Decision in Illinois fire alarm monitoring case 'significant' for industry

ARLINGTON HEIGHTS, Ill.—A federal appeals court has upheld a previous court ruling favoring ADT and other alarm companies in a case involving public entities monopolizing fire alarm monitoring.

“It's a very positive day for the industry,” Kevin Lehan, executive director of the Illinois Electronic Security Association (IESA), based here, told Security Systems News.

In a communication to IESA members, Lehan described the July 31 decision by the U.S. Court of Appeals for the Seventh Circuit as “a significant and positive step toward the goal of opening anti-competitive markets.”

The decision is the latest in the long-running lawsuit, which was filed after the Lisle-Woodridge Fire District adopted an ordinance in 2009 putting itself solely in charge of fire monitoring in the district.

ADT and four other companies—Alarm Detection Systems based in Aurora, Ill.; D.M.C. Security Services of Midlothian, Ill.; Illinois Alarm Services, based in Forest Park, Ill.; and SMG Security Systems, located in Elk Grove Village, Ill.—filed the lawsuit in 2010 in U.S. District Court for the Northern District of Illinois after the fire district invalidated contracts the companies had with commercial and multi-residential customers. The fire district required those customers to contract only with the district for fire alarm monitoring via a wireless radio network implemented by a private vendor with whom the district had contracted.

Last August, Judge Milton Shadur issued a modified permanent injunction order that said, among other findings, that the public Lisle-Woodridge Fire District had no authority to require private businesses to contract only with the district for fire alarm monitoring, and that it couldn't ban the businesses from contracting with private central stations that meet approved codes and standards.

The district appealed to the Seventh Circuit, but the 50-page decision the court issued last week upheld the permanent injunction with only a few minor modifications.

The case is still not over because two other federal claims need to be resolved at trial, according to Bruce Goldsmith, an attorney for the four other alarm companies that joined ADT in the suit.

Jim French, public information officer for the fire district, did not return a request for comment by SSN's deadline, but has previously said the district can't discuss pending litigation. ADT also has said it does not discuss matters in litigation.

But Goldsmith called the appeals court decision “very good news for the industry.”

“It fully supports the position we took in the District Court, and actually [the Seventh Circuit] went to great lengths to look at the factual record that supported the judge's finding and found his findings to be well supported by the record,” he told SSN. Goldsmith noted that the court “highlighted the facts they thought were particularly compelling and one of them comes really from the front page of the opinion, where they saw this as really being designed to gain revenue [on the part of the fire district] and it really wasn't for any public safety reasons.”

The district had argued that having it be in control of monitoring was safer, but instead the court found the district's system “less reliable and more dangerous than the private alarm companies' systems.” The system did not comply with NFPA standards, but central stations are NFPA compliant, the court noted.

Goldsmith, an attorney with the Dykema law firm, which has an office in Lisle, Ill., said that still to come to trial in the case is the alarm companies' allegation that the district violated their rights under the contract clause of the U.S. Constitution “because the district sent out notices to our customers saying their alarm contracts were null and void and they had to contract with the district.”

Also, he said, the alarm companies contend the district's actions constitute “an illegal monopoly because municipalities and fire protection districts are not allowed to monopolize a business like fire alarm monitoring unless there's an express grant of authority from the state which contemplates anti-competitive behavior.”

He said that municipalities traditionally have been the exclusive provider of services like garbage collection and sanitary sewer service, but he said they only have that right if a state statute gives the municipality the authority to monopolize those services. No such express state authority has been given for fire alarm monitoring, he said.

He said he hopes the case will go to trial on those issues soon. “I suspect we would be able to get it to trial by the end of the year,” Goldsmith said.

While this case applies to fire protection districts, those are only one form of governmental unit in Illinois, he said. There also are home-rule municipalities and non-home-rule municipalities, Goldsmith said.

While the industry maintains this case applies to them, not all municipalities agree so further litigation may be needed to make that clear, he said.

“The general principles apply across the board: none of them should be monopolizing and none of them should be interfering with contracts,” Goldsmith said, “but we have to go a little further to get the law clarified on those points.”