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ADT Security Services, Inc. v. Lisle-Woodridge Fire Protection District

United States Court of Appeals, Seventh Circuit

July 31, 2013

ADT Security Services, Inc. et al., Plaintiffs-Appellees,
Lisle-Woodridge Fire Protection District and Chicago Metropolitan Fire Prevention Company, Defendants-Appellants, and DuPage Publi c Safety Communications, Intervening-Appellant.

Argued April 22, 2013

Appeals from the United States District Court for the Northern District of Illinois, Eastern Division. No. 10 cv 04382—Milton I. Shadur, Judge.

Before Wood, Tinder, and Hamilton, Circuit Judges.

Hamilton, Circuit Judge.

In this case we revisit factual and legal issues concerning the Illinois law establishing fire protection districts and one district's effort to shut down the private market in fire alarm monitoring services by substituting for it a less safe and less reliable system operated by just one chosen vendor.

In 2009 the Lisle-Woodridge Fire Protection District passed an ordinance under which it took over fire alarm monitoring for all commercial properties in the District. The private alarm companies that had previously provided those services in the District sued, alleging that the ordinance interfered with their business, created an illegal monopoly for the District, violated their constitutional rights, and exceeded the District's statutory powers. In an earlier appeal from the district court's first order permanently enjoining the District from implementing the ordinance and granting summary judgment for the alarm companies, we affirmed in part, reversed in part, and remanded, finding on review of summary judgment that the District had the authority to enforce parts of the 2009 ordinance. We remanded for the district court to revise its permanent injunction. ADT Security Svcs., Inc. v. Lisle-Woodridge Fire Protection District, 672 F.3d 492 (7th Cir. 2012).

On remand the district court held a four-day evidentiary hearing. The district court issued a modified permanent injunction that was based on new factual findings that are more detailed and differ somewhat from the limited summary judgment record upon which we based our 2012 decision. The District now appeals from the revised permanent injunction order with a long list of objections, but it argues primarily that the revised permanent injunction conflicts with our 2012 decision.

In our 2012 decision, we preserved much of the District's authority to enforce its ordinance. But the evidentiary hearing following our remand showed that many material facts are actually different from what we had to assume when we reviewed the grant of summary judgment, particularly with regard to the statutory authority for and the motivation and efficacy of the District's plan. We therefore find, with a few minor exceptions, that the modified permanent injunction was a sound exercise of the district court's discretion. We affirm the injunction with a few modifications.

I. Factual and Procedural Background

A. The Parties and Alarm Signaling and Monitoring

Appellant Lisle-Woodridge Fire Protection District ("the District") is a specific type of municipal entity established by the Illinois Fire Protection District Act ("the Act"), 70 Ill. Comp. Stat. 705/1 et seq. The District provides fire protection services to residents in the villages of Lisle and Woodridge, Illinois, and other unincorporated parts of DuPage County. Under the Act, the District has the power to set fire codes and to establish standards for fire alarm and dispatching services. 70 Ill. Comp. Stat. 705/6(i), 705/11. The District funds its work through taxes and is governed by a board of trustees. See 705/14.

The District does not receive fire alarms directly. Rather, fire alarms within the District are received and dispatched by intervening appellant DuPage Public Safety Communications, also known as "Du-Comm." Du-Comm is an inter-governmental entity made up of 28 member police and fire agencies in DuPage County, including the District. Du-Comm provides emergency dispatch services to those member agencies.

The plaintiff-appellees are private alarm companies that provide alarm and monitoring services to commercial properties in the District. For example, a warehouse, office building, or apartment complex may contract with an alarm company to install and monitor a building-wide alarm system. That system receives a fire alarm signal at the building's main alarm board from a smoke detector in the building and then transmits that signal to the local dispatcher to send emergency services. The alarm companies also provide monitoring services: in addition to fire alarm signals, the alarm boards also send "trouble" and "supervisory" signals, which indicate to the alarm companies either that the alarm board is not functioning or that someone at the premises has interfered with the system (e.g., shut off a water valve supplying the sprinkler system). The alarm companies receive the signals at "Central Stations, " which need not be geographically close to the customer's premises. Often an alarm company will have one company-wide Central Station that it uses to receive and send dispatch signals for all of its customers.

Prior to this litigation, the plaintiff alarm companies provided alarm and monitoring services to their customers as follows: smoke and fire detectors in a building would send a signal to the alarm panel in the building, the alarm panel's communication device would send a signal to the alarm company's Central Station, and an operator at the Central Station would make a telephone call to Du-Comm for dispatching. An alternative to this "Central Station" model for fire alarm systems is the "Remote Supervising Station" model in which fire alarm and monitoring signals are transmitted from buildings to a facility other than a Central Station, such as a municipal dispatch board.

B. The 2009 Ordinance

In September 2009, the District passed an ordinance that attempted to overhaul alarm signaling and monitoring in the District. The ordinance required all commercial property owners to terminate their contracts with private alarm companies and instead to adopt and pay for an alarm and monitoring system provided by the District. Under the new system, alarm boards at commercial properties would be equipped with wireless transmitters owned by the District that would transmit alarm, trouble, and supervisory signals to a receiving unit located at the District's Fire Station 3. The receiving unit at Station 3 would automatically transmit the signals to another receiving unit at Du-Comm, which would then dispatch the relevant emergency response.

The District claimed that it switched to this system, which the District deemed a Remote Supervising Station system, because it was experiencing outages and other problems with the plaintiffs' private monitoring through Central Stations, including that alarm notifications were delayed and trouble signals indicating outages did not trigger prompt responses. DC-360 at 3; Freeman 265.[1]District officials claimed that the new system would provide two main advantages over the signaling and monitoring provided by the private alarm companies: (1) it was entirely wireless and automated, eliminating the need for a human-operated telephone call from a Central Station to Du-Comm and decreasing the time it took to respond to alarms, and (2) it connected all signals directly to the District's own board, allowing the District to monitor all signals and to ensure that all outages were addressed.

The District took bids from several companies to set up the system and provide the wireless transmitters. It settled on a company called Chicago Metropolitan Fire Prevention Company — also a defendant and appellant here. Chicago Metro would supply the transmission equipment: AES/Keltron-manufactured wireless radio transmitters for all the properties, the District's receiving unit at Station 3, and the second receiving unit at Du-Comm. (AES and Keltron radios are synonymous. Coveny 367.) The District sent a notice to all commercial property owners in the District, informing them that the new ordinance had been adopted and that they would now be charged $66 per month for the alarm and monitoring services and for the radio transmitter and its maintenance. The notice also boldly informed subscribers: "If you are under contract for monitoring with another vendor, our ordinance now supersedes those contracts and makes them null and void."

C. Proceedings Before the District Court

The alarm companies quickly filed suit in the Northern District of Illinois, alleging that the ordinance violated federal antitrust laws and federal constitutional guarantees of equal protection, due process, and the right to contract, and that the District did not have the legal authority to enact the ordinance under the Illinois Fire Protection District Act. On July 20, 2011, the District Court granted the alarm companies' motion for partial summary judgment, and on August 16, 2011 entered a permanent injunction enjoining the District from enforcing and implementing the Ordinance. The District and Chicago Metro appealed both the summary judgment order and the permanent injunction.

D. This Court's 2012 Opinion

On February 27, 2012, we issued an opinion ("ADT I"), reversing in part and remanding for further proceedings. See 672 F.3d 492 (7th Cir. 2012). We held that the District was authorized under the Act to require buildings to be connected directly to its dispatching center and to require that the transmission network be wireless, but we found that the District was not authorized under the Act to be the sole provider of the necessary equipment. In essence, we found that the District had fairly broad authority in its capacity as a fire safety regulator but little if any authority to step in as a participant (or the sole participant) in the competitive market for commercial fire alarm signaling and monitoring services.

Looking first to the District's authority under the Act, we held that the Act permitted the District to require property transmitters to connect directly to the District's own receiving board and to require that the transmission system be wireless. Section 11 of the Act permits fire protection districts to "adopt and enforce fire prevention codes and standards parallel to national standards." 70 Ill. Comp. Stat. 705/11. We interpreted "parallel" to mean that the District could choose to require one acceptable option where national standards contemplated several acceptable options. ADT I, 672 F.3d at 501.

In the fire protection world, national standards include the National Fire Protection Association's "NFPA 72: National Fire Alarm and Signaling Code" (the "Code"). The Code contemplates the use of either a Remote Supervising Station system or a Central Station system. See NFPA 72 § 8.2, 8.4 (2002).[2] Given these options, we applied our interpretation of "parallel" to mean that it was within the scope of the District's authority under the Act to require the use of a Remote Supervising Station system to the exclusion of Central Stations. The Code permitted the use of either Central Stations or a Remote Supervising Station, and the District's system was a Remote Supervising System. We applied the same interpretation of section 11 to the District's wireless requirement and found that it too was "parallel" to the NFPA Code, which lists wireless radios as one acceptable method of transmitting signals. See ADT I, 672 F.3d at 502, citing NFPA 72 § (2010); see also NFPA 72 § (2002).

We affirmed the district court's grant of summary judgment to the extent it held that the District could not anoint itself or its chosen vendor as the exclusive provider of the wireless radio transmitters. We found that the Code did not authorize districts to do so and instead made property owners responsible for the equipment at their property. ADT I, 672 F.3d at 503 ("The District, by making itself the sole purveyor, installer, inspector, tester, and maintainer of the necessary radio transmitter equipment, has usurped responsibilities the NFPA code accords to property owners.").

We remanded to the district court for further proceedings in light of these holdings and to address the issues remaining before the district court. We did not reach all remaining issues, but we addressed several issues to guide the district court in future proceedings. We noted that the District would not likely have an "effective monopoly" on monitoring and equipment if wireless transmitters other than the District's Keltron units would be compatible with the system, which it seemed to us was likely. We also noted that we interpreted the Act as not permitting the District to charge service fees to its residents beyond the taxes it is authorized to collect.

E. Proceedings on Remand

Upon remand, the district court held an evidentiary hearing to resolve factual disputes relevant to modifying the permanent injunction in light of our opinion. The court heard four days of testimony. Plaintiffs' witnesses included Louis Fiore, a consultant on alarm monitoring and a special expert to the NFPA, and Edward Bonifas, vice president of plaintiff Alarm Detection Systems. Defendants' witnesses included Thomas Freeman, Chief of the District, James French, the District's Bureau Chief for Fire Prevention, Lawrence Coveny of Chicago Metro, and Brian Tegtmeyer, the executive director of Du-Comm. Only Fiore was found to be an expert witness. See Tr. 53, 138-39 (district court permitted Fiore to testify as expert witness; plaintiffs' counsel withdrew Bonifas as opinion witness).[3]

After the hearing the district court ordered the parties to submit proposed findings of fact and proposals for a modified permanent injunction. On July 6, 2012 — seven days before the District's submissions were due — the District passed a new ordinance. DC-360 at 2; Joint Separate App. 66-75. The new ordinance repealed the 2009 ordinance and replaced it with a modified set of requirements. Under the new 2012 ordinance, the District would not own any transmitters and would permit property owners to contract with private companies for alarm transmission and monitoring and the necessary equipment. But the signals would still need to be transmitted via the District's wireless network to the District's receiver at Station 3 to be transmitted to the receiver at Du-Comm. Under this arrangement, the District would collect no fees from property owners but Du-Comm would collect fees on its behalf. The District argued before the district court that the new ordinance mooted the controversy; the plaintiff alarm companies disagreed.

F. Modified Permanent Injunction

On August 7, 2012, the District Court entered a Modified Permanent Injunction Order and issued accompanying factual findings and conclusions of law. The court adopted the alarm companies' findings of fact, conclusions of law, and proposed injunction provisions. In essence, the Modified Permanent Injunction[4]required the District to permit the alarm companies to receive and transmit signals directly from property alarm boards (independently of the District) and to retransmit those signals to Du-Comm via Central Stations. Specifically, the injunction barred the District from: requiring that any fire signals be sent to Station 3 (instead it required that Station 3 be shut down), charging residents for fire protection services (including any fees charged by Du-Comm), selling or leasing fire alarm system equipment, and prohibiting signals from properties from being sent to Central Stations. The injunction required the District: to allow alarm companies to use any technology equivalent to wireless transmission and compliant with the NFPA code, to adopt the most current version of the NFPA code, to refund to property owners fees collected by the District since the 2009 ordinance took effect, to direct Du-Comm to cooperate with the alarm companies so it could receive wireless signals directly from Central Stations, and to direct Du-Comm to pre-populate its computer database with names and addresses of the private alarm companies' customers to decrease response times.

The injunction also prohibited the District from enforcing the new ordinance and redacted the 2009 ordinance in accordance with its provisions. The district court explained that, although many of the new provisions of the injunction seem to conflict with ADT I, that was because many of the factual assumptions that we had to make in ADT I turned out to be unsupported by the evidence presented at the hearing. The district court issued a separate memorandum explaining why the new ordinance did not moot the controversy.

The District and Chicago Metro appealed.[5] They each point to many supposed flaws in the injunction and the accompanying findings of fact and conclusions of law. Most of their arguments do not persuade us. Rather, we agree with the district court that the new ordinance did not effectively moot this controversy. We also find no clear error in the district court's factual findings. Instead, the facts found by the district court after the evidentiary hearing persuade us that, while the legal principles of ADT I still stand, given the actual facts here, the new injunction sets appropriate boundaries for the District and does not contravene ADT I in most of the ways that the appellants argue. However, we find that several parts of the injunction exceed the proper scope of injunctions. We modify the injunction by striking the portions requiring the District to refund fees to subscribers and requiring the District to adopt the most current versions of the NFPA code. We thus affirm the injunction with a few modifications.

II. Discussion

The numerous arguments raised by the District and Chicago Metro on appeal fall into several categories. They argue that the injunction: (1) contravenes ADT I by barring the District from enforcing its direct-connect requirement, (2) exceeds the proper scope of injunctions by binding a non-party (Du-Comm) and awarding relief to non-parties (refunds to subscribers), and (3) ignores the 2012 ordinance that supposedly mooted the controversy or at least should have replaced the 2009 ordinance in the district court's analysis.

We have jurisdiction under 28 U.S.C. § 1292 to review an appeal from an injunction. (Several claims remain pending before the district court, so there has been no final judgment.) We review the district court's factual findings for clear error, its entry of the injunction for abuse of discretion, and its legal conclusions de novo. See Knapp v. Northwestern Univ., 101 F.3d 473, 478 (7th Cir. 1996).

Based on the facts revealed at the evidentiary hearing, we find that the injunction is generally appropriate and not an abuse of discretion. When we first heard this case in ADT I, we reviewed the district court's grant of summary judgment. We were required to view the evidence and disputed facts in a light most favorable to the District and Chicago Metro. But the evidentiary hearing revealed many material facts to be quite different in reality from the inferences we were required to draw in the District's favor in ADT I, including such critical issues as the District's motive in enacting the ordinance, the efficacy of the new system, and the District's authority to implement the new system. The District and Chicago Metro object to many of these findings on appeal, but we reject those arguments.

Based on these findings, we find that the major elements of the injunction — shutting down the District's Station 3 and permitting private Central Stations to receive and transmit alarm signals — were well within the district court's discretion. Commercial properties in the District must have some form of fire alarm monitoring, but the District's plans and requirements for such services are beyond the District's legal authority, so it was appropriate for the district court to require the District to permit private alarm companies to provide that essential service. Moreover, the facts have revealed that the District's system is less reliable and more dangerous than the private alarm companies' systems, does not comply with NFPA standards, and interferes with the plaintiffs' ability to serve their customers.

The 2012 ordinance did not remedy these ills so as to render this dispute moot. It would have the effect of continuing to block the alarm companies from providing alarm monitoring services to customers in the District. To the extent the injunction includes Du-Comm even though it is not a party, we find that the injunctive measures involving Du-Comm are appropriate because Du-Comm expressed its willingness to cooperate in the ways required by the injunction. If Du-Comm does not follow through, the district court may need to determine Du-Comm's exact status with respect to the injunction, including whether it might be deemed an agent of the District and already subject to contempt powers, but we hope that will not be necessary. Despite our approval of the core elements of the modified injunction, we take issue with a few of its ancillary elements.

A. Mootness

We first address the threshold question of whether the 2012 ordinance mooted this dispute. See Pakovich v. Verizon LTD Plan, 653 F.3d 488, 492 (7th Cir. 2011). The District argues that its eleventh-hour repeal of the 2009 ordinance and replacement of it with the new ordinance mooted the entire controversy. The District argues both that the new ordinance rendered the modified permanent injunction moot and that, at a minimum, the district court erred by not analyzing the new ordinance instead of the 2009 ordinance. We find that the 2012 ordinance does not moot the dispute over the modified permanent injunction. The alarm companies would still face a variety of injuries stemming from the new ordinance.

The problem of mootness posed by a defendant's change in policy or practice poses a recurring problem when injunctive relief is sought. "[T]he mere cessation of the conduct sought to be enjoined does not moot a suit to enjoin the conduct, lest dismissal of the suit leave the defendant free to resume the conduct the next day." Chicago United Indus., Ltd. v. City of Chicago, 445 F.3d 940, 947 (7th Cir. 2006), citing Friends of the Earth, Inc. v. Laidlaw Environmental Services (TOC), Inc., 528 U.S. 167, 189 (2000). But a case may still be moot if there is no reasonable expectation that the wrong will be repeated. Chicago United Industries, 445 F.3d at 947-49 (finding it "highly unlikely" that city would continue to deprive contractor of fair hearing, but case was not moot with regard to damages award).

Specifically, "[t]he complete repeal of a challenged law renders a case moot, unless there is evidence creating a reasonable expectation that the City will reenact the ordinance or one substantially similar." Fed'n of Adver. Indus. Representatives, Inc. v. City of Chicago, 326 F.3d 924, 930 (7th Cir. 2003). We apply a rebuttable presumption that government actors will not repeat objectionable behavior after an injunction is lifted. Id., citing City of Mequite v. Aladdin's Castle, Inc., 455 U.S. 283, 289 (1982) (case not moot where possibility remained that city would reenact previously enjoined ordinance language). This presumption can be rebutted if a local government reenacts provisions substantially similar to those initially repealed. See 13C Charles Alan Wright & Arthur R. Miller, et al., Fed. Prac. & Proc. § 3533.6 (3d ed.) ("repeal followed by reenactment of provisions similar to those repealed does not moot a continuing challenge"), citing Fireman's Fund Ins. Co. v. City of Lodi, 302 F.3d 928, 936 n.8 (9th Cir. 2002) (new ordinance and repeal of challenged ordinance while appeals were pending did not moot appeals where "core disputes between the parties remain[ed]").

Here, the new 2012 ordinance did not resolve the disputes between the parties. Under the new ordinance, alarm companies are permitted to receive alarm and monitoring signals at Central Stations, but they must transmit those signals to Station 3 via the District's wireless network so that the signals would then be sent from Station 3 to Du-Comm for dispatching. The District claims that the new ordinance removes the District itself from the monitoring business and permits the alarm companies to provide those services to customers in the District. But the new ordinance keeps several requirements from the original ordinance that would continue to injure the alarm companies by effectively blocking them from monitoring in the District or that are beyond the District's authority to impose.

The first and most obvious is that the new ordinance keeps Station 3 as a central part of the District's monitoring plan. Under the new ordinance, according to the District, signals would be sent by Central Stations to Station 3 and then transmitted to Du-Comm. As we explain below, Station 3 does not meet the basic safety requirements to function as an intermediary station under the Code. The arrangement under the new ordinance would place even more of the fire alarm system's essential connections at the unsupervised Station 3 without back-up equipment than the original ordinance would have. This new requirement is not "parallel" to the Code and therefore is not within the District's authority to require under the Act. See 70 Ill. Comp. Stat. 705/11.

Second, to provide alarm monitoring and signaling, the alarm companies must join the District's wireless network. This network is accessible with only one specific type of transmitter, which is not the type the alarm companies use. See Coveny 376, 439. Although the alarm companies proposed using several other types of radios in an attempt to work with the District's wireless requirement, none are compatible with the type of network and receiver used at Station 3. Id. at 383-385. In fact, the new ordinance specifically states that alarm companies will have to transmit all their signals to a "Keltron 703 Communications Board" to gain access to the District's system. This requirement means that alarm companies must either replace all of their existing equipment and transmission technology or they cannot provide alarm monitoring services to customers in the District. See Coveny 439. Excluding alarm companies from the ...

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