Defendants in a Birmingham data center lawsuit have agreed to turn over sales documents that might shine light on how land the facility is being built on dramatically rose in value the day it sold.
Three transactions in a little more than an hour last year increased the property’s price by $66 million, according to plaintiffs, who include residents who live near the site and the Greater Birmingham Humane Society, which has a facility on adjacent land. Defendants in the case include data-center developer Nebius and the city of Birmingham.
Plaintiffs’ attorney Mark Parnell said the agreement reached in a Jefferson County courtroom Wednesday is a win for his clients.
“The defendants are doing everything they can to keep us from getting information,” he said. “The heart of what we were seeking, we got by agreement. It took the judge's intervention to get us to that, but hopefully those core documents we get will answer all the questions that we have, or it may lead to other inquiries that we’ll have to make.”
Plaintiffs’ attorneys had subpoenaed records from several companies that aren’t parties to the lawsuit. The companies include Regions Bank, which formerly owned the site, and Iron City Premier Realty, a firm owned by Birmingham Mayor Randall Woodfin’s wife, Kendra Woodfin. The defendants, Regions and Iron City Premier Realty objected to the subpoenas, calling them a broad fishing expedition.
Wednesday’s hearing was the first to take place after Jefferson County Circuit Court Judge Javan Patton Crayton consolidated three related lawsuits last month. The now-single suit alleges the city of Birmingham illegally granted permits for the data center, which is being built in a mixed-use zoning district near homes and a school, and asks the court to end the project.
Relevance, legitimacy of same-day sales questioned
Defense attorneys argued the land-sales transactions aren’t relevant to the part of the case scheduled for a March 8 non-jury trial for which both sides are currently preparing.
“The acquisition of the land is a complete sideshow that has nothing to do with the propriety of permitting,” Charles Prueter, an attorney for Nebius, said in court Wednesday.
Crayton then addressed plaintiffs’ attorney Parnell: “I presume that your response to that is going to be that's why you're seeking the information that you’re seeking is to wrap it all up.”
Parnell answered in the affirmative and said after the hearing that the same-day land sales don’t make sense to him.
“The whole transaction is suspicious,” he said. “They may have a good explanation for it, and that's what the discovery that we're seeking would help us answer.”
Land-use law experts say there can be legitimate reasons for commercial property to change hands and escalate in value during a short time. Multiple transactions can take place for reasons related to taxes, financing and business development, said Kellen Zale, a professor who teaches land-use law at the University of Houston.
Multiple contracts or options can be negotiated and then executed simultaneously, said Blake Hudson, dean of Samford University’s law school and director of its Land Use & Natural Resources Center.
“A developer or intermediary might acquire a contractual right to purchase property and then arrange to sell the property, or that right, to another party without ever intending to hold the land for any significant period of time,” he said.
Price increases can reflect more than the value of the land itself, he continued. Assembling multiple parcels, securing development rights or access to infrastructure or otherwise putting together a site for a particular project can add value, he said.
“None of that means that those explanations necessarily account for what happened here,” Hudson said. “The size of the increase is certainly enough to raise reasonable questions about what accounts for the difference in price.”
Zale said those kinds of sales transactions and price increases typically take place over a longer time period than one day.
“Normally you actually do see properties kind of changing hands over weeks, months, years, and the price increasing because the property has actually gotten more valuable because it's made it past one set of regulatory hurdles, and then sold to somebody else, and that somebody else maybe will get it through the next set of regulatory hurdles and eventually, it'll get sold to the entity that's doing the actual construction,” she said.
Before reaching a conclusion that something improper happened, someone would need to know more about the contracts, relationships among the parties and what rights or other value was transferred with the property, Hudson said.
Subpoena withdrawn from realty firm mayor’s wife owns
As part of the agreement the judge brokered, plaintiffs attorneys will hold off on the subpoena for Iron City Premier Realty.
Leroy Maxwell Jr., an attorney representing the real-estate company and Kendra Woodfin, also called the hearing a victory for his clients.
“The plaintiffs were not able to articulate any sort of connection to the data center transaction to Iron City or to Mrs. Woodfin – no brokerage relation, no agent relation, no purchase relation,” he said. “They just said they had some information but couldn’t articulate why.”
Parnell said depending on what the real-estate closing documents reveal, he could issue additional subpoenas.
Plaintiffs, Regions to resolve dispute over records request
Plaintiffs attorneys also agreed to meet with Regions attorneys to work out their requests for documents and electronically stored information from that company.
A Regions shareholder last month filed a separate lawsuit related to the sale of the data-center property.
Crayton issued an order Thursday overruling defendants’ objections to subpoenas of information from 201 Milan Birmingham LLC, the middle buyer/seller in the three sales transactions. She indicated in court Wednesday she also was likely to allow a subpoena of Alabama Power records to go through.
