Washington County lawsuit seeks restraining order to shut down Bitcoin mine

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JONESBOROUGH, Tenn. (WJHL) – Washington County sued BrightRidge in chancery court Monday seeking a restraining order that would force a shutdown of a controversial Bitcoin mine in rural Limestone. The lawsuit contends the operations violate the county’s Zoning Resolution.

A hearing initially set for Wednesday morning in Chancellor John Rambo’s court was rescheduled to Nov. 24.

The restraining order requested would prohibit BrightRidge “from any further use of the property in violation of the Zoning Resolution whether directly or indirectly as BrightRidge or through consent and agreement with other entities.”

The suit follows what Washington County Attorney Allyson Wilkinson described as repeated efforts to get BrightRidge, a regional electricity distributor, to shut down the mine owned and operated by Red Technologies LLC.

Red Dog leases property next to BrightRidge’s Phipps substation along Bailey Bridge Road and uses power directly from the substation. It became BrightRidge’s largest electricity user when it started operating this spring.

“BrightRidge exacerbates the problem by refusing to cease operations upon repeated written and verbal requests and referring Washington County to BrightRidge’s business partner, Red Dog Technologies, LLC,” the suit reads.

“Washington County has no relationship to this entity or any other business partner of BrightRidge’s and Tennessee law empowers this Honorable Court to enter a valid decree settling the rights between Washington County and BrightRidge.”

The county contends that on two counts, BrightRidge is violating a rezoning of the land the county commission approved in February 2020.

First, BrightRidge never received a final inspection or approval for use, though that’s clearly a procedural matter that could be remedied.

More importantly, because use by a private business (Red Dog) for a cryptocurrency mine is not permitted in the A-3 (agriculture business) district, the suit argues that Red Dog’s operations don’t constitute a permitted use under the county’s zoning resolution. That’s something that could only conceivably change through BrightRidge, or possibly Red Dog, requesting a variance that would allow the company to operate in the A-3 zone.

BrightRidge applied for the rezoning to allow for a “blockchain data center” but never mentioned a private-sector partner, or crypto mining. That mining, which uses high-powered computer equipment and takes a tremendous amount of electricity, has produced ongoing noise that prompted the initial complaints from neighbors in May.

Wilkinson essentially argues that BrightRidge used an end run to get rezoning permission for itself and that the power provider is now incorrectly claiming the county’s issue should be with Red Dog, not it.

BrightRidge issued a statement Tuesday after its board met in called session Monday and was briefed on the lawsuit. It included a quote from board chairman James Smith that began with reference to BrightRidge being “one of Washington County’s best allies in promoting economic and community development.”

Speaking on behalf of the board, Smith stated “disappointment that we find ourselves as the target of today’s lawsuit. We would have preferred a non-litigated solution to the current disagreement and don’t believe that all other possible solutions were explored.”

‘An undisclosed business relationship’

The suit cites a July 2020 site plan from BrightRidge reviewed by the Washington County Planning Commission as evidence that BrighRidge continued to present the project as that of a public utility.

That plan, which Planning Director Angie Charles’s staff recommended for approval, depicted “a data center for BrightRidge, which consists of 15 containers and their associated generators.”

The lawsuit then fast forwards to May 24, 2021, when “Limestone residents appeared at an open meeting of the Washington County Board of Commissioners complaining about the noise and other aspects of the operation at the property.”

It was then the county learned, the lawsuit says, that operations had begun at the site prior to BrightRidge undergoing an inspection or gaining final approval — and that the property wasn’t being used as a public utility.

“Instead, through an undisclosed business relationship with unidentified contracting parties, BrightRidge had agreed and consented to Red Dog Technologies, LLC’s use of the property to operate a Bitcoin blockchain verification facility.”

The road to court

As News Channel 11 has reported in its investigation of the story, Charles and Wilkinson informed Washington County Mayor Joe Grandy of the violations shortly after that May 24 meeting. Grandy, who also sits on BrightRidge’s board of directors, did not authorize action.

But Washington County commissioners continued hearing from nearby residents, while Red Dog sought a solution to the noise issue. In August they asked BrightRidge CEO Jeff Dykes whether he had asked Red Dog to shut down the mine while they worked on a solution.

Unaware their mayor had been informed of the zoning violations, commissioners also asked Wilkinson to investigate potential legal remedies. She reported at their September 27 meeting that they could direct Charles to order BrightRidge to shut the operation down, which Charles did by letter the next day.

That letter included reference to legal action if BrightRidge didn’t comply. Dykes wrote back Sept. 30 that it was Red Dog, not BrightRidge who the county should be communicating with about unlawful use of the land. His letter urged “dialogue in good faith, not resorting to the court system through litigation.”

But as the lawsuit notes, BrightRidge then requested a meeting at the substation to secure a commercial zoning compliance permit final inspection — something they hadn’t done previously, as noted in Charles’s letter.

Charles’s department visited the site Oct. 20 where they learned the operation was still active. They “personally delivered the renewed request that operations immediately cease and identified a number of deficiencies including the unpermitted use,” the lawsuit states.

Wilkinson told commissioners at their Oct. 25 meeting she had contacted BrightRidge attorney Steve Darden Oct. 22 hoping to avoid a lawsuit.

Her letter to Darden is included in an affidavit from Charles attached to the suit. In it, she referenced BrightRidge’s and Dykes’s “strong reputation in this community” and said the county “views this matter as a business dispute with a longstanding partner.”

That said, she made no bones about the county’s need to “protect the interests of the County as a whole” and wrote that litigation had been authorized.

“I urge you to evaluate this matter and provide your client with a recommendation that comports with the Zoning Resolution — and avoids the need for court intervention,” the letter concluded.

Darden and Wilkinson met Nov. 5, judging from a Nov. 8 letter from Wilkinson that began with her thanking him for “the professional hospitality you extended on Friday afternoon.

Her letter referenced another Nov. 5 event — a letter from Charles to BrightRidge’s Sam Ford letting him know the county “cannot approve the BrightRidge Data Center Commercial Zoning Compliance Permit Application.”

Wilkinson’s letter informed Darden that the county expected BrightRidge to comply with the shutdown order.

“I hope to hear form you that BrightRidge puts the interests of Washington County citizens and the rule of law ahead of the discomfort of working through whatever dispute exists between BrightRidge and its business partner(s). If so, it will avoid the need for Washington County to seek court intervention.”

Four days later (last Friday), Wilkinson emailed Darden, presumably not having heard anything back.

“I presume you have had the opportunity to confer with your client,” the one-line email read. “Thanks and best regards.”

Monday, the suit was filed with its final paragraph simply reading, “BrightRidge’s unpermitted use continues.”

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