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Alarm Detection Systems, Inc. v. Orland Fire Protection District

United States Court of Appeals, Seventh Circuit

July 15, 2019

Alarm Detection Systems, Incorporated, Plaintiff-Appellant,
v.
Orland Fire Protection District, et al., Defendants-Appellees.

          Argued April 8, 2019

          Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. l:14-cv-00876 - Thomas M. Durkin, Judge.

          Before Wood, Chief Judge, and Scudder and St. Eve, Circuit Judges.

          ST. EVE, CIRCUIT JUDGE.

         This appeal is one of two we decide today regarding the market for commercial fire-alarm services in Chicago's suburbs. Here we are concerned with the Villages of Orland Park and Orland Hills (the "Villages") and, to a lesser extent, Bloomingdale and Lemont.

         In 2014, citing safety concerns, the Villages passed ordinances that require commercial buildings to send fire-alarm signals directly to the local 911 dispatch center. This decision, sensible as it may seem, comes at an economic cost: either by design or due to technological restraints, the ordinances allow only one alarm-system provider to operate in the Villages. That provider is Tyco Integrated Security, LLC. It services the area pursuant to an exclusive agreement with the Villages' dispatch center, Orland Fire Protection District.

         One of Tyco's competitors, Alarm Detection Systems, Inc. ("ADS"), filed this suit against Orland Fire, Tyco, and another dispatch center, DuPage Public Safety Communications ("Du-Comm"), among others. It brought a host of claims, including ones under the Illinois Fire Protection District Act (the "District Act"), the Sherman Act, and the Fourteenth Amendment-all with the goal of breaking Tyco's hold on the market.

         The district court decided for the defendants. After dismissing the District Act claims at summary judgment, it concluded after a bench trial that the Sherman Act claims fail because they are premised on the unilateral actions of the Villages-which ADS did not sue-and that the Fourteenth Amendment claims lacked merit. We agree and affirm.

         I. Background

         In Illinois, local laws often require commercial buildings and apartment complexes to maintain fire-alarm systems. The buildings and complexes-or "accounts," as the parties call them-contract directly with the alarm-system providers to install and maintain the systems. The National Fire Protection Association's National Fire Alarm and Signaling Code (NFPA 72) sets the nationwide standard for these systems.

         Should a system detect fire or smoke, local 911 dispatch centers are responsible for receiving distress calls and sending services. The dispatch center in the Villages and Lemont is Or-land Fire. It is what is called a "fire-protection district/' established under the District Act. 70 ILCS 705/1 et seq. The District Act requires fire-protection districts, like Orland Fire, to operate consistent with nationwide standards, like NFPA 72. See 70 ILCS 705/11. In Bloomingdale, Du-Comm is the dispatch center. Du-Comm is not a fire-protection district, but a different creature of Illinois law-an "intergovernmental cooperation," formed by several municipal members, including Bloomingdale. 5 ILCS 220/3.

         The logistics of the fire-alarm systems are important to this appeal. Each account's system has essentially three parts: heat or smoke detectors, a panel, and a transmitter. When a detector goes off, it sends an alert to the panel. The panel then connects to the transmitter. The transmitter, in turn, sends a radio signal to one of two places: (1) a central-supervising station run by the alarm-system provider (the "CSS model"); or (2) a remote-supervising station operated by the local dispatch center (the "RSS model"). Which model applies depends on the account and its provider's arrangement or, as here, what the local ordinance requires.

         Both the CSS model and the RSS model comply with NFPA 72. See NFPA 72: National Fire Alarm and Signaling Code §§ 3.3.282.1, 3.3.282.3 (2016 ed.). If a CSS model is in place, a CSS operator will receive the signal from the property's radio; and if the operator determines that the signal was not a false alarm or a maintenance problem, the CSS calls the dispatch center, which in turn sends help. If, however, the signal goes to the RSS, the RSS either contacts the account directly or sends help. That is why the RSS model is often called a "direct connect" system: accounts send their signals directly to the RSS dispatch center. Alarm-system providers, in addition to their contracts with the accounts, contract with dispatch centers to provide the necessary signal-receiving equipment.

         In an RSS model, unlike a CSS model, the dispatch center and the account usually must share an equipment provider. This, according to the record and the district court's findings, is because the dispatch center's receiving equipment operates on FCC-licensed radio frequencies. For that equipment to receive the signal coming from the property, it must operate on the same frequency. And the equipment provider, like Tyco, owns the frequency licenses.

         This is at least the current state of play. ADS, however, insists that alternative methods are feasible. First, it asserts that its CSS can instantaneously send alert signals it receives from accounts to the RSS through a process called "automatic retransmission." Doing so, ADS believes, would have the same effect as a signal that is sent directly from the accounts to the dispatch center, as in an RSS model. Second, it claims that it can share a radio frequency with the RSS's alarm-system provider, and thus, its transmitters can send signals directly to the RSS. Neither alternative has, to date, taken hold in the areas with which this appeal is concerned.

         That summarizes the technical background. There is an important legal backdrop, too. Alarm-system providers, and ADS specifically, are no strangers to this type of litigation. Two of our past decisions, in which both ADS and Tyco's predecessor, ADT Security Services, Inc., were plaintiffs, feature prominently in ADS's current claims. See ADT Sec. Sews., Inc. v. Lisle-Woodridge Fire Prot. Dist., 672 F.3d 492 (7th Cir. 2012) (ADTI); ADT Sec. Servs., Inc. v. Lisle-Woodridge Fire Prot. Dist., 724 F.3d 854 (7th Cir. 2013) (ADT II).

         ADT I and ADT II concerned another fire-protection district, the Lisle-Woodridge Fire Protection District. The question we faced was whether an ordinance set by the district exceeded NFPA 72, and, by extension, the district's authority under the District Act. We focused on two facets of the ordinance: it (1) mandated an RSS model and (2) required accounts to purchase equipment from Lisle-Woodridge or its exclusive partner. In ADT I, we decided that NFPA 72 permitted an RSS model (there also characterized as a "direct connect" model). But NFPA 72 did not permit the district to order accounts to purchase equipment from it or its exclusive partner. 672 F.3d at 500-03. We then remanded the case for further fact finding. After that fact finding, in ADT II, we affirmed the district court's decision that the district was not in fact operating an RSS model or any other form of NFPA 72-approved supervision; it was, instead, routing signals through an intermediary. The district's scheme therefore violated NFPA 72 and by extension the District Act. 724 F.3d at 868-71.

         ADT I and ADT II caused fire-protection districts and municipalities in the greater Chicagoland area to reconsider their protocols. Orland Fire and the Villages were among them. Since 2006, Orland Fire had operated under an ordinance it issued requiring that systems "directly connect" to Orland Fire. To make that RSS model work, Orland Fire entered into an exclusive contract with Tyco. The contract made Tyco the sole provider of equipment to Orland Fire and of transmitters to the accounts. The ...


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