Antitrust Law Daily Wrap Up, ANTITRUST—N.D. Ill.: Affirmative defenses stricken in action over fire protection district alarm monitoring monopoly, (Feb 5, 2014)

By Linda O’Brien, J.D., LL.M.

The affirmative defenses of unclean hands, estoppel, and waiver raised by a private alarm monitoring service in an action filed by competing private alarm monitoring companies that raised antitrust and constitutional issues in response to a fire protection district ordinance have been stricken by the federal district court in Chicago (ADT Security Services, Inc. v. Lisle-Woodridge Fire Protection District, February 4, 2014, Shadur, M.).

The Lisle-Woodridge Fire Protection District (the District) adopted an ordinance which required commercial buildings and multi-family residences to install fire alarms equipped with wireless radio technology that would send alarm signals to a central monitoring location operated by the District. The ordinance also provided that the District would contract with one private alarm company to provide the signaling equipment. Subsequent to the award of the contract to Chicago Metropolitan Fire Prevention, Inc. (Chicago Metro), several private alarm companies filed suit against the District and Chicago Metro, alleging that the ordinance violated federal antitrust laws by creating a monopoly and precluding competition for alarm monitoring services. The alarm companies moved to strike the defendants’ affirmative defenses.

Ruling that the plaintiffs’ motion to strike was untimely filed, the court exercised its discretion to strike the defendants’ affirmative defenses. The District and Chicago Metro asserted the defenses of unclean hands, estoppel and waiver based on the argument that the plaintiffs participated in arrangements with other fire protection districts that were similar to the arrangement between the District and Chicago Metro that the plaintiffs have challenged. In rejecting the defenses, the court determined that alleged misconduct elsewhere could not form the basis for an affirmative defense in the current litigation. In this case, the alarm companies are seeking to retain their preexisting contractual relationships within the District which are unrelated to their arrangements with other fire protection districts.

Chicago Metro also contended that two of the alarm companies submitted unsuccessful competing bids with Chicago Metro to supply the District with the fire protection network. In rejecting Chicago Metro’s argument that the doctrines of unclean hands, estoppel and waiver should bar parties from challenging the legality of actions they attempted themselves, the court found that the doctrines may be invoked against plaintiffs based on their own conduct and not the conduct of other parties in the litigation.

Chicago Metro’s assertion of a Noerr v. Pennington defense that the alarm companies’ claims were based on its efforts to lobby or petition the District also was rejected. Chicago Metro’s conduct went beyond mere lobbying in light of the alarm companies’ allegations that it not only petitioned the District to engage in antitrust violations but participated in tandem with the District in furtherance of those violations.

Finally, Chicago Metro’s defense that the alarm companies engaged in a conspiracy in restraint of trade was dismissed as without merit. The defendant failed to plead sufficient facts to plausibly state a claim, the court concluded.

The case is No. 10 C 4382.

Attorneys: Christopher Young (Pepper Hamilton LLP) for ADT Security Services, Inc. David Joel Bressler (Dykema Gossett Rooks Pitts PLLC) for Alarm Detection Systems, Inc., D.M.C. Security Services, Inc., Illinois Alarm Services, Inc. and SMG Security Systems, Inc. Martin K. LaPointe (LaPointe Law, PC) for The Lisle-Woodridge Fire Protection District. Christopher W. Carmichael (Holland & Knight LLP) for Chicago Metropolitan Fire Protection, Inc.

Companies: ADT Security Services, Inc.; Alarm Detection Systems, Inc.; D.M.C. Security Services, Inc.; Illinois Alarm Services, Inc.; SMG Security Systems, Inc.; The Lisle-Woodridge Fire Protection District; Chicago Metropolitan Fire Protection, Inc.

Cases: Antitrust IllinoisNews