Data Center Moratoria Are ‘Unconstitutional,’ Lawsuits Claim
Data center developers are increasingly filing federal lawsuits to challenge local moratoria on new data center construction, claiming these bans are unconstitutional. Cases against cities like Nashville, Wixom, and Urbana argue violations of due process and equal protection rights. Developers view these lawsuits as a cost-effective strategy to pressure local governments and advance projects, with legal experts anticipating a rise in such challenges.
A new wave of federal lawsuits has been initiated by data center developers, challenging the constitutionality of local moratoria on data center construction. Developers argue that these bans violate their due process and equal protection rights.
In early August, DC Blox filed a federal suit against the City of Nashville, Tennessee, seeking to overturn a zoning moratorium that prevents the construction of a hyperscale facility. Concurrently, Wixom Industrial One launched a federal lawsuit against the City of Wixom, Michigan, aiming to invalidate what it termed an "illegal police power moratorium" obstructing its data center project. Furthermore, attorneys from Vorys, a law firm that previously issued a client alert on the vulnerability of moratoria to constitutional challenges, are now representing Thor Equities in a federal case against the City of Urbana, Ohio, contesting the city's rejection of their data center project.
Legal experts, including Daniel Metzger of Columbia Law School's Sabin Center, suggest that such lawsuits, though potentially costly for local governments, are a relatively inexpensive tactic for developers to push projects forward, even if the ultimate goal isn't necessarily a judicial victory but rather the completion of the data center itself. These cases are expected to increase, serving as bellwethers for future disputes. The article cites an instance in Hill County, Texas, where an LLC's lawsuit led the county to rescind its moratorium and pay $100,000 in legal fees. While it remains uncertain whether these constitutional challenges will ultimately prevail, the legal ambiguity created by these suits introduces a significant new dimension to the ongoing conflicts over data center development.