CHICAGO — A federal appeals court has upheld a ruling in favor of ADT, Alarm Detection Systems (ADS) and three other private alarm companies, stating that the Lisle-Woodridge Fire Protection District (LWFPD) could not monopolize the fire alarm monitoring market.
The decision is one victory in a years-long legal battle against LWFPD, which issued an ordinance in 2009 that positioned the district as the lone fire monitoring entity in the area. Under the ordinance, the district required all commercial and multi-residential alarm system owners to solely use Keltron transmission devices supplied by the district. Additionally, consumers had to pay a monthly fee of $66 for monitoring services.
In 2010, ADT and ADS, along with D.M.C. Security Services of Midlothian, Ill., Illinois Alarm Services of Forest Park, Ill., and SMG Security Systems of Elk Grove, Ill., filed a lawsuit against LWFPD, charging violations of the Illinois Fire Protection District Act, federal antitrust regulations and applicable codes and standards.
Last August, U.S. District Judge Milton Shadur issued a modified permanent injunction against LWFPD, ordering the district to cease all fire alarm monitoring activities. Additionally, the order stated that the district could not ban business from contracting with central stations that meet approved codes and standards.
The district filed an appeal to the Seventh U.S. Circuit Court of Appeals, which issued a 50-page opinion upholding the permanent injunction stating that LWFPD violated the Illinois Fire Protection District Act, applicable codes and standards and was an illegal monopoly.
Nick Bonifas, an attorney at ADS, says the ruling is good news for the industry, as the case challenged the integrity of central station monitoring.
“Having the court address some of the safety issues was very important to the industry,” he tells SSI. “We had an opportunity to address the safety issues and separate facts from fiction. In reality, central stations are subject to very strict guidelines and independent oversight. We are required by code to dispatch signals immediately, and with existing technology, we can provide instant communication to public dispatch facilities.”
In contrast, the Seventh Circuit found that LWFPD’s monitoring system did not comply with NFPA codes and interfered with the plaintiffs’ ability to serve their customers. For example, when LWFPD performed fire alarm monitoring, there was no system in place to follow up on trouble and supervisory alarm signals. This resulted in the district having an out-of-service rate of more than 12% compared to alarm companies’ rate of 1% to 2%, according to Bruce Goldsmith, an attorney for law firm Dykema, which represented four alarm companies in the lawsuit.
“The whole point of the lawsuit was to preserve the right for alarm companies to use their own monitoring facilities so they could keep track of trouble and supervisory signals,” he tells SSI. “It’s important to make sure the system’s operating properly and to attend to any problems it has. Alarm companies know what to do when they get supervisory signals. They troubleshoot with the owner and they send out service. When the district was monitoring, nobody communicated with the owner. If they did inform the consumer, it was unclear who was responsible for handling the problem.”
The court also found that the district’s new wireless system operates on the FCC “Industrial/Business” frequency, a less reliable frequency than the FCC “Public Safety Pool.”
Both Goldsmith and Bonifas believe the court ruling is also beneficial for consumers, noting the ordinance disrupted the relationship between loyal, long-term customers and alarm companies.
“The court ruling … allows new technology and innovation to flow into the marketplace,” Bonifas says. “It gives consumers the choice of an alarm company, and it creates a forum to shop for the best prices. Competition is healthy; these things are good for everyone, not just the alarm industry.”
However, the case isn’t over yet, as there are still important federal claims upon which no rulings have been made, according to Goldsmith. For example, the alarm companies claim that the district violated their rights under the contract clause of the U.S. Constitution and the 14th Amendment. Additionally, the firms filed a Sherman Antitrust Act claim against LWFPD, as well as the Chicago Metropolitan Fire Prevention Company, claiming that the entities have generated anti-competitive behavior.
Although the decision concludes that fire protection districts do not have the authority to engage in fire alarm monitoring, it doesn’t mention anything about municipalities’ authority to monopolize fire alarm monitoring. However, Goldsmith believes this ruling could dissuade municipalities from pursuing a similar course as LWFPD did.
“Hopefully, this will discourage other communities from trying to take over this business, the revenue stream, and providing substandard service to the commercial base of accounts that the alarm companies serve so well,” Goldsmith says.
LWFPD Public Information Officer Jim French did not return messages before press time.
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