A judge handed Nevada data center giant Switch a setback Monday in a battle of rival developers at the Tahoe Reno Industrial Center (TRIC).

In a 16-page ruling, Storey County District Judge Jason Woodbury gutted Switch’s argument that Tract Management had violated a restrictive property covenant when it began to develop acreage it purchased in 2023 in the industrial center and on adjacent land known as the Peru Shelf.

It’s the latest development in a running legal battle as the data center industry rushes to expand to embrace the skyrocketing use of artificial intelligence (AI) in everyday life. The potential for profit has created an AI gold rush in Nevada and elsewhere — despite concerns about the intensive water use and energy consumption of data centers.

In denying Switch’s motion for summary judgment, Woodbury went to substantial lengths to define the parameters of the covenant in question. He also granted summary judgment in favor of Tract in its counterclaim against Switch.

Switch develops colocation data centers, which store and transmit information for multiple companies, and in that capacity enjoys exclusivity inside TRIC. But, the judge wrote, that property covenant doesn’t apply to independent, single-user data centers of the kind Tract has proposed to develop.

The judge noted in his ruling that the covenant has been in place for more than a decade and previous attempts by Switch to amend it were rejected by the industrial park’s owners.

After having its Northern Nevada investment mired in litigation marking its third year, Tract officials were noticeably pleased with the judge’s decision.

“Switch’s lawsuit never had any basis in law or fact,” a company spokesperson said in a statement. “Now, after two years of fruitless litigation, the Court has unambiguously rejected Switch’s claims and vindicated our position.”

In its own statement, Switch said it was pleased that the court reinforced its covenants on certain land parcels, restrictions that will remain in effect for 88 years. It also said it will “continue to vigorously pursue all methods to enforce its rights against Tract, including in its pending easement litigation, which is scheduled for trial in March 2026 following the Court granting a preliminary injunction in favor of Switch and against Tract in July 2025.”

The judge’s ruling was measured but thorough, and can’t help but raise questions about Switch’s motives for the litigation. Tract has argued in court filings that Switch has a history of harassing business competitors. The company has denied those allegations.

From the start, “Switch wanted a broad restrictive covenant,” Woodbury wrote. “(Tahoe Reno Industrial Center, LLC) wanted a narrow one. They ultimately agreed to language prohibiting colocation facilities on certain property at TRIC.”

The judge said that as early as 2014, Lance Gilman and the rest of the industrial park’s developers had rejected Switch’s proposed restrictions on single-customer data centers. They allowed only a restriction on colocation centers.

“In response to Switch’s deal points,” he wrote, “TRI was adamant that any use restriction be narrow and, on January 10, 2015, Mr. Gilman related TRI’s response further limiting Switch’s proposal of a restriction on colocation facilities.”

In August 2023, Tract purchased more than 2,200 acres of undeveloped land from Nevada-based software developer Blockchains. Switch filed its lawsuit against Tract a few weeks later.

In his analysis, Woodbury called the covenant “appropriately narrow” and substantially different from Switch’s interpretation of it.

“Switch's reading, while not completely illogical, is not a natural reading of the Covenant's plain language and stretches the scope more broadly than the text of the Covenant reasonably allows," he wrote. "Tract's is a workable construction supported by the terms of the Covenant: multi-tenant data centers are restricted, single-tenant and owner-occupied data centers are not."

An argument that Switch and master developer TRI may have privately had other intentions for the covenant was insufficient, he said.

"A subsequent purchaser, like Tract, cannot be bound by the internal intentions of the party restricting the use of the land to create a broader covenant," he wrote.

In June the parties to the lawsuit filled Woodbury’s courtroom in for a two-day hearing to wrangle over control of a dirt access road that could enable — or deter — full development of the properties in question. Switch founder and CEO Rob Roy testified that the company had signed major agreements to construct new data center colocation plants, and the clock was ticking. With the potential of billions at stake in a booming data industry fully embracing the use of artificial intelligence, the stakes are obviously high.

In addition, data center industry publications have reported the possibility of Switch going public in what’s being called a $40 billion initial public offering. Keeping to a tight construction deadline is a high priority.

It’s unclear whether this latest ruling will reverberate inside the company, whose chief investor DigitalBridge, through its CEO Marc Ganzi, has called Roy “a great talented CEO,” but one who “wasn't exactly in love with dealing with public investors because Rob's a very mercurial talent.” The plan, Ganzi told an analyst in 2024, was to free Roy “to go do what he does best, which is sell customers and build great data centers.”

From the look of things, Roy remains confident. In an industry interview in Investmentreports.co posted the day of the judge’s ruling, the Switch CEO expressed confidence in the company’s expansion plans and its place in the rapidly developing AI sector of the data center industry.

“For Switch, the next decade is about more than scale,” Roy said. “It is about building infrastructure flexible enough for new architectures, intelligent enough to orchestrate around energy realities, and principled enough to embed responsibility at every layer. AI factories will continue to evolve, and Switch will continue to shape that evolution.”

That sunny future is complicated by new competition close to home from Tract, which also sees a substantial bright side on the horizon: “Our work will continue for our customers and investors as we bring significant additional economic development to Storey County and the surrounding communities.”

In its own statement, Switch said it is “firmly committed to further growth and continuing its efforts to ensure the long-term economic success of Storey County, as it has done since coming to the Tahoe Reno Industrial Center over a decade ago.”

Storey County should be so lucky, but the tone of the litigation is starting to make me wonder whether there’s enough room at that industrial center for both companies.

John L. Smith is an author and longtime columnist. He was born in Henderson and his family’s Nevada roots go back to the 1860s. His stories have appeared in New Lines, Time, Reader’s Digest, Rolling Stone, The Daily Beast, Reuters and Desert Companion, among others.