Alarm Detection Sys., Inc. v. Orland Fire Prot. Dist.
This text of 326 F. Supp. 3d 602 (Alarm Detection Sys., Inc. v. Orland Fire Prot. Dist.) is published on Counsel Stack Legal Research, covering District Court, E.D. Illinois primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.
Opinion
Honorable Thomas M. Durkin, United States District Judge
Alarm Detections Systems, Inc. is a company that provides fire alarm services to commercial and multi-unit residential buildings. It alleges that the Orland Fire Protection District ("Orland FPD") and Tyco Integrated Security, LLC have conspired to restrain or monopolize trade in the market for fire alarm system monitoring in violation of the Sherman and Clayton Acts and the Equal Protection and Due Process Clauses of the Fourteenth Amendments. The case proceeded to a bench trial on May 22, 2017, and the Court received evidence through May 26, 2017. Initial post-trial briefing was completed on June 26, 2017, and the Court heard closing arguments on August 10, 2017. The parties submitted supplemental post-trial briefs on June 7, 2018, at the Court's request.
This opinion sets forth the Court's findings of fact and conclusions of law pursuant to Federal Rule of Civil Procedure 52(a). These findings are based on the documentary evidence and trial testimony. They are also based on the Court's credibility determinations after observing the witnesses testify. This opinion also addresses Alarm Detection's motion to reconsider the Court's earlier dismissal of part of the Fourteenth Amendment claims. R. 488. For the following reasons, the Court finds in favor of Orland FPD and Tyco on the merits and will enter judgment against Alarm Detection.
Findings of Fact
Companies like Alarm Detection and Tyco install fire alarms (meaning the fire sensors and the transmitters that send alarm signals) in commercial and multi-unit residential buildings, and then monitor the transmitted signals for indications of fire or a need for maintenance of the alarms. Various technological systems can be used to monitor fire alarm signals. The systems relevant to this case are (1) central station and (2) direct connect. In a central station system, an alarm company establishes one facility to receive alarm signals indicating the presence of fire from multiple governmental jurisdictions and then relays those signals to the relevant jurisdiction's fire department 911 dispatch center. In a direct connect system, fire alarm transmitters send alarm signals directly to the relevant 911 dispatch center, without passing through a central station.
Some jurisdictions accommodate both direct connect and central station fire alarm *608monitoring. At issue in this case, however, are jurisdictions that have enacted ordinances requiring buildings to send fire alarm signals directly to the jurisdiction's 911 dispatch center. The Illinois appellate court has held that Illinois municipalities have statutory authority to mandate a direct connect fire alarm monitoring system. See Alarm Detection Sys., Inc. v. Village of Hinsdale ,
Fire protection districts are governmental entities created pursuant to the Illinois Fire Protection District Act, 70 ILCS 705, to "allow two or more local governments to consolidate fire protection and related services." Lisle-Woodridge ,
A governmental entity desiring to implement a "direct connect" system for receipt of fire alarm signals at its 911 dispatch center generally hires an alarm company to provide reception equipment, and sometimes staff, at the 911 dispatch center. Fire alarm companies must obtain a license from the FCC to use a certain signal frequency. See R. 472 at 345 (702:7-13). An alarm company's transmission and reception equipment will be calibrated to the frequency the alarm company has licensed. Thus, when a governmental entity hires an alarm company to establish a 911 dispatch center for a direct connect system, the alarm company must also provide the fire alarm transmitters to the commercial buildings, or sub-license other alarm companies to transmit on that frequency.
Fire alarm transmitters and receivers are generally built to transmit or receive only one signal frequency. See R. 475 at 147 (1363:12-21).1 And in a direct connect system, the governmental entity requires that the signal transmit directly from the fire alarm to 911 dispatch. Thus, even if the other alarm companies not hired to provide the equipment for the 911 dispatch center are interested in reaching an agreement to use the transmission frequency of the company maintaining the 911 dispatch *609center, those companies do not have access to, and cannot monitor, the signals sent by the alarm transmitters, whether indicating the presence of fire in the building or that the alarm transmitters and sensors require maintenance. See R. 471 at 93 (93:2-8); R. 475 at 146-47 (1362:22-1363:4).
In 2006, Orland FPD adopted an ordinance requiring direct connection to its 911 dispatch center. See Ex. D-140. Orland FPD witnesses testified that they believe that direct connect is safer and more efficient. R. 472 at 218-19 (575:15-576:19); 230 (587:3-24); 253-54 (610:4-611:15).2 As far back as 1991, Orland FPD hired Tyco's corporate predecessors to provide alarm monitoring services and equipment for Orland FPD's 911 dispatch center and commercial buildings in Orland FPD. See R. 472 at 250-52 (607:17-609:2).
In 2012 and 2013, the Seventh Circuit issued decisions questioning the authority of fire protection districts to engage in the business of fire alarm monitoring and transmission in a case against the Lisle-Woodridge Fire Protection District. See Lisle-Woodridge ,
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Honorable Thomas M. Durkin, United States District Judge
Alarm Detections Systems, Inc. is a company that provides fire alarm services to commercial and multi-unit residential buildings. It alleges that the Orland Fire Protection District ("Orland FPD") and Tyco Integrated Security, LLC have conspired to restrain or monopolize trade in the market for fire alarm system monitoring in violation of the Sherman and Clayton Acts and the Equal Protection and Due Process Clauses of the Fourteenth Amendments. The case proceeded to a bench trial on May 22, 2017, and the Court received evidence through May 26, 2017. Initial post-trial briefing was completed on June 26, 2017, and the Court heard closing arguments on August 10, 2017. The parties submitted supplemental post-trial briefs on June 7, 2018, at the Court's request.
This opinion sets forth the Court's findings of fact and conclusions of law pursuant to Federal Rule of Civil Procedure 52(a). These findings are based on the documentary evidence and trial testimony. They are also based on the Court's credibility determinations after observing the witnesses testify. This opinion also addresses Alarm Detection's motion to reconsider the Court's earlier dismissal of part of the Fourteenth Amendment claims. R. 488. For the following reasons, the Court finds in favor of Orland FPD and Tyco on the merits and will enter judgment against Alarm Detection.
Findings of Fact
Companies like Alarm Detection and Tyco install fire alarms (meaning the fire sensors and the transmitters that send alarm signals) in commercial and multi-unit residential buildings, and then monitor the transmitted signals for indications of fire or a need for maintenance of the alarms. Various technological systems can be used to monitor fire alarm signals. The systems relevant to this case are (1) central station and (2) direct connect. In a central station system, an alarm company establishes one facility to receive alarm signals indicating the presence of fire from multiple governmental jurisdictions and then relays those signals to the relevant jurisdiction's fire department 911 dispatch center. In a direct connect system, fire alarm transmitters send alarm signals directly to the relevant 911 dispatch center, without passing through a central station.
Some jurisdictions accommodate both direct connect and central station fire alarm *608monitoring. At issue in this case, however, are jurisdictions that have enacted ordinances requiring buildings to send fire alarm signals directly to the jurisdiction's 911 dispatch center. The Illinois appellate court has held that Illinois municipalities have statutory authority to mandate a direct connect fire alarm monitoring system. See Alarm Detection Sys., Inc. v. Village of Hinsdale ,
Fire protection districts are governmental entities created pursuant to the Illinois Fire Protection District Act, 70 ILCS 705, to "allow two or more local governments to consolidate fire protection and related services." Lisle-Woodridge ,
A governmental entity desiring to implement a "direct connect" system for receipt of fire alarm signals at its 911 dispatch center generally hires an alarm company to provide reception equipment, and sometimes staff, at the 911 dispatch center. Fire alarm companies must obtain a license from the FCC to use a certain signal frequency. See R. 472 at 345 (702:7-13). An alarm company's transmission and reception equipment will be calibrated to the frequency the alarm company has licensed. Thus, when a governmental entity hires an alarm company to establish a 911 dispatch center for a direct connect system, the alarm company must also provide the fire alarm transmitters to the commercial buildings, or sub-license other alarm companies to transmit on that frequency.
Fire alarm transmitters and receivers are generally built to transmit or receive only one signal frequency. See R. 475 at 147 (1363:12-21).1 And in a direct connect system, the governmental entity requires that the signal transmit directly from the fire alarm to 911 dispatch. Thus, even if the other alarm companies not hired to provide the equipment for the 911 dispatch center are interested in reaching an agreement to use the transmission frequency of the company maintaining the 911 dispatch *609center, those companies do not have access to, and cannot monitor, the signals sent by the alarm transmitters, whether indicating the presence of fire in the building or that the alarm transmitters and sensors require maintenance. See R. 471 at 93 (93:2-8); R. 475 at 146-47 (1362:22-1363:4).
In 2006, Orland FPD adopted an ordinance requiring direct connection to its 911 dispatch center. See Ex. D-140. Orland FPD witnesses testified that they believe that direct connect is safer and more efficient. R. 472 at 218-19 (575:15-576:19); 230 (587:3-24); 253-54 (610:4-611:15).2 As far back as 1991, Orland FPD hired Tyco's corporate predecessors to provide alarm monitoring services and equipment for Orland FPD's 911 dispatch center and commercial buildings in Orland FPD. See R. 472 at 250-52 (607:17-609:2).
In 2012 and 2013, the Seventh Circuit issued decisions questioning the authority of fire protection districts to engage in the business of fire alarm monitoring and transmission in a case against the Lisle-Woodridge Fire Protection District. See Lisle-Woodridge ,
Alarm Detection alleges that this arrangement between Orland FPD and Tyco illegally precludes Alarm Detection from competing in the fire alarm monitoring business in Orland FPD. See Lisle-Woodridge ,
Alarm Detection also alleges that Tyco's effective monopoly over fire alarm monitoring in Orland FPD causes customers there to pay more for fire alarm monitoring services. Tyco charges $89 to customers in Orland FPD, see R. 472 at 102 (459:10-14), with $23.50 of that fee being remitted to Orland FPD for the right to be the exclusive fire alarm service provider in Orland FPD, see R. 473 at 63 (769:4-10). This means that Tyco receives $65.50 from each Orland FPD customer. Tyco charges an average of $68.98 for direct connection services in other jurisdictions in the northern Illinois region. See R. 474 at 304 (1158:13-23). The record does not reflect whether Tyco remits a fee to the relevant municipal entity in those jurisdictions. By contrast, Alarm Detection charges $55 or less for central station monitoring service. See R. 471 at 160 (160:6-13). It is undisputed that direct connect is typically more expensive because it requires creation of an alarm monitoring "board" for every 911 dispatch jurisdiction, whereas a central station's single board can monitor alarms from multiple jurisdictions. See R. 472 at 163-64 (163:22-164:8).
Alarm Detection argues that the exclusionary effects of the Orland FPD arrangement could be remedied by implementing certain technological or systematic adjustments. See R. 481 at 6; R. 502 at 10-11. Tyco and Orland FPD argue that none of these options complies with the Villages' ordinances mandating a direct connect system.
Conclusions of Law
Alarm Detection claims that its exclusion from the Orland FPD market violates the Sherman Act, the Clayton Act, and the Fourteenth Amendment, and unjustly enriches Defendants in violation of Illinois law. Alarm Detection also brings these claims against Defendants with respect to the services they provide in the Lemont Fire Protection District ("Lemont FPD," a former defendant in this case that settled the claims against it at the pleading stage, see R. 211). The Court addresses each claim to the extent necessary to render a verdict.
I. Lemont FPD and the Clayton Act
Before turning to the Orland FPD arrangement that is the primary focus of Alarm Detection's claims, the Court addresses several claims Alarm Detection has made regarding Defendants' conduct in the Lemont FPD. In addition to providing direct connect fire alarm monitoring and 911 dispatch services in Orland FPD, Tyco and Orland FPD provide these services to residents of the Lemont FPD, respectively. Alarm Detection claims that this arrangement with Lemont FPD also precludes Alarm Detection from providing fire alarm services there.
Very little evidence regarding the arrangement in Lemont FPD was presented at trial. But the evidence presented undermines Alarm Detection's claims. Alarm Detection's executive vice president testified that Lemont FPD does not have a direct connect mandate, customers in Lemont FPD may use central station fire *611alarm monitoring, Alarm Detection has 44 accounts in Lemont FPD, and Alarm Detection uses its own transmitters and does not have to buy or lease them from Tyco. R. 472 at 82-83 (439:5-440:6). Based on this evidence, the Court finds that Alarm Detection is not in fact precluded from competing in Lemont FPD. Therefore, the Court finds for Defendants on Alarm Detection's claims about Lemont FPD.
In addition to its claims about exclusion from Lemont FPD, Alarm Detection continues to claim injury based on Lemont FPD's allegedly illegal assignment of customer contracts to Tyco. R. 481 at 14 n.7; id. at 18. This is apparently Alarm Detection's only remaining basis for a Clayton Act claim. See id. at 14. n.7. But the Court rejected this claim earlier in the case and sees no basis to reconsider. See R. 237 at 19-24 ( Alarm Detection Sys., Inc. v. Orland Fire Protection Dist. ,
Alarm Detection also claims a Fourteenth Amendment violation because Orland FPD is monitoring alarms in Lemont FPD, which is allegedly outside its jurisdiction, and beyond its statutory authority. R. 481 at 18. But the agreement between Orland FPD and Lemont FPD (an exhibit admitted at trial, see J-011) shows that Orland FPD provides 911 dispatch service to Lemont FPD customers, and Tyco uses the Orland FPD dispatch center to provide direct connect alarm services for customers in Lemont FPD who want that service. See R. 473 at 68-71 (774:4-777:11). Moreover, to the extent Orland FPD can be said to be monitoring fire alarms in Lemont FPD in violation of the District Act, this cannot form the basis of a Fourteenth Amendment claim because Alarm Detection has failed to show an injury-i.e., it has failed to show that it is excluded from the Lemont FPD market.
II. Sherman Act
A. Statute of Limitations
Turning to Alarm Detection's Sherman Act claims, Defendants argue that they are untimely, because Tyco has had an exclusive contract to service the Orland FPD district since at least 2003, see R. 478 at 6, and Alarm Detection did not file this case until 2014. Under the federal antitrust laws, a plaintiff must bring a lawsuit "within four years after the cause of action accrued." 15 U.S.C. § 15b. An antitrust "cause of action accrues and the statute of limitations begins to run when a defendant commits an act that injures a plaintiff's business." Zenith Radio Corp. v. Hazeltine Research, Inc. ,
The Seventh Circuit has held that "exclusion from a market"-the type of injury Alarm Detection alleges here-"is a conventional form of antitrust injury that ... [accrues] as soon as the exclusion occurs." Brunswick Corp. v. Riegel Textile Corp. ,
*612Midwestern Machinery Co., Inc. v. Nw. Airlines, Inc. ,
Alarm Detection argues that the renewal of the contract between Orland FPD and Tyco in 2014, and the passage of the Villages' direct connect ordinances that same year, are new exclusionary acts that extended Alarm Detection's exclusion from the Orland FPD market. The Court agrees that these actions are more than mere inertial consequences of prior agreements and ordinances. Rather, they are evidence of a conscious effort to continue the arrangement that is the basis for Alarm Detection's claims. Therefore, Alarm Detection's antitrust claims are timely.
B. Section 1: Contract, Combination, or Conspiracy
Alarm Detection alleges that Defendants' actions violate Section 1 of the Sherman Act. "The purpose of the Sherman Act is to protect consumers from injury that results from diminished competition." Agnew v. Nat'l Collegiate Athletic Ass'n ,
Although Alarm Detection alleges that the Villages' ordinances are part of the "arrangement" constituting the alleged "contract, combination, or conspiracy" satisfying the first element of its claims, Alarm Detection has not sued the Villages, and Alarm Detection does not argue that the Villages' ordinances are preempted by the Sherman Act. Rather, Alarm Detection's primary goal is to have the agreement between Orland FPD and Tyco invalidated. However, when a state statute or local ordinance is alleged to be an aspect of the defendants' alleged "contract, combination, or conspiracy," as Alarm Detection claims here, an analysis of the federal antitrust implications of such alleged concerted action must begin with the role played by the local law.
In Fisher v. City of Berkeley , the Supreme Court explained the standards for such an analysis.
But, this is not true of "all restraints imposed upon private actors by government."
Fisher concerned an ordinance that kept residential rents artificially low in Berkeley, California. Property owners alleged that the ordinance was preempted by Section 1 of the Sherman Act. The Supreme Court held that "[w]hile the Ordinance does give tenants-certainly a group of interested private parties-some power to trigger the enforcement of its provisions, it places complete control over maximum rent levels exclusively in the hands of the [city's] Rent Stabilization Board." Fisher ,
The Court distinguished the unilateral action by the City of Berkeley from state and local legislation the Court struck down in prior cases. In Schwegmann Brothers v. Calvert Distillers , a Louisiana statute authorized liquor distributors to enforce price fixing agreements (which were then legal pursuant to a since-repealed exception to the federal antitrust laws) against retailers who were not parties to the agreements.
Since Fisher was issued more than 30 years ago, courts have had relatively infrequent occasion to apply its standard of unilateral versus hybrid restraint. Four cases are of particular relevance here.
In Yakima Valley Memorial Hospital v. Washington State Department of Health , the Washington State Department of Health refused to license a hospital to perform certain elective heart surgery procedures.
Three years before Yakima , the Ninth Circuit considered a case challenging the State of Washington's restrictions on sales of beer and wine. See Costco Wholesale Corp. v. Maleng ,
In holding that the ban on retailer to retailer sales was a unilateral restriction on competition, the Ninth Circuit relied heavily on a decision from the First Circuit. In Massachusetts Food Association v. Massachusetts Alcoholic Beverages Control Commission , an association of alcoholic beverage sellers sued a state commission that limited the number of licenses to operate a retail liquor store to three per person or corporate entity.
Ten years before Massachusetts Food , in a case closely analogous to Alarm Detection's claims, the Third Circuit upheld a municipality's choice of an exclusive electrical inspector to certify buildings for occupancy. See Englert v. City of McKeesport ,
What Fisher and its progeny teach is that state and local governments may act as market makers and destroyers without running afoul of the federal antitrust laws. However, state and local government may not delegate that power to private parties. In other words, governments must not enable anticompetitive conduct. The government entity's decision to alter the market must be complete upon enactment of the government's decision, and require no further anticompetitive conduct to create the market conditions envisioned by government authorities.
Here, Alarm Detection has not sued the Villages and does not ask the Court to find that the Villages' ordinances are preempted. But the evidence shows that the Villages' direct connect ordinances require alarm signals to be sent directly from fire alarms to Orland FPD's 911 dispatch center. The parties have also implicitly conceded (see footnote 1 above) that dual monitoring technology, i.e., a fire alarm that can send a signal to both Orland FPD's 911 dispatch and a central station, is not available or economically feasible. This combination of municipal regulation and technological/economic limitation eliminates alarm monitoring by any private alarm company other than the company hired to maintain Orland FPD's 911 dispatch center. Granting an exclusive contract for maintenance of the dispatch center is a proper exercise of the Orland FPD's power to contract under the District Act. See Active Disposal, Inc. v. City of Darien ,
The Court further finds that this restraint is "complete upon enactment." Orland FPD and Tyco of course have certain discretion to implement the ordinances, which is embodied in their contract. But the anticompetitive effect at issue-i.e., the existence of an exclusive contract (whether with Tyco or another alarm company)- is *616not within the discretion or control of Orland FPD or Tyco. The Villages require a direct connection to the Orland FPD 911 dispatch center, and an exclusive contract with a fire alarm provider is the only way to accomplish that goal. The Villages' ordinances, therefore, together constitute a "unilateral restraint" that involves no concerted action and therefore cannot be a violation of the Sherman Act. See Alarm Det. Sys., Inc. v. Village of Schaumberg ,
Alarm Detection misses the mark with its argument that "the Supreme Court has classified arrangements that authorize private actors, like Tyco here, to set prices or participate in setting prices, as hybrid restraints." R. 502 at 4. The Sherman Act forbids price fixing agreements , not a single company's right to set the prices at which it will do business. In Schwegmann and Midcal , the Supreme Court found the statutes at issue preempted because they involved government consent for agreements among multiple private actors to set the price they would charge customers. That is not the situation in the fire alarm protection market in Orland FPD. Rather, as discussed, the Villages require direct connect to Orland FPD's dispatch, and Orland FPD has hired Tyco to maintain the dispatch center. Due to current technological and/or economic limitations that prevent the use of dual-frequency transmitters, these governmental decisions have the direct effect of making Tyco the exclusive provider of fire alarm services in Orland FPD. And like the defendants in Yakima and Englert , Tyco has a role in setting the prices it will charge for its services, which it exercises through negotiation with Orland FPD, a governmental entity. This is not the kind of price-fixing agreement among multiple private entities the Supreme Court struck down in Schwegmann and Midcal.
Alarm Detection attempts to distinguish Englert by noting that the ordinance in Englert expressly made the defendant company the exclusive electrical inspector, whereas the Villages ordinances do not make Tyco or any other alarm company the exclusive alarm company for Orland FPD. But as discussed, the evidence shows that the only way to comply with a direct connect requirement to a specific dispatch center-an option a village or fire protection district can indisputably mandate-is to enter into an exclusive contract with a single fire alarm company. The lack of an express choice by the Villages does not change the fact that some company must be given an exclusive contract under the circumstances.
Alarm Detection also argues that the exclusive nature of a direct connect mandate could be remedied by use of different technology. But Alarm Detection concedes that the purpose the Villages' ordinances is "to eliminate any intervening call from a central station operator." R. 502 at 9. The two alternatives Alarm Detection describes in its supplemental brief would not satisfy this goal.4 Alarm Detection first asserts that it "and other alarm companies could use the same radio frequency as Tyco to send [s]ignals from their own transmitters to Orland Central Dispatch." R. 502 at 10.
*617True, but neither Defendants nor the Villages prohibit this. The problem with this "solution," as Alarm Detection has pointed out, see R. 471 at 29-30 (29:17-30:7), is that even if it transmitted signals on Tyco's frequency, Alarm Detection would be subject to the costs of replacing or recalibrating its transmitters with Tyco's frequency. Further, if Alarm Detection sends signals directly to Orland FPD 911 dispatch, Alarm Detection cannot monitor those signals (since transmitters with dual transmission ability are apparently not available) and the exclusive monitoring aspect remains.
Alarm Detection's additional suggestion is that it could "automatically retransmit the [s]ignals to eliminate the need to have a central station operator process the [s]ignals before they were sent to Orland Central Dispatch." R. 502 at 10. But this is obviously not a direct connection to Orland FPD's 911 dispatch. Alarm Detection never explains why a midpoint "retransmission" of the signals would comply with ordinances that require "direct connection." Alarm Detection insists that the retransmission would be "instantaneous."
For these reasons, the Court finds that Alarm Detection has not met its burden to prove concerted action that implicates Section 1 of the Sherman Act. Therefore, the Court finds for Defendants on that claim.
C. Section 2: Monopoly
Only Section 1 of the Sherman Act includes an explicit "concerted action" element. However, unilateral state action also undermines a claim for violation of Sherman Act Section 2, because that provision requires "the willful acquisition or maintenance of [monopoly] power as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident." Endsley v. City of Chicago ,
D. Immunity
The Court has found that Defendants' conduct was not "concerted" or "willful" in the sense those terms are used by Sections 1 and 2 of the Sherman Act. Alternatively, the Court finds Defendants are immune from liability for any anticompetitive effects caused by their conduct under the state immunity and Noerr- Pennington doctrines, holdings the Court explains presently.
1. Orland FPD: State Immunity
States have immunity for anticompetitive conduct "when acting in their sovereign capacity." N.C. State Bd. of Dental Examiners v. F.T.C. , --- U.S. ----,
In addition to demonstrating that the state clearly articulated a policy to allow the anticompetitive conduct at issue, non-sovereign state-actors other than municipalities must show that the state "provides active supervision of the anticompetitive conduct." Dental Examiners ,
This case presents unusual circumstances for application of the state immunity doctrine because the actions of two different kinds of governmental entities are involved-the Villages and Orland FPD. Addressing the Villages first, it is likely that they would be immune from any antitrust liability that might arise from their ordinances. Municipalities in Illinois regulate fire alarm protection pursuant to Article 11 of the municipal code, and the Illinois legislature has stated its "intention ... that the 'State action exemption' to the *619application of federal antitrust statutes be fully available to all municipalities, and that agents, officers and employees of each to the extent that are exercising authority ... [pursuant to] all of Divisions of Articles 10 and 11 of the Illinois Municipal Code." 65 ILCS 5/1-1-10(b). Direct connect fire alarm monitoring has been mandated by some Illinois municipalities at least since 1999 when the ordinance at issue in Hinsdale was adopted.
The fact that the Villages are immune begs the question of whether the Villages' immunity suffices to immunize their sibling governmental entity, Orland FPD. In the Fisher analysis, the Villages' unilateral conduct served to demonstrate that further actions by Orland FPD were not part of a conspiracy implicating the Sherman Act. But the state immunity analysis usually applies only in a case were hybrid concerted action is present. See Fisher ,
The state statute granting municipalities antitrust immunity under Sections 10 and 11 of the Illinois Municipal Code does not apply to fire protection districts like Orland FPD. Instead, Orland FPD's authority is provided by the District Act. The District Act does not include an express grant of antitrust immunity. But under the District Act, a fire protection district has the authority to adopt an ordinance requiring direct connect fire alarm systems. The District Act also gives the "Board of Trustees of any fire protection district" the power to "contract with any corporation organized to furnish fire protection service." 70 ILCS 705/11a.
In Active Disposal v. City of Darien (a case not cited by the parties in their trial briefs), the Seventh Circuit applied the state-action immunity doctrine to a case like this.
The statute at issue in Active Disposal contained a separate section providing that municipalities may adopt ordinances "notwithstanding the fact that competition may be displaced or that such ordinance may have an anti-competitive effect." 65 ILCS 5/11-19-5. But the Seventh Circuit held that the municipalities' authority to enter into the contracts at issue was not derived from the section concerning ordinances , but from the section expressly providing the power to contract. Nor did the court rely on the general grant of antitrust immunity to Illinois municipalities in 65 ILCS 5/1-1-10 discussed above. The court was clear that the mere authority to make contracts in a certain field (trash hauling in Active Disposal ; fire protection in this case) is sufficient to establish that the making of exclusive contracts is foreseeable. The Tenth Circuit agreed in Southern Disposal. This Court finds this reasoning persuasive, if not (entirely) binding, and holds that Orland FPD's power to contract in the area of fire alarm protection made its exclusive contract with Tyco foreseeable.
Non-sovereign state actors other than municipalities must also show that they "provide active supervision of the anticompetitive conduct." Dental Examiners ,
However, even if that requirement is relevant, it is satisfied here. Tyco's discretion is completely circumscribed by its contract with Orland FPD. This agreement is for a set term and has been periodically adjusted according to Orland FPD's needs.
*621Further, Orland FPD has a role in receiving fire alarm signals at its 911 dispatch center. This is not a case where Tyco has complete discretion over its activities in Orland FPD. Thus, Orland FPD provides active supervision of Tyco's conduct.
Therefore, the Court holds that Orland FPD is immune from any liability arising from its contract with Tyco.
2. Tyco: Noerr-Pennington Immunity
Tyco argues that it is entitled to immunity under the Noerr- Pennington doctrine. The Noerr- Pennington doctrine originated as protection for concerted action by private actors in petitioning the government. While "petitioning" is customarily understood as "legislative lobbying," the Supreme Court has interpreted that term to include additional types of interaction with government by private entities. See VIBO Corp., Inc. v. Conway ,
Here, Alarm Detection's claims against Tyco are predicated upon Tyco's actions to secure adoption of the Villages' direct connect ordinances and the exclusive agreement with Orland FPD. The cases cited above show that Tyco's actions are squarely within the realm of activity courts have found is protected by the Noerr- Pennington doctrine.
Alarm Detection's primary argument as to why these actions should not receive Noerr- Pennington immunity is that Orland FPD acted as a commercial entity. See R. 487 at 9 (citing Wheeling-Pittsburgh Steel Corp. v. Allied Tube & Conduit Corp. ,
Moreover, this case is not about the Villages or Orland FPD making purchases in the fire alarm monitoring market (as was true of the defendant fire protection district in Lisle-Woodridge ). Rather, the effect of the Villages' ordinances is to define the market for fire alarm monitoring in Orland FPD in the first place. The evidence simply does not support Alarm Detection's contention that Orland FPD is acting as a commercial entity. Thus, to the extent there is a "commercial exception" to the federal antitrust laws, it does not apply in this case.
Alarm Detection also argues that the "sham exception" should apply because "Tyco has promoted outdated technology and supported the District's misunderstanding of response times and denial of alternative means of transmission [s]ignals, even though these positions were inconsistent with its own positions in Lisle-Woodridge. " R. 487 at 9-10. The Court finds Alarm Detection's contention that Orland FPD's fire safety professionals would or could be fooled by such allegedly false information to be questionable at best. But even if Alarm Detection's contentions were true, and could be characterized as a "sham," they are not the kind of sham that serves as a basis to deny Noerr- Pennington immunity. The sham exception to Noerr- Pennington prevents the application of immunity where a defendant's act of "petitioning" was "a mere sham to cover what is actually nothing more than an attempt to interfere directly with the business relationships of a competitor." City of Columbia v. Omni Outdoor Advert., Inc. ,
At most, Alarm Detection contends that Tyco has used false information in an attempt to secure an exclusive contract for the Orland FPD market. The evidence supporting this contention is inconclusive at best. But to the extent Tyco's tactics could be described as "improper," they still do not constitute a basis to deny immunity to Tyco, because there is no evidence that Tyco did not genuinely desire to achieve an exclusive contract for fire alarm monitoring in Orland FPD. And there is no evidence that Tyco sought to abuse the governmental process in order to impede Alarm Detection's business in particular, as opposed to seeking to gain a greater share of the market, no matter the competitor. Absent such evidence, the sham exception does not apply.
For these reasons, even if Tyco could be found to have engaged in concerted action *623in violation of Section 1, or willful acquisition of monopoly power in violation of Section 2, Tyco is immune from any such liability.
III. Fourteenth Amendment
Alarm Detection also claims that Tyco's and Orland FPD's actions constitute violations of the Equal Protection and Due Process clauses of the Fourteenth Amendment. The Court previously held that these claims were time-barred. Alarm Detection has filed a motion to reconsider that holding. R. 488.
In its previous decision, the Court held that Alarm Detection's pleadings demonstrated that it had been excluded from the Orland FPD market at least since 2003 when Orland FPD signed an exclusive agreement with Tyco. Despite the age of this exclusion, Alarm Detection argued then, and argues again, that the 2014 contract constitutes a new and discrete act that is within the statute of limitations. R. 125 at 14. The Court held that "[e]ven if such acts constituted fresh injuries to Alarm Detection's constitutional rights ... they are insufficient to trigger the application of the continuing violation doctrine, because the doctrine is reserved for only those cases where a plaintiff could not reasonably be expected to have perceived or known about the alleged violation." R. 237 at 50 ( Alarm Detection ,
The Court's holding would have been correct with respect to an attempt to make old injuries actionable. But the Court was incorrect that the notice provided by earlier conduct made actions for relief based on more recent injuries untimely. As the Court held with respect to the timeliness of Alarm Detection's antitrust claims, the 2014 ordinances and contract renewal are sufficiently overt actions to start a new statute of limitations. Since Alarm Detection brought this action in 2014, the Court reconsiders it earlier decision and finds that Alarm Detection's Fourteenth Amendment claims are timely.
B. Merits
Alarm Detection argues that Orland FPD does not have the authority under the District Act to make its agreement with Tyco. And since Orland FPD does not have the authority to make that agreement, Alarm Detection argues it is arbitrary conduct that cannot satisfy the rational basis test of the Equal Protection Clause. Specifically, Alarm Detection argues that "Orland FPD is not authorized by the District Act to [1] exclusively engage in fire alarm monitoring; [2] control the decision over transmission equipment; or [3] collect fees from its residents." R. 481 at 17-18.
As to the first two contentions, both the Villages and Orland FPD have statutory authority to require a direct connect fire alarm monitoring. Further, Orland FPD's power to contract under the District Act necessarily implies the authority to enter into exclusive contracts. Moreover, although a governmental entity's decision to enter into an exclusive contract "inherently involves a kind of discrimination," it does not violate the Equal Protection Clause when government actors merely exercise their discretion. See Corey Airport Servs., Inc. v. Clear Channel Outdoor, Inc. ,
Additionally, to the extent the District Act prohibits Orland FPD itself from engaging in transmission of fire alarm signals and collecting fees from residents, Alarm Detection has not proven that Orland FPD engages in such activities. Rather, the evidence shows that Orland FPD contracts with Tyco to provide fire alarms transmission services to its residents. Alarm Detection also concedes that the $23.50 Tyco remits to Orland FPD for each commercial account is "consideration" for the right to the exclusive contract. See R. 481 at 3.
Alarm Detection also claims that Orland FPD "violated [its] due process rights because: (1) [Alarm Detection] is licensed under the Alarm Act and has a protected property interest in engaging in the Business; and (2) [Alarm Detection] was deprived of its property interest due to Defendants' arbitrary conduct." R. 481 at 17. This claim fails. First, Alarm Detection does not claim that it has lost its license under the Alarm Act. Second, Alarm Detection has cited no authority over the course of four years of litigating this case to demonstrate that it has a protected property right in the business of alarm monitoring in Orland FPD. Absent, such a property right, there can be no due process violation.
Therefore, the Court finds for Defendants on Alarm Detection's Fourteenth Amendment claims.
IV. Unjust Enrichment
The Court noted earlier in the case that Alarm Detection's claim for unjust enrichment would rise or fall with its other claims. See R. 316 at 36 ( Alarm Detection Sys., Inc. v. Orland Fire Prot. Dist. ,
Conclusion
For the foregoing reasons, the Court finds in favor of Defendants and against Alarm Detection on all counts.5
Related
Cite This Page — Counsel Stack
326 F. Supp. 3d 602, Counsel Stack Legal Research, https://law.counselstack.com/opinion/alarm-detection-sys-inc-v-orland-fire-prot-dist-illinoised-2018.