether your mineralization is a true lode or vein with an apex (versus a blanket-style deposit), which is often dispositive for extralateral analysis.
Map the Apex and End Lines with Precision. Delineate the apex’s location, length, width, and the claim’s end-line geometry to understand the true scope of any extralateral right.
Build the Geological Record. Collect geologic evidence to support vein type, continuity, and path (e.g., geologic mapping, oriented drilling, structural interpretation).
Plan Access. If extralateral pursuit is feasible, secure underground access from your surface estate or obtain easements/rights-of-way under state law.
Consider Commercial Solutions. Given the cost, uncertainty, and fact intensity involved in an Apex Rule dispute, consider mitigating risk through boundary agreements, joint development agreements, or strategic acquisitions instead of litigation.
Diagram 1: Side Lines, End Lines, the Apex, the Dip, and “Lateral Pursuit”[18]
DIAGRAM KEY:
The side lines of a claim (yellow highlight) cannot exceed 1500 feet. In an ideal location, the side line should parallel the vein as closely as possible to maximize the extent of the lode included within the boundaries of a claim.
The end lines (green highlight) of a claim cannot exceed 600 feet. Extralateral rights do not extend beyond the end lines.
The “apex” of a vein, lode, or ledge is the top or highest point of the vein proper, whether at or below the surface and the terminal edge from which the vein extends downward to form a dip (blue highlight).
Extralateral rights, or the “right to lateral pursuit” entitle a senior claimant to follow the dipping vein (pink highlight). The area of vein intersection or “bonanza” belongs to the senior claimant, and he may continue to follow the vein originating at his apex beyond the intersection (dotted pink) to the maximum length permitted.
The “strike” of a vein is its horizontal course (yellow highlight).
The “dip” is the downward course of the vein at a right angle to the strike (green highlight).
[1] As indicated by the footnotes that follow, we have relied heavily on the American Law of Mining, published jointly by the Foundation for Natural Resources Law and Matthew Bender—an invaluable resource for information on the Mining Law of 1872—for this analysis.
[3] Am. Law of Mining, 2d Ed. § 37.01[1]; Silver Surprize v. Sunshine Mining Co., 15 Wash. App. 1, 6, 547 P.2d 1240, 1244 (1976).
[4]See 30 U.S.C. § 26 (providing that a lode locator “shall have the exclusive right of possession and enjoyment of all veins, lodes, and ledges throughout their entire depth, the top or apex of which lies inside of such surface lines extended downward vertically, although such veins . . . may so far depart from a perpendicular in their course downward as to extend outside the vertical side lines of such surface locations.”); supra, note 2, §§ 37.02[5], 37.05[1].
[11]See 30 U.S.C. § 26 (Nothing in this section shall authorize the locator or possessor of a vein or lode which extends in its downward course beyond the vertical lines of his claim to enter upon the surface of a claim owned or possessed by another); supra, note 2, § 37.01[3].
[13]Supra, note 2, § 37.01[4]. As noted in the introduction, the Apex Rule would not apply to a number of currently mined and recently discovered deposits, including in-situ uranium, lithium brine, and diffuse gold and silver, because these are broadly mineralized rather than vein- or lode-style deposits. Further, even if a mineral deposit meets the definition of a “vein” or “lode” under 30 U.S.C. § 26 (i.e., a mineral body within defined boundaries), it may not have an apex, in which case extralateral rights do not attach.
[14] Robert Leclerc, Perspectives Du Nord: A Canadian View of Problems and Opportunities in International Business Transactions, 32 Rocky Mtn. Min. L. Inst. 6 (1986), 6-6; Harry Macdonell, Comparative Analysis of American and Canadian Hard Mineral Laws, 10 Rocky Mtn. Min. L. Inst. 13 (1965), 439; Silver Surprize, 15 Wash. App. at 16, 547 P.2d at 1250 (“Modern mining practice seems to require amendment of the act of 1872 to deal specifically with the problems that arise from deep underground discoveries.”).
[17] M-36955, “Apex and Extralateral Rights Issues Raised by the Stillwater Mineral Patent,” 93 Interior Dec. 369, 382, 1986 I.D. LEXIS 34, *34; Bunker Hill & Co. v. Shoshone Mining Co., 1904 I.D. LEXIS 157, *9, 1904 I.D. LEXIS 157 (1904); Golden Link Mining, Leasing & Bonding Co., 1899 I.D. LEXIS 78, *5, 1899 I.D. LEXIS 78 (1899).
[18] Diagram taken from the Digest of Mining Claim Laws (Fifth Edition, 1996), published by the Rocky Mountain Mineral Law Foundation (now known as the Foundation for Natural Resources and Energy Law).
[19] Diagram taken from Research Gate, https://www.researchgate.net/figure/Diagram-illustrating-strike-and-dip-After-you-cross-the-bridge-walk-east-to-your-left_fig10_239604084.
On July 9, 2026, the Colorado Court of Appeals issued its opinion in Elk Creek Ranch Owners Association v. Elk Creek Ranch Development, Inc. and YZ Ranch, LLC, 2026 COA 58, addressing three issues: (1) when a postjudgment order denying one party’s attorney fee request becomes final and appealable in a multi-party case where other fee requests remain pending; (2) whether a breach of the implied duty of good faith and fair dealing constitutes a “default” triggering an attorney’s fees clause in a commercial lease; and (3) the proper methodology for calculating attorney fee awards under the lodestar method. The division reversed the district court’s denial of the Association’s fee request against YZ Ranch, reversed the fee award to ECRD, and remanded with directions.
Background
This case arises from a dispute concerning Elk Creek Ranch, a residential development in Rio Blanco County, Colorado. Elk Creek Ranch Development, Inc. (“ECRD”) developed the property and created its homeowners’ association, Elk Creek Ranch Owners Association (the “Association”). ECRD also formed a separate entity, ECO, to serve as the Association management company. Meanwhile, YZ Ranch, LLC, the owner of property adjacent to Elk Creek entered a lease (the “Lease”) with ECO as tenant that granted fishing access along Elk Creek to the Association’s members.
The Association brought suit against YZ Ranch for breaching the implied duty of good faith and fair dealing under the Lease, against ECO for breaching its management agreement with the Association (the “Management Agreement”), and against ERCD for violating the protective covenants that govern the development (the “Covenants”). At the close of evidence, the court dismissed the Association’s claims against ERCD on statute of limitations grounds. The remaining claims went to trial, where the jury found in the Association’s favor against YZ Ranch and ECO.
Following trial, the parties filed multiple requests for postjudgment attorney fees. The Association sought fees from YZ Ranch under the Lease and from ECO under the Management Agreement; as for ECRD, it sought fees from the Association under the Covenants. On August 20, 2024, the district court denied the Association’s fee request against YZ Ranch—concluding that under the plain language of the Lease, YZ Ranch, as landlord, could never trigger the fee-shifting clause—while simultaneously granting the Association’s fee request against ECO and granting ECRD’s fee request against the Association. The granted fee requests were not reduced to sums certain until a subsequent order entered on April 4, 2025. The Association filed its notice of appeal on May 21, 2025.
The Division’s Analysis
Appellate Jurisdiction and Finality. As a threshold matter, the division addressed whether the Association’s notice of appeal was timely under C.A.R. 4(a), given that it was filed more than 49 days after the August 20, 2024 order denying its fee request against YZ Ranch. The division applied the two-part finality test from Luster v. Brinkman, 250 P.3d 664 (Colo. App. 2010), asking (1) whether the order completely resolved the rights of the parties as to the particular part of the action in which it was entered, and (2) whether the order was more than merely ministerial. The division concluded that because other parties’ fee requests remained pending and had not yet been reduced to sums certain, the August 2024 order did not finally resolve all fee-related matters. Relying on persuasive federal authority—Mayer v. Wall Street Equity Group, Inc., 672 F.3d 1222 (11th Cir. 2012), and In re Syngenta AG MIR 162 Corn Litigation, 61 F.4th 1126 (10th Cir. 2023)—the division held that piecemeal appeals of fee orders should be avoided when other fee requests in the same action remain outstanding. Accordingly, the final appealable order was the April 4, 2025 order reducing the granted fee awards to sums certain, making the Association’s May 21, 2025 notice of appeal timely under C.A.R. 4(a).
Fee-Shifting Under the Terms of the Lease. On the merits, the division reversed the district court’s denial of the Association’s attorney fee request against YZ Ranch. Section 11.15 of the Lease provided for attorney’s fees upon “a default on the part of either party in the performance of any of the terms and conditions of this Lease.” The district court had read the undefined, lowercase term “default” as coextensive with the defined term “Default” in Section 8.1—which referred only to a “Default by Tenant” (e.g., failure to pay rent)—and thus concluded that YZ Ranch, as landlord, could never trigger the fee clause.
The division disagreed, holding instead that an undefined term in a contract must be given its plain and ordinary meaning and is not interchangeable with terms that the same instrument defines elsewhere. Applying the plain-meaning definition of “default,” the division held that any breach of contract constitutes a “default” under Section 11.15. The division further held that because a breach of the implied duty of good faith and fair dealing is itself a breach of contract—not a separate tort or independent cause of action—the jury’s finding that YZ Ranch breached the implied duty of good faith and fair dealing under the Lease entitled the Association to reasonable attorney’s fees and costs from YZ Ranch under Section 11.15.
Attorney Fee Award Methodology. Finally, the division reversed the district court’s award of $1,261,649.10 in attorneys’ fees to ECRD under the Covenants. The district court found, and the division affirmed, that ERCD’s fee request was unreasonable because the matter was overstaffed and ERCD failed to isolate the fees it actually incurred from those incurred by YZ Ranch and ECO, parties that shared the same counsel. But rather than excluding these unreasonable hours before calculating the lodestar, the district court calculated the full lodestar first and then applied a flat twenty-five percent reduction.
The division held this was backwards under Payan v. Nash Finch Co., 2012 COA 135M. Under Payan and Hensley v. Eckerhart, 461 U.S. 424 (1983), the US Supreme Court instructed that to calculate the lodestar, courts must first determine the “reasonable number of hours expended by counsel” on the case by excluding the “excessive, redundant, or otherwise unnecessary” hours and then multiply these reasonable hours by the reasonable hourly rate. Applying Payan, the division reasoned that an across-the-board percentage reduction after calculating the lodestar, like the district court applied here, inverts the proper methodology and constitutes reversible error.
Significance
This opinion offers several practical takeaways for Colorado practitioners. First, on appellate jurisdiction, the division’s holding establishes that in cases with requests for postjudgment attorney fees from multiple parties, a denial of one request is not final and appealable until all requests have been resolved and reduced to sums certain. Second, the decision underscores the importance of precise drafting in fee-shifting clauses. The division’s distinction between the undefined, lowercase term “default” and the specifically defined, capitalized term “Default” reinforces that courts will not conflate defined and undefined terms. Third, the division’s holding clarifies that a successful good-faith-and-fair-dealing breach can independently support an attorney fee award depending on the plain language of the contract’s fee-shifting clause. Fourth, the division’s treatment of the lodestar methodology reaffirms that courts must exclude unreasonable, excessive, and redundant hours before calculating the lodestar, not after. Courts may not shortcut the analysis by applying a blanket percentage reduction to a lodestar calculated from unfiltered hours.
SEC SEEKS PUBLIC COMMENT ON NOVEL EXCHANGE-TRADED FUNDS
On June 30, the U.S. Securities and Exchange Commission’s (“SEC” or “Commission”) issued a request for public comment (the “Request for Comment”) from funds, their advisers, investors and other market participants on exchange-traded funds (“ETFs”) seeking to invest in innovative asset classes or engage in novel investment strategies (“Novel ETFs”). The Request for Comment specifically seeks comments on ways to facilitate innovation in ETFs while still protecting investors, maintaining fair, orderly, and efficient markets, and facilitating capital formation.
The Request for Comment noted that ETF sponsors have expressed interest in providing exposure markets, and facilitating capital formation, including crypto assets; commodity-focused instruments; single‑stock strategies; heightened leverage; blockchain-enabled opportunities; private assets; event contracts; and/or a combination of the aforementioned categories. The Request for Comment outlined questions that have been raised by market participants regarding Novel ETFs (for example, whether a Novel ETF would qualify as an “investment company” or operate pursuant to the requirements of Rule 6c-11 under the Investment Company Act of 1940 (the “1940 Act”).
Under Section 3 of the 1940 Act, “investment company” is defined as an issuer that (i) is or holds itself out as being engaged primarily , or proposes to engage primarily in the business of investing, reinvesting, or trading in securities (the “Subjective Test”), or (ii) is engaged or proposes to engage in the business of investing, reinvesting, owning, holding, or trading in securities, and owns or proposes to acquire investment securities having a value exceeding 40% or more of such issuer’s total assets (exclusive of Government securities and cash items), on an unconsolidated basis. Among other questions, the Request for Comment asks whether a Novel ETF would meet the Subjective Test even if its principal investment strategy is to invest in securities that may not be securities.
With respect to Rule 6c-11 under the 1940 Act, the Request for Comment includes, for example, questions regarding portfolio-related conditions, including (i) whether the assets of Novel ETFs present any questions regarding the functioning of the ETF arbitrage mechanism and the supporting secondary trading activity, investor protection, the maintenance of fair, orderly, and efficient markets, or other structural or operational issues, and (ii) whether Rule 6c-11 should be amended to address these or other questions related to Novel ETFs.
Among other items, the Request for Comment also includes questions regarding automatic effectiveness of post-effective amendments filed pursuant to Rule 485 under the Securities Act of 1933, including whether the 75-day and 60-day automatic effectiveness periods should be extended for Novel ETFs.
Comments must be submitted to the Commission by August 31.
SUPREME COURT UNANIMOUSLY UPHOLDS THE SEC’S ABILITY TO USE “DISGORGEMENT” IN SRIPETCH V. SEC
On June 4, the United States Supreme Court (the “Court”) issued a unanimous decision in Sripetch v. Securities and Exchange Commission, No. 25-466, addressing what the SEC must show to obtain disgorgement from a defendant in federal court. The Supreme Court held that the SEC need not prove investor pecuniary loss to obtain disgorgement under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), so long as the remedy is directed to the defendant’s unjust gains and otherwise fits within the equitable framework assumed by the Court for purposes of the case. In doing so, the Court also resolved a circuit split: the First and Ninth Circuits did not require proof of investor pecuniary loss, while the Second Circuit did.
Sripetch arose against the backdrop of the SEC’s evolving authority to seek monetary remedies in federal securities enforcement actions. As explained in the Supreme Court’s decision, when Congress created the SEC in the 1930s, the SEC’s statutory enforcement toolkit did not include monetary awards and was limited principally to seeking injunctions against future violations of the federal securities laws. Congress later expanded the agency’s enforcement powers, including by authorizing monetary penalties in 1990. Beginning in the 1970s, however, courts began permitting the SEC to seek disgorgement as ancillary equitable relief in enforcement actions. In 2002, Congress enacted the Sarbanes-Oxley Act, which, among other things, provides that the SEC may seek “equitable relief” for the “benefit of investors” in civil actions under Section 21(d)(5) of the Exchange Act.
Over time, the SEC’s disgorgement practice became a significant enforcement remedy and, in some cases, produced awards that were deposited with the United States Treasury or exceeded the defendant’s own profits from the alleged violation. The Supreme Court previously addressed aspects of that practice by applying a five-year statute of limitations in Kokesh v. SEC, 581 U. S. 455 (2017), and by imposing two “traditional equitable principles” limits on its use: (1) remedies are limited to a defendant’s net profits, and (2) the award must go to victims rather than be imposed as a penalty where feasible, Liu v. SEC, 591 U.S. 71 (2020).
After Liu, Congress amended the Exchange Act in a way that made the SEC’s disgorgement authority more explicit but also generated new questions about the relationship between statutory disgorgement and equitable limits. Congress left intact Exchange Act Section 21(d)(5), which authorizes “equitable relief,” and added Section 21(d)(7), which expressly authorizes the SEC to seek disgorgement in enforcement proceedings. Congress also provided that federal district courts may require disgorgement of “any unjust enrichment” received as a result of a securities-law violation and added limitations provisions addressing both equitable relief and disgorgement. Unlike Section 21(d)(5), Section 21(d)(7) does not contain language requiring relief to be “for the benefit of investors,” which led to differing views about how Liu’s requirements apply after the statutory amendments and created the conflict that prompted Supreme Court review. The Second Circuit held that the disgorgement remedy under both Sections 21(d)(5) and 21(d)(7) is equitable and available only if it can be awarded to victims, which the court defined as those who have suffered “pecuniary harm.” In contrast, the First Circuit held that, because disgorgement’s purpose is to deprive wrongdoers of ill-gotten gains, a pecuniary harm showing is not required.
In Sripetch, the underlying dispute stemmed from a civil enforcement action against Ongkaruck Sripetch (“Sripetch”) and other defendants in the United States District Court for the Southern District of California, in which the SEC alleged securities-law violations arising from alleged classic “pump and dump” schemes involving at least 20 penny-stock companies. The SEC charged Sripetch with six counts of securities fraud and one count of selling unregistered securities, and it sought, among other remedies, disgorgement of more than $6.6 million in ill-gotten gains. Sripetch ultimately consented to entry of judgment and agreed that the District Court could order disgorgement, but when the SEC sought more than $4.1 million in disgorgement, Sripetch objected that the request was inconsistent with Liu v. SEC because the SEC had not shown that investors suffered financial losses and therefore had not identified “victims” for whom disgorgement could be awarded. The SEC responded that investors may qualify as victims even without proof of pecuniary loss and, in the alternative, that its evidence showed investor pecuniary harm in any event. The District Court for the Southern District of California accepted the SEC’s alternative evidentiary position, concluded that the SEC had made an adequate showing of pecuniary harm, and ordered disgorgement of $2,251,923.16 in net profits plus prejudgment interest without deciding whether such a showing was legally required.
On appeal, Sripetch again argued that disgorgement under Exchange Act Sections 21(d)(5) and 21(d)(7) requires proof that investors suffered pecuniary harm. The Ninth Circuit ruled against Sripetch, concluding that demonstrating pecuniary loss to investors is unnecessary to support a disgorgement order. The Ninth Circuit acknowledged Liu’s requirement that disgorgement be awarded for victims but rejected the argument that “victim” status turns on proof of measurable financial loss. In doing so, the Ninth Circuit aligned with the First Circuit and rejected the Second Circuit’s approach. The Supreme Court granted certiorari to decide the narrow question whether the SEC must prove that investors suffered pecuniary loss before obtaining disgorgement under Section 21(d)(5) or Section 21(d)(7) of the Exchange Act.
In a unanimous opinion by Justice Gorsuch, the Court affirmed the Ninth Circuit, holding that the SEC does not need to show financial harm to investors. The Court explained that traditional equitable principles do not require proof of pecuniary loss and that a person whose legally protected interests have been invaded may qualify as a victim for disgorgement purposes even without a measurable financial loss. Accordingly, the Supreme Court rejected Sripetch’s reading of Liu v. SEC because Liu required disgorgement to be “awarded for victims,” but did not make pecuniary loss a prerequisite to victim status. The Court also rejected Sripetch’s “status quo” argument, reasoning that, where a defendant is unjustly enriched without leaving the victim financially worse off, equity traditionally favors stripping the wrongdoer’s gain rather than allowing the wrongdoer to retain the benefit.
The Supreme Court’s decision in Sripetch further distinguished SEC enforcement actions from private securities-fraud suits, which do require a preliminary showing of the plaintiff’s economic loss. The Court, however, did not decide the full scope of the SEC’s post-Liu disgorgement authority, including whether Congress’s addition of Section 21(d)(7) displaced any traditional equitable limits on disgorgement. Justice Thomas concurred, agreeing with the result while stating that a future case should address whether SEC disgorgement under the amended Exchange Act is a legal remedy that implicates the Seventh Amendment right to a jury trial.
SEC ANNOUNCES ENFORCEMENT RESULTS FOR FISCAL YEAR 2025
On April 6, the Commission announced enforcement results for its fiscal year ended September 30, 2025 (“FY 2025”). During FY 2025, the Commission filed 456 enforcement actions comprised of 303 standalone actions and 69 follow on administrative proceedings that sought to bar or suspend individuals from certain securities market functions based on criminal convictions, civil injunctions, or other orders. The Commission obtained orders for monetary relief of $17.9 billion.
The press release announcing the enforcement results (the “Press Release”) included that, “[t]hese enforcement actions addressing a broad range of misconduct demonstrate the Commission’s prioritization of cases that directly harm investors and the integrity of the U.S. securities markets, including offering frauds, market manipulation, insider trading, issuer disclosure violations, and breaches of fiduciary duty by investment advisers.” The Press Release also noted that FY 2025 was a transition period for the enforcement division, noting its renewed focus on bringing actions that prevent investor harm and that moving forward, enforcement priorities and results would be linked to the Commission’s core mandate and focus on (i) standing up to fraud and market participants engaged in such misconduct; (ii) addressing fraudulent and manipulative conduct through appropriate remediation; and (iii) repaying investor losses when harmed.
SUPREME COURT DECISION IN FS CREDIT OPPORTUNITIES CORP. V. SABA
On June 11, the United States Supreme Court held in FS Credit Opportunities Corp. v. Saba Capital Master Fund, Ltd., No. 24-345, that Section 47(b) of the 1940 Act does not impliedly allow private parties to sue for rescission of contracts that allegedly violate the 1940 Act. The 6–3 decision reverses the prior decision by the Second Circuit and resolves a longstanding circuit split.
Section 47(b) of the 1940 Act permits rescission of any contract that allegedly violates the 1940 Act as a remedy to parties to such a contract, provided that rescission would not produce a more inequitable result than performance. In recent years, litigants have argued that Section 47(b) implicitly creates a private right of action for rescission available not just to parties to the contract, but to any investor affected by it.
The case arose from a dispute between investment companies that manage closed-end mutual funds (the “Funds”) and Saba Capital Master Fund, Ltd., and Saba Capital Management, L.P. (collectively, “Saba”), each an activist investor. The Funds were incorporated in Maryland and adopted resolutions opting into the Maryland Control Share Acquisition Act, which limits the voting rights of shareholders holding a disproportionate number of shares—such as activist investors—unless other shareholders approve. Saba sued the Funds, arguing that these resolutions violate the 1940 Act’s requirement that every share of stock be a voting stock with equal voting rights. Saba’s argument relied on Section 47(b), which provides that “a court may not deny rescission” of contracts violating the 1940 Act “at the instance of any party” unless certain equitable conditions are met.
The Court’s reasoning focused on several arguments, including the following:
The Court concluded that Section 47(b)’s language stating “a court may not deny rescission at the instance of any party” is a directive to courts, not a grant of rights to individuals. This language assumes that parties are already before the court and merely directs how courts should exercise their remedial authority; it does not confer a standalone right to sue.
The Court noted that under longstanding contract-law principles, rescission is a remedy, not a cause of action in and of itself.
The Court observed that Congress created two express private rights of action elsewhere in the 1940 Act—for breach of fiduciary duty by investment advisers and for recovery of certain short-term profits. The existence of these express provisions demonstrates that when Congress wants to provide a private remedy, it does so expressly.
Saba relied heavily on the Court’s 1979 decision in Transamerica Mortgage Advisors, Inc. v. Lewis (“TAMA”), which found an implied right of action in a comparable “shall be void” provision of the Investment Advisers Act of 1940 (“Advisers Act”). However, the Court noted that Congress amended Section 47(b) in 1980 to delete the “shall be void” language on which TAMA relied and replaced it with language focused on a court’s remedial authority. In contrast, Congress retained “shall be void” language in other related provisions, suggesting the change was intentional and substantive rather than merely clarifying.
The Court’s decision significantly narrows the ability of private parties (including activist investors) to bring implied private suits under the 1940 Act to challenge fund governance decisions. The decision also reinforces the principle that the SEC, as the 1940 Act’s primary enforcer, is the principal avenue for addressing alleged 1940 Act violations, and private enforcement must be grounded in an express statutory grant.
SEC PUBLISHES DRAFT STRATEGIC PLAN FOR FY 2026-2030
On June 2, the SEC published its Draft Strategic Plan (the “Draft Strategic Plan”) for Fiscal Years 2026-2030 and opened the plan for public comment through July 2, 2026. The Draft Strategic Plan provides a roadmap for the agency’s direction and the initiatives SEC Chairman Paul Atkins intends to advance.
The Draft Strategic Plan indicates that the SEC is focusing on three primary goals as part of its strategy over the next four years:
Goal 1: Modernize regulation. The SEC plans to update its regulatory approach to better support innovation, capital formation, market efficiency, and investor protection, including by addressing digital assets, distributed ledger technology, and alternative trading platforms. In particular, the Draft Strategic Plan emphasizes easier access to public and private capital markets, modernized early-stage fundraising rules, streamlined disclosure, updated shelf registration, and improvements to Regulation A for smaller issuers.
Goal 2: Change regulatory practices. The SEC plans to increase engagement with stakeholders, make compliance easier for market participants, and shift enforcement back toward clear violations of established law, especially fraud and manipulation. The Draft Strategic Plan specifically identifies possible retrospective review of rules involving foreign private issuers, quarterly and private fund reporting, executive compensation, alternative trading systems, and market structure.
Goal 3: Improve internal operations. The SEC plans to reorganize, modernize technology, improve performance management, and use internal reporting to track accountability, resource use, and program success.
The Draft Strategic Plan indicates that the SEC seeks to regulate in a way that is more innovation-friendly, more predictable for market participants, more focused on fraud and manipulation, and more efficient internally.
Compared with the strategic plan adopted under former Chairman Gary Gensler for Fiscal Years 2022-2026, the Draft Strategic Plan retains the same mission statement, and both plans emphasize technology, data, and the need to keep pace with changing markets. Under SEC Chairman Paul Atkins’ Draft Strategic Plan, however, the order of priorities has shifted. For instance, the SEC’s plan for Fiscal Years 2022-2026 emphasized keeping pace with emerging risks through enforcement measures. By contrast, the Draft Strategic Plan states that enforcement should focus on established legal violations and should not be used as a substitute for policymaking. Accordingly, the plan signals a likely push toward clearer, more formal rules rather than regulation primarily through enforcement.
Going forward, market participants should watch for the final Strategic Plan, along with any additional SEC rulemaking or guidance, to evaluate how these activities correspond with the SEC’s stated strategic priorities in the draft Strategic Plan.
SEC RESCINDS POLICY REGARDING DENIALS OF SETTLEMENTS IN ENFORCEMENT ACTIONS
Historically, pursuant to Rule 202.5(e) of the SEC’s informal rules of procedure, defendants or respondents settling enforcement actions were required to agree not to publicly deny the allegations made in an SEC complaint or administrative order. On May 18, the SEC rescinded this informal rule. As a result, defendants settling SEC enforcement actions are no longer required to comply with no-deny restrictions as a condition of settlement. Such defendants will now be able to freely comment on and contest such allegations made in enforcement actions.
The SEC gave four reasons for the rescission of the informal rule:
The Commission noted that it is not aware of any instance in which an action was reopened following a violation of the no-deny provision.
Given the prevalence of social media, implementation of the rule has become more difficult and the line between public and private statements has become less clear.
Rescinding this rule aligns the SEC with the majority of federal agencies that do not have a similar rule.
Rescinding the rule gives the Commission additional flexibility in settling enforcement actions. The SEC noted that the rule will no longer “preclude settlements with defendants who do not wish to waive their rights by signing a no-deny provision that imposes a contractual obligation regarding denials that continues into the future beyond the time of settlement.”
Going forward, the SEC has stated that it will no longer enforce no-deny restrictions that have previously been agreed to in settlements.
UPCOMING CONFERENCES
2026
Date
Host*
Event
Location
7/21
MFDF
Director Discussion Series – Open Forum (Philadelphia)
Philadelphia, PA
7/21
MFDF
Board Oversight of Subadvisers: Compliance and Regulatory Issues
Webinar
7/28
MFDF
Director Discussion Series – Open Forum (NYC)
New York, NY
7/29
ICI/IDC
Cybersecurity in the Age of AI: A Primer for Fund Directors
Webinar
7/29
MFDF
Closed-End Fund Roundtable
New York, NY
9/1
MFDF
AI in the Fund Boardroom
Webinar
9/9
MFDF
Section 351 & ETF Formation: What Fund Directors Need to Know
Webinar
9/14
MFDF
Intermediary Fees: What Today’s Trends Mean for Independent Directors
Webinar
9/15-17
ICI/IDC
Compliance, Risk, and Legal Conference
Nashville, TN
9/17
MFDF
How the SPIVA U.S. Scorecard Understates the Performance of Actively Managed Mutual Funds – What Directors Should Know
Webinar
9/23
MFDF
Director Discussion Series – Open Forum
Denver, CO
9/27-30
ICI/IDC
Tax and Accounting Conference
Marco Island, FL
10/15
MFDF
In Focus – Board Oversight Approaches to AI and Risk Management
Webinar
10/21
MFDF
Director Discussion Series – Open Forum
Boston, MA
10/26-28
ICI/IDC
Fund Directors Conference
Scottsdale, AZ
11/10
ICI/IDC
2026 Retail Alternatives and Closed-End Funds Conference
New York, NY
11/2
MFDF
ETFs, Mutual Funds, and Taxes: A Structural Comparison for Fund Boards
Webinar
11/9
MFDF
In Focus – Usage of AI in the Boardroom
Virtual
12/2-3
ICI/IDC
Foundations for Fund Directors
Virtual
2027
Date
Host*
Event
Location
2/1
MFDF
2027 Directors’ Institute
Amelia Island, FL
2/3-5
ICI/IDC
ICI Innovate
Phoenix, AZ
3/14-17
ICI/IDC
Investment Management Conference
San Diego, CA
4/8
MFDF
2027 Fund Governance & Regulatory Insights Conference
Washington, DC
5/10-12
ICI/IDC
Leadership Summit
Washington, DC
5/10-12
ICI/IDC
Fund Directors Workshop (IDC)
Washington, DC
6/7-9
ICI/IDC
ETF Conference
New Orleans, LA
9/19-22
ICI/IDC
Tax and Accounting Conference
Phoenix, AZ
10/25-27
ICI/IDC
Fund Directors Conference
Scottsdale, AZ
11/9
ICI/IDC
Retail Alternatives and Closed-End Funds Conference
New York, NY
*Host Organization Key: Mutual Fund Directors Forum (“MFDF”), Independent Directors Council (“IDC”), and Investment Company Institute (“ICI”)
On June 11, 2026, the Colorado Court of Appeals held in Nunn v. Nestor, 2026 COA 49, that a verdict form labeled “Special Verdict Form” was in fact a general verdict accompanied by answers to interrogatories under Colorado Rule of Civil Procedure 49(b). The division reached this conclusion because the verdict form required the jury to decide the ultimate legal result of each claim, leaving nothing for the court to do but enter judgment. Because the form constituted a general verdict rather than a special verdict, the defendant-appellant was required to object to any inconsistency before the jury was discharged. His failure to do so resulted in waiver of the right to raise that challenge on appeal.
Background
In May 2021, Officer Nestor pulled over Nunn, a young black man, for failing to yield to an emergency vehicle. As Nunn handed Nestor his registration and reached for his wallet to produce his driver’s license, Nestor drew his gun and called for backup. Nunn got out of his car at gunpoint as more officers arrived. Once out of the car, Nunn was tackled to the ground by another officer, tased twice, arrested, and charged with several crimes. All charges were later dismissed.
Nunn sued Nestor for excessive force, unreasonable seizure, failure to intervene in another officer’s use of force, and an equal protection violation based on racial discrimination. The jury found in Nunn’s favor only on the excessive force claim based on the officer pointing his weapon at Nunn.
Nestor appealed, contending that the jury’s verdict was irreconcilably inconsistent. Nunn responded that Nestor failed to preserve that issue for appeal because he did not object before the jury was dismissed.
Both arguments turned on whether the jury’s verdict was (1) a special verdict, or (2) a general verdict with special interrogatories. A challenge to a special verdict need not be preserved before the jury is discharged, but a challenge to a general verdict with interrogatories must be raised before discharge or it is waived.
The Jury Verdict Form
The trial court submitted a verdict form to the jury labeled “SPECIAL VERDICT FORM-DEFENDANT NESTOR.” In relevant part, the verdict form asked:
SECTION I: PRESTON NUNN’S EXCESSIVE FORCE CLAIM AGAINST GABRIEL NESTOR
1. Did Defendant Gabriel Nestor deprive Plaintiff Preston Nunn of his constitutional right to be free from excessive force?
Yes X No
. . . .
(a). Did Defendant Gabriel Nestor deprive Plaintiff Preston Nunn of his constitutional right to be free from excessive force when he pointed his duty weapon at Plaintiff Nunn?
Yes X No
(b). Did Defendant Gabriel Nestor deprive Plaintiff Preston Nunn of his constitutional right to be free from excessive force when he used his Taser on Plaintiff Nunn?
Yes No X
. . . .
SECTION II: PRESTON NUNN’S UNREASONABLE SEIZURE CLAIM AGAINST GABRIEL NESTOR
1. Did Defendant Gabriel Nestor deprive Plaintiff Preston Nunn of his constitutional right to be free from unlawful seizure?
Yes No X
The Division’s Analysis
The Division began by highlighting that Colo. R. Civ. P. 49 is identical to Fed. R. Civ. P. 49, and that the Division may look to federal authority for guidance in construing the Colorado rule.
The division recognized that the Colorado Rules of Civil Procedure contemplate three types of verdicts and described each as follows:
General Verdict: A verdict by which the jury finds in favor of one party or the other, as opposed to resolving specific legal questions. The hallmark of a general verdict is that it requires the jury to announce the ultimate legal result of each claim and leaves nothing for the judge to do other than enter judgment.
Special Verdict: A verdict in which the jury makes findings only on factual issues submitted by the judge, and the judge decides the legal effect of those findings. It is a special verdict only if the judgment itself requires the judge to apply the law to the facts found by the jury.
General Verdict with Interrogatories: A verdict that combines a general verdict with factual questions that, standing alone, would be special verdicts. If the court asks for a general verdict, then any factual question is an interrogatory.
The division reaffirmed that if a party fails to object to a Rule 49(b) general verdict accompanied by answers to interrogatories before the jury is discharged, the party waives any later challenge based on an alleged inconsistency. A timely objection matters because it gives the trial court the option to send the jury back for further deliberations.
The division next examined the language of the verdict form, which was labeled as a “Special Verdict Form.” The form asked the jury:
“Did Defendant Nestor deprive Plaintiff Preston Nunn of his constitutional right to be free from excessive force?”
“Did Defendant Nestor deprive Plaintiff Preston Nunn of his constitutional right to be free from unlawful seizure?”
The division concluded that those questions required the jury to decide the ultimate legal result of each claim. By answering these questions, the jury left nothing for the court to do but enter judgment. All remaining factual questions were therefore interrogatories accompanying a general verdict under Rule 49(b).
The verdict form’s label as a “Special Verdict Form” did not change the conclusion because the label given to a verdict form is not controlling.
Accordingly, the division held Nestor needed to object to any inconsistencies before the jury was discharged to preserve the issue for appellate review. Because he didn’t object, Nestor was barred from raising his inconsistent-verdict argument on appeal.
Implications
In order to preserve its rights to appeal, a party should object to a plausible verdict-inconsistency issue before the jury is discharged. Waiting until post-trial motions or appeal risks waiver of the objection if the verdict is later characterized as a general verdict or a general verdict accompanied by answers to interrogatories.
In addition, parties should examine the verdict form’s language, not just the label. If the form requires the jury to determine liability or damages and leaves only entry of judgment for the court, the form may be treated as a general verdict even if it is labeled as a “Special Verdict Form.” The division’s decision also reinforces the importance of preserving objections in real time. This preserves the client’s right to challenge a verdict’s consistency on appeal.
This decision clarifies the boundaries between special verdicts and general verdicts (including general verdicts with interrogatories). The division’s reasoning reinforces that substance—not the form’s label—controls the classification.
The Court of Appeals affirmed.
The opinion was authored by Judge Moultrie, Judges Gomez and Berger concurring.
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