Antitrust Law Daily Wrap Up, ANTITRUST—N.D. Ill.: Alarm company’s claims against fire protection districts, rivals narrowed , (Sep 9, 2015)

By Jeffrey May, J.D.

The federal district court in Chicago has significantly narrowed the antitrust claims in an action brought by a fire alarm services company against three municipal fire protection districts in Illinois and the private alarm contractors with whom they contracted. The complaining firm did, however, plausibly allege that it was effectively precluded from competing for business by the actions of one of the defending districts and a contractor. All but two of eight antitrust counts in the complaint were dismissed without prejudice (Alarm Detection Systems, Inc. v. Orland Fire Protection District, September 8, 2015, Durkin, T.).

Alarm Detection Systems, Inc. (ADS) sued the municipal fire protection districts of Bloomingdale, Lemont, and Orland for, among other things, entering into agreements with fire alarm services companies—Tyco Integrated Security, LLC, Cross Points, Inc., and Chicago Metropolitan Fire Prevention Company—in violation of the federal antitrust laws. Eight of the 14 counts in the complaint were based on alleged antitrust violations. ADS also contended that the districts exceeded their authority under Illinois’s Fire Protection District Act when they contracted with three fire alarm services companies and violated the Equal Protection and Due Process Clauses of the Fourteenth Amendment by taking away ADS’s rights under the District Act to provide fire alarm services. ADS settled its claims with Bloomingdale and Lemont, but their actions remained relevant to determining the liability of the remaining defendants—Chicago Metro, Cross Points, Tyco, and Orland.

ADS claimed that it lost customers because of the anticompetitive agreements between the districts and the defending companies that precluded other alarm companies from competing for accounts. Bloomingdale, Lemont, and Orland allegedly maintained illegal monopolies over the fire alarm monitoring markets in their districts. The agreements between the districts and defending companies allegedly restrained trade. Moreover, the transfer by Bloomingdale and Lemont of these monopolies to Tyco provided Tyco with “an advantage” because commercial and multi-unit residential building owners were “reluctant to seek other private alarm contractors when they can contract for [alarm services] with the private alarm contractor that owns the wireless transmitters already in place.”

Statute of limitations. Since ADS did not file suit until 2014, its antitrust claims based on Bloomingdale’s 2005 agreement with Chicago Metro and Lemont’s 2002 agreement with Cross Points were barred by the four-year statute of limitations. The Bloomingdale-Chicago Metro and Lemont-Cross Points agreements purportedly required subscribers to use only the districts’ appointed private alarm companies.

ADS unsuccessfully contended that its claims based on these agreements were timely because Chicago Metro and Cross Points’s “active participation” in the agreements constituted “ongoing conduct that avoids the statute from running.” Under ADS's theory of the case, however, no actions other than the agreements and their enabling ordinances were necessary to effectuate the company's exclusion from the alleged markets.

Antitrust injury. ADS failed to allege an antitrust injury to support claims that agreements between Bloomingdale and Tyco and Lemont and Tyco, as well as the assignment of subscriber agreements to Tyco, violated Sections 1 and 2 of the Sherman Act and Section 7 of the Clayton Act, the court ruled. Subscribers were purportedly informed that they were not required to continue under their subscriber agreements with Tyco and were free to choose any private fire alarm company to maintain and monitor their fire signaling equipment. The court pointed out that ADS had admitted that it had been able to acquire “a handful of accounts” in Bloomingdale with its lower prices.

ADS adequately alleged, however, that unlike customers in the Bloomingdale and Lemont district, subscribers in Orland were not free to contract with any private alarm company for provision and maintenance of their alarm signal transmission equipment. It was plausibly alleged that Orland subscribers were forced to buy or lease their equipment from Tyco at prices higher than the market would bear if other private alarm companies were permitted to compete for this business, in the court's view. Tyco was unable to win dismissal on the ground that the collection of fees did not amount to exclusionary conduct to support a monopoly claim.

State action immunity. The state action doctrine did not bar ADS's claims against Orland, the court also ruled. The Illinois Fire Protection District Act did not provide Orland with the authority to enact its ordinance and by extension to enter the agreement with Tyco that the ordinance enabled.

This is Case No. 1:14-cv-00876.

Attorneys: Bruce Lee Goldsmith (Dykema Gossett Rooks Pitts PLLC) for Alarm Detection Systems, Inc. Ericka J. Thomas (Ottosen Britz Kelly Cooper Gilbert & DiNolfo, Ltd.) for Bloomingdale Fire Protection District. James J. Roche (James J. Roche and Associates) for Orland Fire Protection District. A. Christopher Young (Pepper Hamilton LLP) for Tyco Integrated Security, LLC. Kenneth B. Drost (Drost, Gilbert, Andrew & Apicella LLC) for Cross Points, Inc. Christopher James Murdoch (Holland & Knight LLC) for Chicago Metropolitan Fire Prevention Co.

Companies: Alarm Detection Systems, Inc.; Cross Points, Inc.; Chicago Metropolitan Fire Prevention Co.; Tyco Integrated Security, LLC; Bloomingdale Fire Protection District; Orland Fire Protection District.

Cases: Antitrust IllinoisNews