Alarm Detection Systems, Incorporated, an Illinois corporation, et al., Plaintiffs-Appellants,
Village of Schaumburg, a municipal corporation, et al., Defendants-Appellees.
April 8, 2019
from the United States District Court for the Northern
District of Illinois, Eastern Division. No. l:17-cv-02153 -
Rebecca R. Pallmeyer, Chief Judge.
Wood, Chief Judge, and Scudder and St. Eve, Circuit Judges.
EVE, CIRCUIT JUDGE.
appeal is one of two we decide today regarding the market for
commercial fire-alarm services in Chicago's suburbs. The
current case takes us to the Village of Schaumburg.
2016, Schaumburg passed an ordinance that requires commercial
buildings to send fire-alarm signals directly to the local
911 dispatch center. That decision, sensible as it may seem,
comes at an economic cost: as implemented, the ordinance
threatens to exclude from the market all but one alarm-system
provider. This is because the area's dispatch center,
Northwest Central Dispatch System ("NWCDS"), has an
almost decade-old exclusive arrangement with Tyco Integrated
Security, LLC. To send signals to NWCDS, then, local
buildings must also use Tyco equipment-or at least that is
what Schaumburg has told local building owners.
of Tyco's competitors (the "Alarm Companies" or
"Companies") see in these facts a profit-driven
conspiracy among Schaumburg, NWCDS, and Tyco to centralize
the local market for fire-alarm services. The Alarm Companies
filed this suit charging violations of constitutional,
antitrust, and state tort law. The district court, however,
dismissed the case, concluding that the complaint's
allegations failed to state a claim.
agree in large part. With one exception, the claims, and the
underlying conspiracy, are not pleaded with enough facts to
cross the line from speculative to plausible. We therefore
affirm in large part and reverse and remand in part.
case comes to us on a motion to dismiss, so we draw the
following facts from the complaint's well-pleaded
Schaumburg, local law requires commercial buildings and
apartment complexes to maintain fire-alarm systems. The
buildings and complexes-or "accounts," as the
parties call them-contract directly with alarm-system
providers to install and maintain the systems. These systems,
as a general matter, must comply with the National Fire
Protection Association's National Fire Alarm and
Signaling Code ("NFPA 72"), a nationwide
logistics of the fire-alarm systems are important to this
appeal. Each system has three components: heat and smoke
detectors, a panel, and a transmitter. When a detector goes
off, it sends an alert to the panel. The panel then connects
to the transmitter. Before 2016, the accounts'
transmitters would route the signals to one of two places:
(1) a central-supervising station run by the alarm-system
provider (the "CSS model"); or (2) a
remote-supervising station operated by the local emergency
dispatch center (the "RSS model"). NWCDS is the
dispatch center for Schaumburg. It is an
"intergovernmental cooperation," see 5ILCS
220/3, of which Schaumburg is a municipal member.
the CSS model and the RSS model comply with NFPA 72. See
NFPA 72: National Fire Alarm and Signaling Code
§§ 3.3.282.1, 3.3.282.3 (2016 ed.). If the parties
have arranged for the signal to go to the CSS, a CSS operator
will address the signal. If the signal was in fact an alarm
signal, and not a trouble or maintenance alert, the CSS calls
the dispatch center, which in turn sends help. If, however,
the signal goes directly from the account to the RSS, the RSS
either contacts the account or sends help. For an RSS to
receive signals directly from an account, the RSS must have
signal-receiving equipment that is compatible with the
2011, NWCDS and Tyco entered into an agreement for this
signal-receiving equipment. NWCDS granted Tyco the
"exclusive right to install, own, maintain and service
all alarm signal receiving and processing equipment and
systems located at the NWCDS Operations Center and the
covered agencies." This exclusive agreement covered
Schaumburg, among other areas, and it has a ten-year term
with automatic one-year renewals. Per the agreement, Tyco
pays NWCDS an administrative fee of $23 per month for each
account it connects to the equipment at NWCDS. Before 2016,
there were about 50 such accounts in Schaumburg, for which
Tyco provided equipment and NWCDS directly monitored. The
complaint implies that Schaumburg's other accounts, of
which there are more than 1, 000, operated under the CSS
changed in August 2016, when Schaumburg adopted Ordinance No.
16-078. The Ordinance states that "[a]ll new fire alarm
and fire suppression systems shall transmit fire,
supervisory, and trouble signals to the Village of
Schaumburg's designated remote supervising station"
- NWCDS-"via a wireless transmitter in accordance with
NFPA 72." As the complaint explains, the Ordinance
effectively mandates accounts to use the RSS model and
"requires all" accounts "to contract with Tyco
to obtain" their fire-alarm systems.
the Ordinance's adoption, Schaumburg sent a notice (the
"Notice," as we will refer to it) in September 2016
to the area's accounts. The Notice cited the Ordinance
and advised that "[t]he NWCDS-contracted fire alarm
vendor, Tyco Integrated Security, is the authorized installer
of the radio equipment required for fire alarm systems
monitored by NWCDS." It explained further that
Schaumburg had adopted the Ordinance to increase the
reliability of fire-alarm monitoring, to eliminate the
possibility for transmission delays, and to improve response
times. Existing systems, according to the Notice, had until
the earliest of one of three dates to begin sending signals
directly to NWCDS through Tyco equipment: "(a) [w]hen an
existing contract with a monitoring agency (central station)
ends; (b) [w]hen the existing fire alarm equipment is
modified or replaced; [or] (c) [p]rior to August 31,
2019," subject to possible extensions. The Notice added
that accounts would be charged $81 per month to rent
Tyco's radio transmitters and for the monitoring service.
Ordinance and the Notice were not well received, according to
the Alarm Companies. Tyco's fee is about 47 percent
higher than its competitors' fees for comparable
services, and one account has said that switching to Tyco
will cost it more than $7, 500 per month. Schaumburg, NWCDS,
and Tyco, on the other hand, stand to benefit from the
Ordinance and the Notice. The complaint estimates that the
reduction in competition will result in a $1, 000, 000 annual
profit for Tyco. Tyco's $23-per-customer fee to NWCDS
will then grow, and in turn Schaumburg also profits. The
village receives a credit from NWCDS in the amount of the
fees Tyco pays NWCDS, and Schaumburg anticipates now
receiving more than $300, 000 each year.
Companies filed this suit and sought to enjoin preliminarily
the Ordinance's enforcement in March 2017. The complaint
brought many claims, including for violations of the
Contracts Clause of Article I and the Equal Protection and
Due Process Clauses of the Fourteenth Amendment, pursuant to
42 U.S.C. § 1983. The complaint also claimed violations
of the Sherman Act, 15 U.S.C. §§ 1, 2, the Clayton
Act, 15 U.S.C. § 18, and state tort law. The various
claims derive from the same theory: Schaumburg, working with
NWCDS and Tyco, passed the Ordinance to exclude the Companies
from the market and collect monopoly rents. The Companies
also argue (but did not allege) that even if the Ordinance
was lawful, the Notice was not. Tyco's competitors can
operate in a RSS system, the Companies say, by automatically
retransmitting signals from their CSS to the RSS. The
Companies add that this court has twice thwarted attempts to
concentrate a similar market, in decisions we will explain
below. See ADT Sec. Servs., Inc. v. Lisle-Woodridge Fire
Prot. Dist., 672 F.3d 492 (7th Cir. 2012) (ADT T);
ADT Sec. Sews., Inc. v. Lisle-Woodridge Fire Prot. Dist,
724 F.3d 854 (7th Cir. 2013) (ADT II).
district court found the Alarm Companies' claims wanting.
It first denied the Companies' motion for a preliminary
injunction after a hearing, finding that none of the claims
was likely to succeed. The court then offered the Companies a
chance to replead. They declined-opting instead to file a
motion for reconsideration, which the district court also
denied. The defendants moved to dismiss and the court granted
those motions, concluding that the Companies had inadequately
pleaded their federal claims. See Fed. R. Civ. P.
12(b)(6). It held the same with respect to the state-law
claims against Tyco, and it relinquished jurisdiction over
the remaining state-law claims against Schaumburg and NWCDS.
See 28 U.S.C. § 1367(c).
Alarm Companies appeal. We consolidated their case with
Alarm Detection Sys., Inc. v. Orland Fire Prot.
Dist., No. 18-2926, which concerns a similar market and
ordinance. But deciding the appeals requires addressing
different legal, factual, and procedural questions, so we
issue this opinion independently.
Alarm Companies submit that the district court erred both in
denying their request for a preliminary injunction and in
granting the motions to dismiss. We review the legal
conclusions of a preliminary-injunction denial de novo, as we
do a Rule 12(b)(6) dismissal. GEFT Outdoors, LLC v. City
of Westfield, 922 F.3d 357, 364 (7th Cir. 2019); Bd.
of Forensic Document Exam'rs, Inc. v. Am. Bar
Ass'n 922 F.3d 827, 830 (7th Cir. 2019). With one
exception, which we explain below, our analysis of the
motion-to-dismiss decision resolves this appeal.
requirements for surviving a motion to dismiss are now
familiar. The complaint must contain allegations that
collectively "state a claim to relief that is plausible
on its face." Ashcroft v. Iqbal, 556 U.S. 662,
678 (2009) (quoting Bell Ml Corp. v. Twombly, 550
U.S. 544, 570 (2007)). We accept all well-pleaded allegations
of fact as true and draw all reasonable inferences in the
plaintiffs' favor. Erickson v. Pardus, 551 U.S.
89, 94 (2007). Legal conclusions do not get the same benefit;
those we may disregard. McCauley v. City of Chicago,
671 F.3d 611, 616 (7th Cir. 2011). If the well-pleaded
allegations plausibly suggest-as opposed to possibly
suggest-that the plaintiffs are entitled to relief, the case
enters discovery. Iqbal, 566 U.S. at 678;
Yeftich v. Navistar, Inc., 722 F.3d 911, 917 (7th
Cir. 2013). If, however, the allegations fail to raise the
right to relief "above the speculative level,"
dismissal is appropriate. Twombly, 550 U.S. at 555.
This may be the case, for example, if there is an
"obvious alternative explanation" for the
complaint's factual allegations. Iqbal, 556 at
682; Twombly, 550 U.S. at 567; Smoke Shop, LLC
v. United States, 761 F.3d 779, 785 (7th Cir. 2014).
asking whether the claims before us pass this test, one issue
is worth addressing at the outset. Throughout their briefing,
the Companies thematically cite ADT I and ADT
II and insist that this case, like those cases, warrants
enjoining a local effort to ...