New Jersey Developer Takes Montgomery Township to Court Over AI Data Center Ban
A legal fight over artificial intelligence infrastructure is putting Montgomery Township in Somerset County at the centre of New Jersey’s growing debate over where large data centres should be built.
E. Kahn Development, or EKD, the owner of a large former Johnson & Johnson and Kenvue campus in Montgomery Township, has filed a lawsuit challenging the township’s decision to prohibit data centres throughout the community. The developer is asking a New Jersey Superior Court judge to invalidate the ban and stop the township from enforcing it.
The lawsuit, filed July 31, adds another layer to an already complicated dispute over the future of the 257-acre property on Grandview Road. EKD is also seeking more than $300 million in damages, arguing that the township’s action has significantly reduced the property’s potential value and restricted the company’s redevelopment options.
The dispute comes as communities across New Jersey wrestle with a difficult question: how should towns handle the rapid growth of artificial intelligence and the enormous facilities needed to support it?
Data centres are specialised buildings that house computer servers and other equipment used to store and process enormous amounts of digital information. The rapid expansion of artificial intelligence has increased demand for these facilities because AI systems require substantial computing power.
For Montgomery residents and local officials, however, the issue is not simply about technology. Large data centres can require significant amounts of electricity and, depending on their cooling systems, substantial water resources. They can also create concerns about noise, equipment, backup power systems, construction activity and the effect of major industrial facilities on nearby neighbourhoods.
Those concerns were at the heart of Montgomery Township’s decision to prohibit data centres.
The Township Committee unanimously approved an ordinance on June 18 that added data centres and detention centres to the township’s list of prohibited uses. The change effectively prevents a data centre from being developed anywhere within Montgomery Township under the current land-use rules.
Township officials have pointed to concerns involving electricity consumption, water use and cooling-system noise. The ordinance states that the restrictions are intended to protect residential, commercial and environmental resources and support orderly development within the township.
EKD sees the matter differently.
In its lawsuit, the developer argues that the township went too far by imposing a complete ban rather than creating regulations that could address specific concerns. The company maintains that issues such as noise, setbacks, utility demand and environmental impacts could potentially be handled through conditions placed on individual projects.
That distinction could become important as the court considers whether Montgomery’s decision was a legitimate land-use measure or an improper attempt to prevent a particular type of development.
The developer has also argued that the former Kenvue campus has characteristics that make it suitable for a data centre.
The property was previously used for corporate offices, research and manufacturing operations connected to Johnson & Johnson. It was later occupied by Kenvue, the consumer health company spun off from Johnson & Johnson and known for brands such as Tylenol, Neutrogena and Band-Aid.
Kenvue began moving away from the Montgomery campus after announcing plans in 2024 to relocate its operations to Summit.
EKD acquired the property around December 2025 and has since explored different possibilities for redeveloping the large site.
One argument made by the developer is that the property already has substantial electrical infrastructure because of its previous industrial and research uses. EKD representatives have also pointed to the distance between the campus and nearby homes.
According to the allegations described in the lawsuit, the closest residential property is roughly 2,000 feet from the site, with a railroad line and existing buffers separating the campus from surrounding residential areas.
The developer has further argued that a data center could create less daily vehicle traffic than some other industrial uses, including manufacturing or warehousing.
That does not mean a data center project has been approved for the property.
In fact, the dispute is taking place before EKD has submitted a formal site plan specifically for a data centre. Instead, the developer’s representatives discussed the possibility of using the property for such a facility during the township’s June 18 public hearing.
At that hearing, EKD representatives described a data centre as potentially the “highest and best use” of the former Kenvue property.
The timing of the township’s ban is especially significant because EKD and Montgomery have already disagreed over other redevelopment plans for the same property.
The site had previously been considered as part of Montgomery’s affordable-housing planning. At one point, the property was expected to be rezoned to allow residential development that could include affordable housing.
That plan faced resistance from nearby residents who raised concerns about traffic, wetlands, wildlife and other effects associated with a major residential project.
The township ultimately removed the property from that affordable-housing plan.
EKD then pursued a different path based on uses it says are permitted under the property’s existing zoning.
In October 2025, the developer submitted a general development plan involving potential manufacturing, warehouse, research laboratory and office uses.
That proposal ran into another legal obstacle.
The Montgomery Planning Board dismissed the General Development Plan application after determining that the township did not have an ordinance authorising the board to consider such a plan. Township planning officials said the decision was based on a jurisdictional issue rather than a detailed review of the proposed development.
EKD challenged that decision in a separate lawsuit filed in January. That case remains part of the broader dispute over what can ultimately happen at the former corporate campus.
The new data centre lawsuit, therefore, is not an isolated disagreement. It represents another stage in a continuing battle between the property owner and local government over zoning, redevelopment and the future of a major piece of land.
The case also reflects a much larger trend across New Jersey.
As demand for artificial intelligence services grows, developers are looking for locations where large computing facilities can be constructed and connected to reliable power. At the same time, municipalities are becoming increasingly cautious about allowing projects that could place new demands on local infrastructure.
That has created a difficult balance for local governments.
Data centres can bring investment, construction activity, property-tax revenue and new economic opportunities. But communities must also consider whether existing electrical systems, water resources, roads and surrounding neighbourhoods can accommodate the facilities.
The debate is particularly sensitive in suburban communities where large technology facilities may sit close to established residential areas.
Montgomery’s decision to prohibit data centers rather than regulate them puts that question directly before the courts.
EKD contends that the township’s concerns could be addressed through appropriate development standards instead of a blanket prohibition. The company argues that the ban was influenced by political pressure and public opposition rather than sound land-use planning.
Montgomery officials, meanwhile, have maintained through the ordinance that the restrictions are connected to legitimate concerns about infrastructure, environmental resources and community protection.
The court will ultimately have to consider the legal arguments presented by both sides.
The lawsuit does not automatically mean a data centre will be built on the former Kenvue property. Even if EKD succeeds in challenging the ban, the developer would still have to navigate the applicable zoning, planning and permitting requirements before construction could begin.
Likewise, the lawsuit does not guarantee that Montgomery’s ordinance will remain in place permanently. Its future will depend on the court proceedings and any subsequent decisions by township officials.
For now, the former Johnson & Johnson campus remains at the centre of an unresolved redevelopment debate.
What makes the Montgomery case particularly notable is that it brings together several issues that are increasingly colliding across the country: the explosive growth of artificial intelligence, demand for new digital infrastructure, local control over land use, environmental concerns and the economic value of ageing commercial properties.
As more developers look for locations for AI-related infrastructure, communities such as Montgomery are being forced to decide whether these facilities should be welcomed, tightly regulated or prohibited altogether.
The legal battle in Somerset County could therefore have significance beyond the boundaries of one New Jersey township. Its outcome may help illustrate how local governments and developers navigate the growing conflict between AI’s demand for physical infrastructure and residents’ concerns about how that infrastructure changes their communities.
For Montgomery Township, the immediate question is whether its town-wide data centre prohibition can withstand the developer’s legal challenge.
For EKD, the larger issue is whether the owner can retain the freedom to pursue what it considers the most valuable future use for a property that has already gone through several possible redevelopment plans.
Until the court resolves those questions, the future of the former Kenvue campus remains uncertain — and the quiet Somerset County community has become an important battleground in New Jersey’s rapidly expanding AI infrastructure debate.
Sources
Montgomery Township, New Jersey — official Land Development Code and Ordinance No. 26-1779.
Montgomery Township, New Jersey — official Township Committee meeting and public-hearing materials.
Montgomery Township, New Jersey — official Planning Board records concerning E Kahn Development Corporation.
New Jersey Courts — official court records and public case information.
New Jersey Department of Environmental Protection — official information concerning environmental and land-use regulation.
