New Jersey Data Center Bans Draw a Second Developer Lawsuit, and a $300 Million Damages Claim

New Jersey municipalities are moving aggressively to keep data centers out, and developers are beginning to push back in court. Within the span of a month, two New Jersey townships have been sued by data center developers over local bans, and one of those suits seeks damages in excess of $300 million. Property owners, developers, and municipalities with data center projects in the pipeline should be paying close attention to how these cases unfold.

The Monroe Township Litigation

The most consequential of the new filings is Hexa Builders, LLC and 3043 Williamstown Urban Renewal, LLC v. Mayor and Township Council of the Township of Monroe and Planning Board of the Township of Monroe. Hexa filed a twenty-count Complaint in Lieu of Prerogative Writ in Gloucester County Superior Court on June 5, 2026. The Township removed the case to the United States District Court for the District of New Jersey in Camden on July 6, 2026, where it is now pending before Judge Edward S. Kiel as Civil Action No. 26-cv-08284-ESK-EAP.

The factual background matters because the plaintiffs’ theory rests almost entirely on the sequence of municipal actions.

The subject property, located at 3043 Black Horse Pike in Williamstown, sits within an area the Township designated in 2019 as in need of rehabilitation and later as a non-condemnation redevelopment area in 2024. In February 2023, Monroe adopted a redevelopment plan permitting warehouse, storage, and distribution uses on the property. In March 2025, the Township amended that plan by ordinance to add data centers as a permitted use.

In September 2025, Hexa applied for preliminary major site plan approval for two warehouses totaling roughly 1.6 million square feet. The Planning Board approved the application at a January 8, 2026, hearing, though the record reflects substantial public opposition to a data center at the site.

What followed is the heart of the dispute. Later in January, the Township Council directed the Planning Board to develop performance standards for data centers addressing noise, emissions, water consumption, heat and glare, lighting, utility capacity, and viewshed impacts. The Planning Board did that work and forwarded its recommendations. A draft ordinance adopting those standards was listed for introduction on March 11, 2026, then pulled from the agenda.

Two weeks later, the Township introduced an ordinance repealing the designation of data centers as a permitted use on the property. On April 8, 2026, it introduced a second ordinance banning data centers, and any use substantially similar to a data center, in every zoning district in the Township. That same day, Hexa submitted an amended preliminary site plan application to convert one of the approved warehouses into a data center. Both ordinances were adopted on April 22, 2026, and took effect on May 13, 2026. On May 12, 2026, at a special meeting convened for the purpose, the Planning Board determined that the amended application was incomplete.

The town-wide ban includes two provisions that will likely receive close attention. The first states that no prior approval, including site plan approvals and redevelopment agreements, vests any right to establish a data center use. The second makes it a violation of the ordinance not only to construct or operate a data center, but to apply for or obtain any approval for a use that constitutes or resembles one.

The Claims

Hexa’s twenty counts blend federal constitutional theories with conventional New Jersey land use claims. They include equal protection challenges to the redevelopment plan amendment, the town-wide ban, and the completeness determination; a First Amendment claim premised on the argument that a total ban on facilities supporting electronic communication burdens protected speech; claims under 42 U.S.C. § 1983 and the New Jersey Civil Rights Act; federal and state Contract Clause claims; fundamental fairness and square corners claims; Municipal Land Use Law and ultra vires zoning claims; arbitrary, capricious, and unreasonable action claims; and a claim that the Township failed to give the notice required by N.J.S.A. 40:55D-62.1 and N.J.S.A. 40:55D-15. Each count seeks damages in excess of $300 million for the loss of the use of the property as a data center, plus fees and costs.

The Township’s Response

Rather than answer, counsel for Monroe submitted a letter to Judge Kiel on July 28, 2026, requesting leave to move to dismiss under Rule 12(b)(6).

The Township’s core position is that this is an ordinary local land-use dispute that does not become a federal civil rights case simply because it is pleaded as such. On equal protection, the Township argues that Hexa cannot identify a similarly situated comparator that was treated more favorably, and that the Complaint itself provides rational bases for regulating data centers as a distinct use. On the First Amendment, it argues that the ordinance regulates whether a physical facility may be built and operated, not speech, a speaker, or a message. On substantive due process, it argues that policy reversals, public opposition, and a disputed determination of completeness do not meet the conscience-shocking standard the Third Circuit requires. On the Contract Clause, the argument is that Hexa has not identified an existing contract that the ordinance substantially impaired.

The Township also raises a threshold argument that could reach seven of the counts regardless of how the constitutional theories fare. Because the property lies within the Pinelands Area, N.J.A.C. 7:50-4.34(b) bars a local permitting agency from deeming a development application complete unless a Pinelands Certificate of Filing accompanies it. Hexa acknowledges that it did not obtain a new Certificate of Filing for the data center application, contending that one was unnecessary given the earlier warehouse application. If the Court agrees with the Township on that point, the claims premised on the completeness determination become difficult to sustain.

Finally, the Township signals that, if the federal claims are dismissed, it will ask the Court to decline to exercise supplemental jurisdiction over the state-law claims under 28 U.S.C. § 1367(c), thereby returning the dispute to the Superior Court.

Data Center Bans Beyond Monroe

Monroe is not an outlier. On July 10, 2026, National Land Developers filed suit in Sussex County Superior Court challenging Andover Township’s data center ban, alleging a nearly identical sequence in which the township introduced operating standards and then, days later, replaced them with an outright prohibition.

More than two dozen New Jersey municipalities have now enacted bans or restrictions. That local activity is running ahead of, and in some tension with, state policy. In May 2026, Governor Sherrill announced a four-point framework intended to regulate rather than prohibit data centers, addressing cost allocation for grid connections, water and electricity reporting, community benefit agreements, and siting standards. Legislation implementing parts of that framework, including a large-load tariff bill, remains pending. The result is a widening gap between a state policy that contemplates regulated data center development and a growing number of municipalities exercising home rule to foreclose it entirely.

What These Data Center Bans Mean

Several practical points emerge for clients on either side of these disputes.

For developers and property owners. Approvals for one use do not carry over to a different use, and municipalities are including express anti-vesting language in their bans. Where a project depends on a politically vulnerable use, the timing of the application relative to a pending ordinance is critical, and the procedural record built at the local level, including waiver requests, objections to the completeness standard applied, and notice deficiencies, is often more valuable than a federal constitutional theory.

For municipalities. The Monroe and Andover complaints both target the same vulnerability: a governing body that developed reasonable performance standards and then abandoned them in favor of a total prohibition after public opposition. A municipality may amend its zoning in response to community concerns, but the record should reflect planning rationale rather than reaction. Bans that extend beyond zoning authority, penalize the act of applying for relief, or purport to override existing redevelopment agreements invite exactly the claims Hexa has brought.

For everyone. Damages exposure is now part of the calculus. Whether a $300 million figure survives court review, municipalities considering outright bans should evaluate that risk before adopting one.

How Scarinci Hollenbeck Can Help

New Jersey’s data center fight has moved from public meetings into the courts, and the first rulings in these cases will shape how much room municipalities have to prohibit a use that state policy contemplates regulating. Developers, property owners, and municipalities alike are better served by assessing their positions now than by waiting for the first decisions to be issued.

Daniel T. McKillop, a Partner in the firm’s Little Falls, NJ office, has twenty-five years of experience in all aspects of environmental law and litigation, including environmental permitting and compliance, regulatory proceedings before state and federal agencies, and the environmental aspects of commercial real estate and redevelopment transactions. Mr. McKillop and the attorneys of Scarinci Hollenbeck’s Environmental and Commercial Real Estate practice groups advise clients on the siting, permitting, and approval of energy-intensive development projects, evaluate the enforceability of local restrictions, and counsel municipal clients on the drafting and defensibility of land use regulations.

To discuss how New Jersey’s evolving data center restrictions may affect a current or contemplated project, contact Mr. McKillop at dmckillop@sh-law.com or 201-896-7115.