City of Gallatin v. Gallatin Data Centers, LLC; Gallatin Data Centers, LLC and Phoenix Data Center Holdings, LLC v. City of Gallatin and Gallatin Department of Electricity

Summary

The United States District Court for the Middle District of Tennessee considers the City of Gallatin’s renewed motion for judgment on the pleadings in a dispute concerning the City’s asserted right to repurchase property sold to Gallatin Data Centers, LLC. The court denies the motion, addressing the pleadings, contractual and restrictive-covenant provisions, alleged development activities, and the standards governing Rule 12(c) motions. The case also involves counterclaims for declaratory judgment, unjust enrichment, and breach of contract by Gallatin Data Centers, LLC and Phoenix Data Center Holdings, LLC.

Holdings

1. The City was not clearly entitled to judgment on the pleadings because the pleadings, construed in the Counter-Plaintiffs' favor, alleged facts that could defeat the City's repurchase right and created factual issues concerning the meaning and application of the governing provisions.
2. The City was not entitled to specific performance because, even assuming the City's interpretation that its repurchase right lasted until GDC began construction of a building, the allegations that GDC graded the property plausibly established that construction had begun before the City's January 2024 exercise of the repurchase right.
3. The City was not entitled to judgment on the pleadings dismissing the declaratory-judgment counterclaim.
4. The City was not entitled to judgment on the pleadings dismissing the unjust-enrichment counterclaim.
5. The City was not entitled to judgment on the pleadings dismissing the breach-of-contract counterclaim because the pleadings presented a factual question regarding whether the City and the Gallatin Department of Electricity were one entity or separate entities.

Questions Presented

1. Whether the City was entitled to judgment on the pleadings and specific performance based on its interpretation of the restrictive-covenant and warranty-deed repurchase provisions.
2. Whether GDC's alleged grading and other development activities constituted the beginning of construction or development sufficient to extinguish the City's repurchase right.
3. Whether the counterclaims for declaratory judgment, unjust enrichment, and breach of contract were subject to judgment on the pleadings.
4. Whether the City and the Gallatin Department of Electricity were sufficiently shown on the pleadings to be separate entities for purposes of the breach-of-contract counterclaim.

Disposition

other