Everyone hates data centers. Lawyers love them

Jason Morris spent years helping housing, office and industrial developers cut through red tape and NIMBYs around Phoenix. Occasionally, the land-use attorney advised data center builders. Data center projects were slam dunks. Cities welcomed them because they resembled office buildings and didn’t bring much traffic. The Phoenix region grew into a data center hub powering the artificial intelligence boom. Cue the backlash, and call the lawyers. Morris now spends about 70% of his time on data center projects. It used to be 10%. It seems impossible to escape the data center fight in America. It dominates Facebook feeds, town council meetings and midterm election ads. Construction on data centers is propping up the economy and sucking up trillions in investments. Data centers have also created a lucrative new line of business for lawyers. On one side, plaintiffs’ lawyers are working with local communities and advocacy groups to throw up legal obstacles to bog down development. More than 300 jurisdictions in 44 states have enacted moratoriums against data centers. On the other, lawyers repping data center builders and investors are responding to growing litigation over land use, the environment and noise. Morris is defending data center developers, operators and tech companies in lawsuits over noise and water consumption. He’s also battling with regulators to approve permits for the buildout. It’s complicated work, and city officials have grown more hostile. Hyperscale data centers for AI are larger than earlier data centers and use enormous amounts of power and water. Cities are weighing tradeoffs that come with data centers. “These cases are my single most difficult. Every legal tool is being used,” he said. But the legal quagmire around data centers adds up to lot of billable hours. Big firms such as Latham & Watkins, Perkins Coie and WilmerHale are promoting their white-glove services to data center clients on their websites. And companies are throwing money at partners with experience handling data center projects. “When you start to see law firms large and small putting data centers on their websites, it tells you everything you need to know about the potential for business,” Morris said. Larger firms have also formed data center and digital infrastructure teams with a range of lawyers specializing in energy, regulatory and real estate law. Around one-third of large law firms now have a team or practice group specializing in data centers, according to a Bloomberg Law survey released in June. Energy lawyers are in particularly high demand because of data centers’ enormous power needs. Clean energy projects were the major focus of the energy industry during the Biden administration. But they have more recently been eclipsed by the data center buildout, said Tyler O’Connor, an energy litigator at Crowell & Moring in Washington, DC. He advises data center developers on energy compliance and infrastructure. “Even when we’re not working for those clients, almost all of the work we do now is informed by the emergence of data centers,” he said. Mass tort lawyers are also offering up help on social media to people who live near data centers and filing class action lawsuits against operators. “When these facilities started popping up everywhere, we were contacted by people who were upset,” said Laura Sheets, an attorney in Detroit who recently filed one of the country’s first nuisance cases against a data center operator in Michigan. These claims are a “natural fit” for her practice. Sheets has brought four nuisance complaints against data centers in four states and is preparing others. The suits say continuous noise from data centers’ cooling systems and power generators is substantially interfering with local neighbors’ use and enjoyment of their property — a legal standard for proving a private nuisance. They also allege that data centers are driving down local property values. The case against data centers follows a legal playbook often used against large industrial facilities. Courts will apply the same set of laws used to address environmental and land use questions to data centers, said Michael Pollack, a professor at the Cardozo School of Law who focuses on land use law. Some of the lucrative work around data centers may eventually dry up. If lawsuits succeed in slowing development, the data center industry may lobby Congress to pass legislation that pre-empts municipalities from blocking new construction. That could stop the flood of local lawsuits against data centers. After a wave of local communities blocked wireless cell phone towers in the 1990s, Congress made it harder for municipalities to ban antennas or towers for wireless service in the Telecommunications Act of 1996. “Companies may look to states or Congress to pass laws that give them a trump card,” Pollack said.