Alarm Detection Sys., Inc. v. Vill. of Schaumburg, Corp.
930 F.3d 812
| 7th Cir. | 2019Background
- In 2016 the Village of Schaumburg enacted an ordinance requiring commercial fire alarms to transmit directly to the village’s designated remote supervising station (NWCDS), effectively mandating the RSS model under NFPA 72.
- NWCDS had an existing exclusive long‑term contract (since 2011) with Tyco Integrated Security to install, own, maintain and service signal‑receiving equipment; Tyco pays NWCDS $23/month per connected account and charges customers about $81/month for transmitter rental/monitoring.
- The Village issued a Notice saying Tyco is the authorized installer for NWCDS‑monitored systems and set deadlines (~Aug 2019) requiring accounts to convert, creating substantial costs for some customers and raising Tyco’s prospective revenues and credits to Schaumburg.
- Several competing alarm companies sued, alleging violations of the Contracts Clause, the Fourteenth Amendment (due process and equal protection) under § 1983, Sherman Act §§ 1 & 2 and Clayton Act § 7, and state torts; district court dismissed under Rule 12(b)(6).
- The Seventh Circuit affirmed most dismissals but reversed and remanded only as to the Contracts Clause claim against Schaumburg, finding that plaintiffs plausibly alleged a substantial impairment and insufficiently tailored ordinance at the pleading stage.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Contracts Clause (Schaumburg) | Ordinance substantially impairs alarm companies’ contracts and is not appropriately tailored to safety goals; RSS mandate effectively forces customers to Tyco. | Ordinance serves legitimate safety interests (reliability, reduced delays); provides transition window and extensions; tailoring is reasonable. | Reversed dismissal as to Schaumburg: plaintiffs plausibly alleged substantial impairment and inadequate tailoring at pleading stage; claim survives Rule 12(b)(6) though preliminary‑injunction likelihood was not shown. |
| Contracts Clause (NWCDS & Tyco) | §1983 conspiracy theory: NWCDS and Tyco conspired with Schaumburg to effect the impairment. | Contracts Clause liability arises only from legislative action; NWCDS and Tyco did not pass the ordinance; petitioning activity is protected by Noerr‑Pennington. | Affirmed dismissal: Contracts Clause applies to legislative actors; claims against NWCDS and Tyco fail. |
| Fourteenth Amendment (Due Process / Equal Protection) | Ordinance/Notice irrationally target competitors and exclude them despite feasible retransmission alternatives. | Law is rationally related to legitimate safety interests; reliance on longstanding exclusive partner is rational; strong presumption of validity under rational‑basis review. | Affirmed dismissal: Plaintiffs failed to plausibly plead irrationality; rational‑basis review satisfied. |
| Antitrust (Sherman & Clayton Acts) | Defendants conspired to allocate market to Tyco (Sherman §1), monopolized or attempted to (Sherman §2), and Tyco’s acquisition/lock‑in of accounts violates Clayton §7. | No plausible agreement alleged; profits/motives do not show conspiracy; Noerr and state‑action defenses may apply; plaintiffs waived amendment opportunities. | Affirmed dismissal: §1 conspiracy insufficiently pleaded; §2 depends on §1 so fails; Clayton claim waived for failure to develop below. |
Key Cases Cited
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (plausibility standard for pleading conspiracies)
- Ashcroft v. Iqbal, 556 U.S. 662 (pleading standard; legal conclusions not entitled to pleading‑stage inference)
- ADT Sec. Servs., Inc. v. Lisle‑Woodridge Fire Prot. Dist., 672 F.3d 492 (7th Cir.) (prior case addressing RSS mandates and NFPA 72 issues)
- ADT Sec. Servs., Inc. v. Lisle‑Woodridge Fire Prot. Dist., 724 F.3d 854 (7th Cir.) (follow‑up decision clarifying RSS vs. intermediary routing)
- United Mine Workers v. Pennington, 381 U.S. 657 (Noerr‑Pennington doctrine: petitioning protected absent sham)
- City of Columbia v. Omni Outdoor Advert., Inc., 499 U.S. 365 (Noerr principles and limits)
- Sveen v. Melin, 138 S. Ct. 1815 (Contracts Clause framework: substantial impairment and tailoring)