Court injunction favors ADT, other companies

Judge says fire district has ‘no express authority’ to engage in monitoring business, but decision has been appealed
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Thursday, December 9, 2010

LISLE, Ill.—Five security companies, including security giant ADT, recently won a positive court ruling on an issue that has been roiling the industry in this state—public entities taking control over fire alarm monitoring.

The alarm companies won a preliminary injunction order in a federal lawsuit they filed against an Illinois fire protection district that passed an ordinance putting itself solely in control of the monitoring of commercial fire alarms in the district.

The order, signed Nov. 23, would essentially allow the reinstatement of more than 400 monitoring contracts the security companies had with entities ranging from retailers to government institutions. The Lisle-Woodridge Fire District, based here, passed an ordinance in September 2009 that led to the district declaring those contracts null and void and requiring commercial property owners to contract exclusively with the district to get fire alarm monitoring service through its wireless radio network.

However, the fire district has appealed the judge’s decision and is asking for a stay of the order.

ADT, which is based in Boca Raton, Fla., and four Illinois corporations, Alarm Detection Systems; D.M.C. Security Services; Illinois Alarm Services; and SMG Security Systems, filed the lawsuit this summer in U.S. District Court for the Northern District of Illinois, Eastern Division, against the fire district. Among the claims in the lawsuit is that the district violated the businesses’ constitutionally protected contract rights and committed antitrust violations by creating a monopoly for the district. The case itself is pending.

Under the new ordinance, the district informed commercial and multi-residential customers using fire alarm systems in the district that their existing fire alarm monitoring company contracts were cancelled and they must instead contract exclusively with the district.

The district set up its own unified wireless radio network to transmit fire alarm signals. Jim French, bureau chief of the district’s Fire Prevention Bureau, said in a court affidavit that the district’s direct-connect radio network is “dramatically” faster and safer for fire monitoring than a third-party central station or a phone line system. The district charged commercial properties a $66 monthly fee per alarm system.

The district selected the Chicago Metropolitan Fire Prevention Co. of Elmhurst, Ill. as the vendor to implement the radio network. Chicago Metro, which sells, installs and monitors fire alarm systems, is named along with the fire district as a defendant in the lawsuit.

But the preliminary injunction order, signed by Judge Milton I. Shadur, determined that the fire district had “no express authority” in the law to engage in the fire alarm monitoring business. Shadur also found that the alarm companies had “demonstrated a substantial likelihood of success on the merits” of the lawsuit.

The judge ordered the district to cease its fire alarm monitoring program under the ordinance and to notify hundreds of commercial and multi-residential customers that their previous contracts with other alarm companies are in full force and effect, and not null and void, as the district previously has said.

ADT, responding to questions about the lawsuit from Security Systems News, issued a brief statement that said, in part: “A federal court judge has made a preliminary ruling that the contracts customers signed with the district are null and void and customers can now choose which company they prefer to use. The court’s ruling is preliminary, not final, and is subject to appeal.”

ADT said the commercial customers impacted by the ordinance included banks, retailers, government and educational institutions and industrial businesses. 

Bureau chief French told SSN he could not comment on ongoing litigation.

Peter Friedman, the attorney representing Chicago Metro, said his client is not liable in any way.

He also said Chicago Metro is hopeful the district’s appeal will be successful because it has “significant concerns” that “the system that the court is mandating be reinstated is not as protective of the public health and safety as the new system the district has established. The district’s wireless network is generally safer, faster and more reliable than central station systems.”

State legislation proposed in Illinois would confirm that fire protection districts could establish state-of-the-art wireless alarm networks for fire alarm monitoring within their borders if they chose to do so, according to Friedman.

Friedman contends that the Lisle-Woodridge Fire District already has the legal authority to act as it did. But he said “if the legislation was adopted, it would make that even more clear and would require the court, we would think, to revisit its order.

“However, the proposed state legislation is opposed by the Electronic Security Association  (ESA) and the Illinois Electronic Security Association (IESA). In a recent statement on the issue, the groups said they believe the legislation would allow districts to build central monitoring stations, placing “alarm dealers in direct competition with public entities.” They said it would also provide “incentives for municipalities, needing to boost their budgets, to mandate that all fire alarms be directly connected to the fire protection district.”

The Lisle-Woodridge litigation involves a fire protection district and Friedman said it does not affect municipalities, which he said “already have the authority and past case law to establish these types of systems.”