Last week, the Seventh Circuit Court of Appeals decided two cases challenging local ordinance requirements that commercial buildings be equipped with fire-alarm systems. The cases addressed various claims by Alarm Detection Systems (ADS) that these local ordinances violate state and federal laws and the constitution because they require commercial buildings to contract directly with only one alarm system provider. In both cases, the local government bodies had entered into exclusive agreements with Tyco Integrated Security, LLC, a competitor of ADS. With the exception of a Contracts Clause claim, the court rejected ADS’ arguments, and dismissed its claims.
In ADS v. Orland Park Fire Protection District, ADS argued that the local requirement that commercial businesses contract with Tyco for alarm services violated the Illinois Fire Protection District Act, the Sherman Act, and the 14th Amendment to the U.S. Constitution. The district court rejected those claims, ruled in favor of the local government, and dismissed the case. On appeal, the Seventh Circuit upheld the dismissal. First, the 7th Circuit held that ADS had no private right of action under the Illinois Fire Protection Act based on its status as a competitor to Tyco. Second, the 7th Circuit rejected ADS’ Sherman Act claims because ADS could not show that its own system could comply with the local requirements. Finally, the 7th Circuit found no fundamental right of ADS to support a 14th Amendment claim, and ADS had accepted that the local ordinances were lawful.
In the second case, ADS v. Schaumburg, ADS brought a variety of claims against Schaumburg, including claims of antitrust and state tort claims which the 7th Circuit rejected. However, the 7th Circuit did allow ADS’ claim that the Schaumburg ordinance violated the Contracts Clause of the U.S. Constitution to move forward. The Contracts Clause “restricts the power of States to disrupt contractual arrangements” through legislation, which also applies to municipalities. ADS claimed that Schaumburg’s ordinance forces ADS customers to either cancel or not renew their contracts with ADS in order to comply with the ordinance requirement that it contract with Tyco. That claim was allowed to move forward for further proceedings.