Alarm Detection Systems, Inc. v. Village of Schaumburg

• Court: Court of Appeals for the Seventh Circuit
• Decided: July 25, 2025
• Docket: 24-3163
• Status: Published

Opinion

In the

United States Court of Appeals For the Seventh Circuit ____________________ No. 24-3163 ALARM DETECTION SYSTEMS, INC., et al., Plaintiffs-Appellants, v.

VILLAGE OF SCHAUMBURG, Defendant-Appellee. ____________________

Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 17-C-2153 — Joan H. Lefkow, Judge. ____________________

ARGUED JUNE 26, 2025 — DECIDED JULY 22, 2025 ____________________

Before SCUDDER, ST. EVE, and JACKSON-AKIWUMI, Circuit Judges. ST. EVE, Circuit Judge. In 2016, the Village of Schaumburg adopted an ordinance aimed at reducing fire department re- sponse times. The ordinance required commercial and multi- family properties to route fire alarm signals directly to a re- gional emergency-dispatch center. It also upended the market for fire alarm services in the Village. 2 No. 24-3163

Several alarm companies sued to enjoin the ordinance, al- leging that it violated the Contracts Clause and tortiously in- terfered with their contracts and prospective economic ad- vantage. Yet at summary judgment, the alarm companies failed to come forward with evidence that the ordinance drove their customers to breach existing contracts or that the Village intended to interfere with their business relationships. Their claims thus fail for lack of proof, and we AFFIRM the district court’s entry of summary judgment for the Village. I. Background Increased intergovernmental cooperation and the rise of regional emergency-dispatch centers have prompted consoli- dation in the market for fire alarm detection services in Illi- nois. They also have generated a slew of challenges to munic- ipal fire alarm policies. See, e.g., Alarm Detection Sys., Inc. v. Orland Fire Prot. Dist., 929 F.3d 865 (7th Cir. 2019); ADT Sec. Servs., Inc. v. Lisle-Woodridge Fire Prot. Dist., 724 F.3d 854 (7th Cir. 2013). This case presents one such dispute. A. Factual Background Local law requires that all commercial and multifamily properties in the Village of Schaumburg employ automated fire alarm systems. These systems both detect fires and trans- mit alarm signals to emergency dispatchers, so the Village’s fire department can respond quickly. The National Fire Protection Association, which sets na- tionwide standards for fire alarm systems, authorizes two pri- mary modes of alarm transmission: the “supervising station” model and the “direct connect” model. Under the supervising station model, alarm signals route from a monitored property to a central station operated by the property’s private alarm No. 24-3163 3

company. Signals requiring emergency response are then re- transmitted to the appropriate local emergency-dispatch sta- tion. Under the aptly named direct connect model, all alarm signals route directly to a receiver at the local dispatcher. Between 2007 and 2016, the Village of Schaumburg per- mitted its residents to choose between the two service models. Alarm Detection Systems, Inc., Illinois Alarm Service, Inc., Nitech Fire & Security Industries, Inc., and SMG Security Sys- tems, Inc. (collectively, “the Alarm Companies”) all employed the supervising station model and sold their services in the Village. To retransmit alarm signals from their respective su- pervising stations, the Alarm Companies relied on phone calls to the Village’s regional dispatch center, the Northwest Cen- tral Dispatch System (“NWCDS”). Then, in 2016, Schaumburg’s fire chief recommended that all multifamily and commercial properties in the Village shift to the direct connect model. The fire chief gave three justifica- tions for the change. First, he reasoned that the direct connect model would reduce fire department response times because it would eliminate the need for supervising stations to place phone calls to NWCDS. Second, he explained that a direct connect system would increase the Village’s awareness of out- of-service alarm systems because NWCDS would receive “trouble” and “supervisory” signals indicating system out- ages, not just active alarms. The fire chief’s third justification was financial. NWCDS had an exclusive contract with Tyco/Johnson Controls, another fire alarm detection com- pany. If the Village adopted a direct connect model, Tyco would pay NWCDS $23 per month per customer, and NWCDS would credit an equal amount to the Village, saving the Village roughly $300,000 a year. 4 No. 24-3163

The Village adopted its fire chief’s recommendation and enacted Ordinance No. 16-087 (“the Ordinance”). The Ordi- nance required that covered properties switch to the direct connect model by the earliest of: (1) when the property’s ex- isting contract for alarm services ended, (2) when the prop- erty modified or replaced its fire alarm equipment, or (3) Au- gust 31, 2019. The Ordinance dealt a blow to the Alarm Companies’ businesses. According to the Alarm Companies, it is impossi- ble for their transmitters to interoperate with Tyco receivers because Tyco receivers use an FCC-licensed radio frequency that Tyco owns. See Orland Fire Prot. Dist., 929 F.3d at 868. So to comply with the Ordinance, Village property owners must contract with Tyco. The Alarm Companies allege that by the end of the Ordinance’s implementation period, they had lost 250 customers—all their business in the Village. The Alarm Companies claim that customers, too, have suf- fered a blow. They contend that the Ordinance has resulted in more expensive and lower quality alarm services. Where their services had cost Village customers an average of $45 per month, Tyco charged $89 per month following the Ordi- nance’s enactment. The Alarm Companies also allege that the move to a direct connect model has increased the number of out-of-service alarm systems in the Village because private alarm companies no longer receive “trouble” or “supervi- sory” signals. NWCDS receives those signals now, yet the Alarm Companies and the Village agree that private alarm companies are responsible for remedying them. No. 24-3163 5

B. Procedural History Aggrieved, the Alarm Companies sued. As relevant here, they alleged that the Ordinance violated the Contracts Clause, U.S. Const., art. I, § 10, and that the Village tortiously inter- fered with their contracts and prospective economic ad- vantage by enacting it. The district court initially dismissed the Alarm Compa- nies’ federal claims pursuant to Federal Rule of Civil Proce- dure 12(b)(6), and relinquished jurisdiction over their state- law claims. The Alarm Companies appealed, and we reversed in part, holding that they had stated a Contracts Clause claim. Alarm Detection Sys., Inc. v. Vill. of Schaumburg (“Alarm Detec- tion I”), 930 F.3d 812, 823–24 (7th Cir. 2019). We cautioned, however, that to ultimately prevail, the Alarm Companies would need to show the Ordinance caused their customers to prematurely cancel existing contracts, not just decline to re- new them. See id. On remand, the parties filed cross-motions for summary judgment. Rather than offer evidence of premature cancella- tions, the Alarm Companies relied on allegations from their amended verified complaint to support their claims, such as: 45. … Many Commercial Accounts terminated their Customer Contracts before the end of the existing terms. Other Commercial Accounts terminated their Customer Contracts by August, 2019, even though the terms of such contracts extended beyond that date. … 107. Some of the Commercial Accounts breached their Customer Contracts shortly after the Challenged Con- duct commenced. 6 No. 24-3163

108. Other Commercial Accounts breached their Cus- tomer Contracts which extended beyond the final im- plementation date of August 31, 2019. They also submitted into the record a customer nonrenewal letter, which cited the Ordinance as the sole reason for termi- nation. The district court granted the Village’s motion in a thor- ough written opinion. It reasoned that the Alarm Companies had offered no admissible evidence substantiating their claim that the Ordinance caused customers to breach contracts with them. And while the Ordinance likely drove customers to cease using the Alarm Companies’ services, the uncontested record would not permit a reasonable factfinder to conclude the Village possessed the intent required to sustain a claim of tortious interference with prospective economic advantage. The Alarm Companies now appeal. II. Discussion We review a district court’s summary judgment decision de novo. ADT Sec. Servs., Inc. v. Lisle-Woodridge Fire Prot. Dist., 672 F.3d 492, 498 (7th Cir. 2012). Summary judgment is proper where there are “no material facts in dispute and the moving party is entitled to judgment as a matter of law.” Frazier-Hill v. Chi. Transit Auth., 75 F.4th 797, 801 (7th Cir. 2023); Fed. R. Civ. P. 56(a). A. Contracts Clause and Tortious Interference with Contract Claims We begin with the Alarm Companies’ claim that the Ordi- nance interfered with their customer contracts, in violation of the Contracts Clause and state tort law. No. 24-3163 7

The Contracts Clause prohibits the enactment of any law “impairing the Obligation of Contracts.” U.S. Const., art. I, § 10. A state or local law offends the Clause where it (1) “op- erate[s] as a substantial impairment of a contractual relation- ship,” and (2) is not “drawn in an ‘appropriate’ and ‘reasona- ble’ way to advance ‘a significant and legitimate public pur- pose.’” Sveen v. Melin, 584 U.S. 811, 819 (2018) (quoting Energy Reserves Grp., Inc. v. Kan. Power & Light Co., 459 U.S. 400, (1983)). Illinois tort law, too, ascribes liability to those who in- tentionally and unjustifiably interfere with contracts. HPI Health Care Servs., Inc. v. Mt. Vernon Hosp., Inc., 545 N.E.2d 672, 676 (Ill. 1989); see also Webb v. Frawley, 906 F.3d 569, 576 (7th Cir. 2018). Common to both causes of action is a threshold inquiry: whether the defendant’s challenged act caused the infringe- ment of a vested contractual right. Harm to a plaintiff’s con- tingent interests does not suffice. See Weaver v. Graham, 450 U.S. 24, 29–30 (1981) (“Evaluating whether a right has vested is important for claims under the Contracts or Due Process Clauses, which solely protect pre-existing entitlements.”); HPI Health Care Servs., 545 N.E.2d at 676 (requiring plaintiffs prove the alleged tortfeasor induced the breach of an existing, valid, and enforceable contract). The Alarm Companies cannot cross this threshold. After our remand in Alarm Detection I, they failed to come forward with evidence that the Ordinance drove their customers to breach existing contracts. Instead, the Alarm Companies re- lied upon allegations from their verified complaint and docu- mentary evidence of customer nonrenewals. Neither of their citations satisfies their burden. 8 No. 24-3163

Some—but not all—sworn statements of fact within a ver- ified complaint can serve as evidence at summary judgment. Jones v. Van Lanen, 27 F.4th 1280, 1285 (7th Cir. 2022). To do so, however, a sworn statement must possess “the specificity re- quired for a reasonable jury to understand how” the affiant reached her factual conclusion. See Osborn v. JAB Mgmt. Servs., Inc., 126 F.4th 1250, 1259 (7th Cir. 2025) (emphasis added). Al- legations that are “conclusory as a legal matter” will not demonstrate an issue of material fact and stave off summary judgment. Foster v. PNC Bank, Nat’l Ass’n, 52 F.4th 315, 320 (7th Cir. 2022); see also King v. Ford Motor Co., 872 F.3d 833, 840 (7th Cir. 2017) (reminding litigants that “summary judgment is not a time to be coy” (citation modified)). Recall, to support their summary judgment motion, the Alarm Companies cited statements in their verified complaint attesting that customers breached contracts with them. Yet these statements leave much to the imagination. They do not reveal which customers breached, when they breached, how the companies were notified of the breaches, or the reasons given for the breaches—all information a reasonable jury would need to understand how the Alarm Companies reached their conclusion that breaches occurred. Without any of this basic information, the Alarm Companies’ bare allega- tions are too conclusory to carry their burden at summary judgment. The Alarm Companies also relied on documentary evi- dence of customer nonrenewals, but this evidence cannot de- feat summary judgment, either. The Alarm Companies never possessed enforceable rights in future contract extensions be- cause their contracts provided that prior to a renewal period’s vesting date, customers could cancel at will. See Cody v. Harris, No. 24-3163 9

409 F.3d 853, 859 (7th Cir. 2005) (concluding that an at-will contract cannot sustain a tortious interference with contract claim under Illinois law because it constitutes “at most . . . a prospective economic advantage”); cf. Dodge v. Bd. of Educ. of City of Chi., 302 U.S. 74, 80 (1937) (indicating that where a state is “free to alter, amend, and repeal” a statute, the statute does not create vested rights protected by the Contracts Clause). And neither the Contracts Clause nor the tort of intentional interference with contract protects contingent interests. B. Tortious Interference with Prospective Economic Advantage Claim We next examine whether the district court erred when it granted summary judgment for the Village on the Alarm Companies’ claim of tortious interference with prospective economic advantage. To prevail on such a claim, the Alarm Companies must show: (1) they had a reasonable expectancy of entering into a valid business relationship, (2) the Village knew of the expec- tancy, (3) the Village intentionally and unjustifiably interfered with the expectancy, inducing or causing a breach or termina- tion, and (4) they suffered damage as a result. Voyles v. Sandia Mortg. Corp., 751 N.E.2d 1126, 1133–34 (Ill. 2001). Because the parties dispute only the Village’s intent and justifications, we confine our analysis to the third element. The Illinois Supreme Court has long held that defendants must act with “the purpose of injuring the plaintiff’s expec- tancies” for their conduct to be intentional. Panter v. Marshall Field & Co., 646 F.2d 271, 298 (7th Cir. 1981) (collecting cases); see also Dowd & Dowd, Ltd. v. Gleason, 693 N.E.2d 358, 371 (Ill. 1998) (continuing to require “purposeful interference”). 10 No. 24-3163

The uncontroverted evidence here shows that citizen safety, and perhaps Village finances, motivated the adoption of the Ordinance, not a desire to harm the Alarm Companies’ businesses. Indeed, the Alarm Companies all but concede as much. They protest only that if safety is the Village’s goal, the Ordinance is poorly crafted. This line of argument cannot save their claim. The tort of interference with prospective eco- nomic advantage does not countenance judicial review of the wisdom of the Village’s policy choice. The proper forum for that debate is a Village Board meeting or a local election, not a federal court. * * * The judgment of the district court is AFFIRMED.