Alarm Detection Systems, Incor v. Village of Schaumburg , 930 F.3d 812 ( 2019 )

In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 18‐3316
ALARM DETECTION SYSTEMS, INCORPORATED,
an Illinois corporation, et al.,
Plaintiffs‐Appellants,
v.
VILLAGE OF SCHAUMBURG, a municipal
corporation, et al.,
Defendants‐Appellees.
____________________
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 1:17‐cv‐02153 — Rebecca R. Pallmeyer, Chief Judge.
____________________
ARGUED APRIL 8, 2019 — DECIDED JULY 15, 2019
____________________
Before WOOD, Chief Judge, and SCUDDER and ST. EVE, Circuit
Judges.
ST. EVE, Circuit Judge. This appeal is one of two we decide
today regarding the market for commercial fire‐alarm ser‐
vices in Chicago’s suburbs. The current case takes us to the
Village of Schaumburg.
2 No. 18‐3316
In 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 ordi‐
nance 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 al‐
most decade‐old exclusive arrangement with Tyco Integrated
Security, LLC. To send signals to NWCDS, then, local build‐
ings must also use Tyco equipment—or at least that is what
Schaumburg has told local building owners.
A few 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 lo‐
cal 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.
We 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.
I. Background
This case comes to us on a motion to dismiss, so we draw
the following facts from the complaint’s well‐pleaded allega‐
tions.
In Schaumburg, local law requires commercial buildings
and apartment complexes to maintain fire‐alarm systems. The
buildings and complexes—or “accounts,” as the parties call
No. 18‐3316 3
them—contract directly with alarm‐system providers to in‐
stall and maintain the systems. These systems, as a general
matter, must comply with the National Fire Protection Asso‐
ciation’s National Fire Alarm and Signaling Code (“NFPA
72”), a nationwide safety standard.
The 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 5 ILCS 220/3, of which Schaumburg is a mu‐
nicipal member.
Both 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 trou‐
ble 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 ac‐
count or sends help. For an RSS to receive signals directly
from an account, the RSS must have signal‐receiving equip‐
ment that is compatible with the account’s transmitters.
In 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
4 No. 18‐3316
signal receiving and processing equipment and systems lo‐
cated 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 con‐
nects to the equipment at NWCDS. Before 2016, there were
about 50 such accounts in Schaumburg, for which Tyco pro‐
vided equipment and NWCDS directly monitored. The com‐
plaint implies that Schaumburg’s other accounts, of which
there are more than 1,000, operated under the CSS model.
Things 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 trans‐
mit 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 effec‐
tively mandates accounts to use the RSS model and “requires
all” accounts “to contract with Tyco to obtain” their fire‐alarm
systems.
Following 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 ad‐
vised 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 monitor‐
ing, to eliminate the possibility for transmission delays, and
to improve response times. Existing systems, according to the
No. 18‐3316 5
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 equip‐
ment 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.
The Ordinance and the Notice were not well received, ac‐
cording to the Alarm Companies. Tyco’s fee is about 47 per‐
cent 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.
The Companies filed this suit and sought to enjoin prelim‐
inarily the Ordinance’s enforcement in March 2017. The com‐
plaint 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
6 No. 18‐3316
market and collect monopoly rents. The Companies also ar‐
gue (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 I); ADT Sec. Servs., Inc. v. Lisle‐Woodridge Fire
Prot. Dist., 724 F.3d 854 (7th Cir. 2013) (ADT II).
The district court found the Alarm Companies’ claims
wanting. It first denied the Companies’ motion for a prelimi‐
nary 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 de‐
nied. The defendants moved to dismiss and the court granted
those motions, concluding that the Companies had inade‐
quately 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 remain‐
ing state‐law claims against Schaumburg and NWCDS. See 28
U.S.C. § 1367(c).
The 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 de‐
ciding the appeals requires addressing different legal, factual,
and procedural questions, so we issue this opinion inde‐
pendently.
No. 18‐3316 7
II. Discussion
The 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 con‐
clusions of a preliminary‐injunction denial de novo, as we do
a Rule 12(b)(6) dismissal. GEFT Outdoors, LLC v. City of West‐
field, 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.
The requirements for surviving a motion to dismiss are
now familiar. The complaint must contain allegations that col‐
lectively “state a claim to relief that is plausible on its face.”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp.
v. Twombly, 550 U.S. 544, 570 (2007)). We accept all well‐
pleaded allegations of fact as true and draw all reasonable in‐
ferences 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 com‐
plaint’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).
8 No. 18‐3316
Before 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 centralize a market in one provider’s hands
through an RSS protocol. We disagree.
ADT I and ADT II concerned the Illinois Fire Protection
District Act (the “District Act”). See 70 ILCS 705/1 et seq. That
statute, among other things, permits municipalities to set up
a “fire protection district” to provide dispatch services and re‐
quires that local systems abide by nationwide standards, like
NFPA 72. In ADT I, we concluded that NFPA 72 permitted an
RSS model, but that the district violated NFPA 72, and thus
the District Act, by requiring accounts to purchase radio sys‐
tems from it or its exclusive partner. 672 F.3d at 500–03; see
also Alarm Detection Sys., Inc. v. Vill. of Hinsdale, 761 N.E.2d 782,
789 (Ill. App. Ct. 2001) (holding that a village could enact an
ordinance “requiring that all fire alarm systems … be tied di‐
rectly to the Village’s fire board”). In ADT II, we affirmed the
district court’s decision that the fire‐protection district was
not in fact operating in an RSS model. The district was instead
routing signals through an intermediary, and that scheme, we
held, violated NFPA 72 and by extension the District Act. 724
F.3d at 868–71.
This case is not like ADT I or ADT II, as a matter of law or
fact. Here, unlike in ADT I and ADT II, the dispatch center has
not entered the alarm‐service business by requiring accounts
to purchase equipment from it. And this case, unlike those
cases, concerns only constitutional, antitrust, and state tort
law claims. The District Act, which controlled our analysis in
ADT I and ADT II, is not in play here, as there is no fire‐
No. 18‐3316 9
protection district in this case and the Companies have not
raised a District Act claim.1 Facing distinct law and different
facts, we see nothing controlling in ADT I or ADT II on the
merits of this appeal.
A. Contracts Clause Claim
We start with the Companies’ Contracts Clause claim. Ar‐
ticle I of the Constitution provides that “[n]o state shall …
pass any … Law impairing the Obligation of Contracts.” U.S.
Const., Art. I, § 10, cl. 1. This Clause “restricts the power of
States to disrupt contractual arrangements” through legisla‐
tive action. Sveen v. Melin, 138 S. Ct. 1815, 1821 (2018). And it
applies equally to municipal ordinances. St. Paul Gaslight Co.
v. City of St. Paul, 181 U.S. 142, 148 (1901).
Not all laws that affect contracts are unconstitutional, of
course. Allied Structural Steel Co. v. Spannaus, 438 U.S. 234,
240–41 (1978). States and municipalities retain the ability to
regulate for the public welfare, even if doing so impacts pri‐
vate arrangements. U.S. Tr. Co. of New York v. New Jersey, 431
U.S. 1, 21 (1977). So to state a Contracts Clause claim, a plain‐
tiff must plausibly allege that: (1) the state law “operated as a
substantial impairment of a contractual relationship”; and (2)
the state law is not drawn “in an ‘appropriate’ and ‘reasona‐
ble’ way” that advances “‘significant and legitimate public
purpose.’” Sveen, 138 S. Ct. at 1821–22 (quoting Energy Re‐
serves Grp., Inc. v. Kansas Power & Light Co., 459 U.S. 400, 411–
12 (1983)).
1 Indeed, there is no implied right of action in the District Act for the
sort of claims the Alarm Companies advance, as we explain further in de‐
cision in Orland Fire, No. 18‐2926.
10 No. 18‐3316
The first element is context specific. Courts must consider
“the extent to which the law undermines the contractual bar‐
gain, interferes with a party’s reasonable expectations, and
prevents the party from safeguarding or reinstating his
rights.” Id. at 1822; see also Gen. Motors Corp. v. Romein, 503
U.S. 181, 186 (1992). The second element, like many questions
in constitutional law, requires a tailoring assessment. “The se‐
verity of the impairment measures the height of the hurdle
the state legislation must clear.” Spannaus, 438 U.S. at 245.
1. The Contracts Clause Claim Against Schaumburg
Beginning with the Contracts Clause claim against
Schaumburg, the Alarm Companies have stated a plausible
claim.
The complaint alleges that the Ordinance forces all of the
Alarm Companies’ customers, totaling more than 1,000, to ei‐
ther cancel or not renew their contracts. Some accounts have
already canceled their agreements. The district court rightly
accepted that this could amount to a significant impairment
on the Companies’ contractual rights. But the court then fo‐
cused on Schaumburg’s proffered interests: public safety, and
more specifically, reliability, efficiency, and the prevention of
signal delays. Deferring to those interests, the court con‐
cluded that they justified the possible impairment. That con‐
clusion was premature.
At this stage, it is too soon to know how much deference
to afford Schaumburg. We afford “at least some deference,”
to be sure. Elliott v. Bd. of Sch. Trs. of Madison Consol. Sch., 876
F.3d 926, 936 (7th Cir. 2017); see also Energy Reserves Grp., 459
U.S. at 412–13. But the amount of deference owed “differs de‐
pending on” the impairment’s severity and the state’s self‐
No. 18‐3316 11
interest. Elliott, 876 F.3d at 937 (citing Spannaus, 438 U.S. at
245; U.S. Trust Co., 431 U.S. at 25–26). The complaint alleges a
potentially significant impairment, the early cancellation of
contracts, as well as Schaumburg’s self‐interest, namely, the
$300,000 it stands to gain after the Ordinance. Taking those
allegations as true, as we must, it follows that the deference
owed to Schaumburg may be minimal.
With minimal deference, would Schaumburg’s proffered
interests justify the Ordinance and the Notice? Again, it is too
early to tell. There is no presumption of legislative validity
under the Contracts Clause, and it demands more than a le‐
gitimate end and a rational means. See Am. Exp. Travel Related
Servs., Inc. v. Sidamon‐Eristoff, 669 F.3d 359, 369 (3d Cir. 2012)
(Contracts Clause review is “more exacting” than rational‐ba‐
sis review). The Contracts Clause instead requires “appropri‐
ate” and “reasonable” tailoring, and the complaint alleges
facts that suggest the Ordinance is not so well tailored: a CSS
model is reliable and efficient, the complaint says, and it is
NFPA 72’s “preferred” supervisory system. The Companies
also suggest that even if Schaumburg wants an RSS system for
the area, the Companies can still keep their customers. Auto‐
matic retransmission is feasible, they claim, but Tyco’s posi‐
tion as the exclusive provider forecloses that alternative. Tak‐
ing those facts as true, there may be “an evident and more
moderate course” that would have served Schaumburg’s
“purposes equally well.” U.S. Trust Co., 431 U.S. at 31.
The Alarm Companies therefore pleaded a plausible Con‐
tracts Clause claim against Schaumburg, because of the favor‐
able inferences we afford to them under a Rule 12(b)(6) anal‐
ysis. The Companies have not, however, demonstrated a likeli‐
hood of success on the merits, as required for a preliminary
12 No. 18‐3316
injunction. HH‐Indianapolis, LLC v. Consol. City of Indianapolis
& Cty. of Marion, Ind., 889 F.3d 432, 437 (7th Cir. 2018); Lambert
v. Buss, 498 F.3d 446, 452 (7th Cir. 2007) (per curiam). The
Alarm Companies appear to recognize as much, making little
effort on appeal to argue otherwise.
Sensibly so. The Contracts Clause, as we have said before,
is concerned with the “taking away” of “entitlements that pre‐
dated the change” in legislation. Underwood v. City of Chicago,
Ill., 779 F.3d 461, 463 (7th Cir. 2015). In this case, however,
many contracts will simply not be renewed—not prematurely
canceled—which makes it less likely that the Companies have
a reasonable expectation in those contracts after the Ordi‐
nance’s August 2019 cutoff date. Accord Dodge v. Bd. of Educ. of
City of Chicago, 302 U.S. 74, 80 (1937) (holding that Contracts
Clause challenge failed in the absence of vested contractual
rights). The Ordinance, moreover, not only allows for a three‐
year window from its enactment to its effective date; it also
permits accounts with contracts expiring after the August
2019 cutoff to seek an extension. This, then, is not a case of a
“sudden, totally unanticipated, and substantial[ly] retroac‐
tive” change in the law, with which the Contracts Clause is
most concerned. Spannaus, 438 U.S. at 248–49.
The Alarm Companies still press that the Ordinance and
the Notice are poorly tailored because they preclude auto‐
matic retransmission, which, they say, is a less restrictive
means of meeting the same safety goals. Yet the Companies
themselves admit that automatic retransmission has not been
used in Schaumburg to date. The state’s important interest in
fire safety and the fact that the RSS model is NFPA 72‐ap‐
proved present likely more hurdles for the Alarm Companies.
The companies have thus failed to demonstrate a likelihood
No. 18‐3316 13
of success, even if they adequately pleaded their Contracts
Clause claim against Schaumburg.
2. The Contracts Clause Claims Against NWCDS
and Tyco
The Contracts Clause claims against NWCDS and Tyco
are a different story. The Companies cannot state a Contracts
Clause claim against these two entities, which, in contrast to
Schaumburg, are not alleged to have passed the Ordinance or
issued the Notice.
Unlike most constitutional deprivations, there is just one
way to violate the Contracts Clause: legislative action. See
Gary Jet Ctr., Inc. v. AFCO AvPORTS Mgmt. LLC, 863 F.3d 718,
723 (7th Cir. 2017); Khan v. Gallitano, 180 F.3d 829, 832 (7th Cir.
1999); see also Nowicki v. Ullsvik, 69 F.3d 1320, 1325 (7th Cir.
1995) (the Clause “is directed against legislative action only”)
(quoting Barrows v. Jackson, 346 U.S. 249, 260 (1953)). Contracts
Clause liability therefore presupposes legislative power. See
Underwood, 779 F.3d at 464; E & E Hauling, Inc. v. Forest Pres.
Dist. of DuPage Cty., Ill., 613 F.2d 675, 678 (7th Cir. 1980). But
nothing alleged suggests that either NWCDS, an intergovern‐
mental cooperation, or Tyco, a private company, have such
power, let alone that they themselves passed the Ordinance
or issued the Notice.
The Companies believe that NWCDS can be subject to the
Contracts Clause because Schaumburg, which does act as a
legislative body, is a “member” of NWCDS. The point still re‐
mains: the complaint does not allege that NWCDS is “respon‐
sible” for Schaumburg’s ordinances and notices. Underwood,
779 F.3d at 464.
14 No. 18‐3316
That is equally true for Tyco. There is also another prob‐
lem with respect to the claim against Tyco. The Companies
think Tyco can be held liable under the Contracts Clause for
its supposed work in helping to get the Ordinance passed and
the Notice issued. This theory runs headlong into the First
Amendment and, more specifically, the Noerr‐Pennington doc‐
trine. See United Mine Workers v. Pennington, 381 U.S. 657, 670
(1965); E. R.R. Presidents Conf. v. Noerr Motor Freight, Inc., 365
U.S. 127, 135 (1961). Under the Noerr‐Pennington doctrine, in‐
dividuals and corporations have the First Amendment right
to petition lawmakers for favorable legislation (so long as
their efforts are not a sham or fraudulent). Octane Fitness, LLC
v. ICON Health & Fitness, Inc., 572 U.S. 545, 556 (2014); City of
Columbia v. Omni Outdoor Advert., Inc., 499 U.S. 365, 379–83
(1991); California Motor Transp. Co. v. Trucking Unlimited, 404
U.S. 508, 510 (1972); see also New W., L.P. v. City of Joliet, 491
F.3d 717, 722 (7th Cir. 2007) (“Noerr‐Pennington has been ex‐
tended beyond the antitrust laws, where it originated, and is
today understood as an application of the first amendment’s
speech and petitioning clauses.”). That is, at most, all Tyco is
alleged to have done—press Schaumburg to pass an Ordi‐
nance that would favor it.
The Alarm Companies nevertheless believe that they can
state a Contracts Clause claim against NWCDS and Tyco
through a “conspiracy theory” under 42 U.S.C. § 1983. Even
assuming that the complaint adequately pleads a conspiracy
(which we discuss below), the Companies’ position mistakes
the scope of a § 1983 suit with liability under the Contracts
Clause.
Section 1983, under which the Companies bring their con‐
stitutional claims, provides a right of action for constitutional
No. 18‐3316 15
deprivations that occur “under color of” state law.2 Thus pri‐
vate actors, like Tyco, cannot usually be sued under § 1983.
Am. Mfrs. Mut. Ins. Co. v. Sullivan, 526 U.S. 40, 49–50 (1999).
The “conspiracy theory,” or the “joint participation doctrine,”
provides an exception: if a private actor conspires with a state
actor to deprive someone’s constitutional rights, the private
actor may be subject to a § 1983 suit. E.g., Spiegel v. McClintic,
916 F.3d 611, 616 (7th Cir. 2019) (citing Adickes v. S.H. Kress &
Co., 398 U.S. 144, 152 (1970)); see also, e.g., L.P. v. Marian Cath‐
olic High Sch., 852 F.3d 690, 696 (7th Cir. 2017) (explaining that
there must be a “nexus between” private action and state ac‐
tion); Listecki v. Official Comm. of Unsecured Creditors, 780 F.3d
731, 738 (7th Cir. 2015) (discussing the “various tests to use
when deciding whether someone is a governmental actor”).
But that is all the exception does. It potentially offers a way to
bring nongovernment actors into the case under § 1983. It
does not expand what the Contracts Clause prohibits.
The “conspiracy theory,” therefore, may fix a § 1983 prob‐
lem for the Companies’ claim against Tyco, but it does noth‐
ing to resolve the larger Contracts Clause problem—that en‐
tities not alleged to have taken legislative action cannot be li‐
able under the Clause. The district court was correct to dis‐
miss the Contracts Clause claims against NWCDS and Tyco.
2 We assume that a Contracts Clause claim may be brought under
§ 1983, a question that neither the parties nor our caselaw addresses. But
we note, as have others, that there is “considerable debate” over the ques‐
tion. Kaminski v. Coulter, 865 F.3d 339, 345 (6th Cir. 2017) (holding that a
Contracts Clause claim cannot be brought under § 1983); Crosby v. City of
Gastonia, 635 F.3d 634, 641 (4th Cir. 2011) (same); but see S. Cal. Gas Co. v.
City of Santa Ana, 336 F.3d 885 (9th Cir. 2003) (per curiam) (holding the
opposite).
16 No. 18‐3316
B. The Fourteenth Amendment Claims
The Fourteenth Amendment provides several guarantees,
including due process and equal protection. The Alarm Com‐
panies assert that the Ordinance and the Notice violate both
protections. Neither claim has merit.3
The Alarm Companies address their due process and
equal protections theories together, and we will do the same.
As the Companies admit, their claims are not premised on ei‐
ther a fundamental right (for due process purposes) or a sus‐
pect classification (for equal protection purposes). So the Or‐
dinance and the Notice pass constitutional muster as long as
they have a rational basis. Washington v. Glucksberg, 521 U.S.
702, 728 (1997); Hayden ex rel. A.H. v. Greensburg Cmty. Sch.
Corp., 743 F.3d 569, 576 (7th Cir. 2014) (explaining the similar‐
ity between rational‐basis review in the due process and equal
protection contexts). Under rational‐basis review, laws need
only be rationally related to a legitimate interest. The rational
basis does not have to be the one lawmakers actually had in
mind; it is enough that the basis is conceivable or imaginable.
Minerva Dairy, Inc. v. Harsdorf, 905 F.3d 1047, 1053 (7th Cir.
2018); Goodpaster v. City of Indianapolis, 736 F.3d 1060, 1071 (7th
Cir. 2013). Adding to that lenient standard, laws challenged
under rational‐basis review carry a “strong presumption of
validity.” Minerva Dairy, 905 F.3d at 1053.
The complaint does not plausibly allege a claim that can
withstand this review. It is beyond dispute that improving
fire safety and reducing the chance of signal delays are
3 Because we decide that the Ordinance and Notice are not plausibly
irrational, we need not address whether Tyco, a private company, can be
subject to liability under § 1983.
No. 18‐3316 17
legitimate interests. To reach those ends, Schaumburg reason‐
ably adopted an NFPA 72‐approved RSS model through the
Ordinance. Because Tyco, for five years, had been the exclu‐
sive provider of equipment with NWCDS, and understand‐
ing, as the complaint indicates, that the accounts’ transmitters
must be compatible with the NWCDS’s equipment, Schaum‐
burg issued the Notice informing the accounts that Tyco was
the preferred vendor. Nothing about those facts suggests irra‐
tionality on the defendants’ part. See D.B. ex rel. Kurtis B. v.
Kopp, 725 F.3d 681, 686 (7th Cir. 2013); Flying J Inc. v. City of
New Haven, 549 F.3d 538, 546 (7th Cir. 2008).
The Alarm Companies resist this conclusion. They believe
that even if the Ordinance is rational, the decision to issue the
Notice and force customers to contract with Tyco was not. The
Notice, they say, was irrational because the Companies can
operate in an RSS model too, so there was no good reason to
exclude them. But the complaint alleges otherwise. While it
does allege that the Companies had the “ability to automati‐
cally re‐transmit alarm signals” to NWCDS, it squarely
blames the Ordinance, not the Notice, for expelling the Com‐
panies from the market. As the complaint puts it, the “com‐
bined effect of the Ordinance and the Exclusive Agreement is
that all Commercial Accounts … must contract with Tyco.”
And it later repeats that the Ordinance “requires all Commer‐
cial Accounts in Schaumburg to contract with Tyco.” The
Companies are allowed reasonable inferences, not ones that
require us to disregard what they have actually pleaded. See
Holman v. Indiana, 211 F.3d 399, 405 (7th Cir. 2000).
Even assuming that the Notice, and not the Ordinance, is
to blame, the complaint still fails to make out a plausible Four‐
teenth Amendment claim. The complaint alleges that while
18 No. 18‐3316
the companies could automatically retransmit signals, Tyco
had already been in the RSS business and NWCDS’s exclusive
provider for five years. It would surely be rational for
Schaumburg and NWCDS to continue on with their longtime
partner in the safety arena rather than take a risk on compa‐
nies experimenting with new technology. The complaint,
therefore, does not plausibly plead irrationality on the de‐
fendants’ part.
C. Antitrust Claims
Our antitrust laws forbid several forms of anticompetitive
conduct. Section 1 of the Sherman Act prohibits agreements
that unreasonably restrain trade. 15 U.S.C. § 1. Section 2 pro‐
hibits monopolization, or the attempt at it, through willful,
anticompetitive acts. Id. § 2. And Section 7 of the Clayton Act
bans mergers or acquisitions that substantially lessen compe‐
tition or create a monopoly. Id. § 18. The Alarm Companies
claim, with varying degrees of care, that the defendants have
violated all three sections. We find those claims inadequately
pleaded.4
Start with § 1, where the Alarm Companies devote their
focus. Section 1 liability requires an agreement or a conspir‐
acy. E.g., Twombly, 550 U.S. at 553; Kleen Prod. LLC v. Georgia‐
Pac. LLC, 910 F.3d 927, 933 (7th Cir. 2018). According to the
Companies, Schaumburg, NWCDS, and Tyco “carefully
4 We therefore do not need to consider the alternative grounds for dis‐
missal, namely: whether Schaumburg and NWCDS enjoy state‐action im‐
munity from antitrust claims and whether Tyco is protected by the Noerr‐
Pennington doctrine. But see Omni Outdoor, 499 U.S. at 383 (holding that
there is no “conspiracy” exception to the Noerr‐Pennington doctrine). We
also assume, without deciding, that Schaumburg and NWCDS are legally
capable of conspiring.
No. 18‐3316 19
scripted” a “clear design” to pass the Ordinance and issue the
Notice—and then “share in the spoils.” The defendants en‐
tered into this conspiracy, the Companies submit, knowing
that Tyco was “the sole provider of receiving equipment at
NWCDS,” knowing that the Ordinance and the Notice would
make Tyco the “sole provider of all transmission equipment,”
and knowing that the defendants could then reap the profits
of a one‐provider market.
For this claimed conspiracy to survive the motion‐to‐dis‐
miss stage, Twombly requires that it be pleaded plausible
through allegations of fact. Such allegations usually take one
of two forms: (1) direct allegations of an agreement, like an
admission by a defendant that the parties conspired; or (2)
more often, circumstantial allegations of an agreement, which
are claimed facts that collectively give rise to a plausible infer‐
ence that an agreement existed. See In re Text Messaging Anti‐
trust Litig., 630 F.3d 622, 628–29 (7th Cir. 2010); see also, e.g.,
Kleen Prods., 910 F.3d at 934. Whatever the allegations, the
question is the same. Stripped of legal conclusions, does the
complaint contain “enough factual matter (taken as true) to
suggest that an agreement” to pass the Ordinance and issue
the Notice “was made”? Twombly, 550 U.S. at 555–56. The an‐
swer is no.
The complaint provides no direct allegations of an agree‐
ment. As to circumstantial allegations, the complaint pleads
only:
 Schaumburg is a municipal member of NWCDS.
 In 2011, NWCDS and Tyco entered into an exclusive
equipment‐provider relationship, under which Tyco
would pay NWCDS a fee for each account it links to
NWCDS’s RSS.
20 No. 18‐3316
 In 2016, Schaumburg passed the Ordinance mandat‐
ing the RSS model, citing fire‐safety concerns.
 Shortly after, Schaumburg issued the Notice essen‐
tially requiring accounts to obtain Tyco equipment.
 Tyco charges $81 per month to most customers, more
than its competitors for what (we assume) are compa‐
rable products and services.
 NWCDS will profit, by way of more fee payments
from Tyco, as a result of the Ordinance.
 So, too, will Schaumburg, stemming from the credits
it receives from NWCDS.
Getting from these allegations to the nefarious conspiracy as‐
serted by the Companies requires a speculative leap, not a rea‐
sonable inference. Schaumburg is a home‐rule municipality,
capable of passing its own regulations and rules. The com‐
plaint alleges no facts suggesting that an agreement—as op‐
posed to an independent, legislative decision—led Schaum‐
burg to pass the Ordinance and issue the Notice.
The Alarm Companies, for their part, harp on the profits
to the defendants, arguing that such profits suggest a conspir‐
acy. Profits through coordination can be relevant to whether
a conspiracy is inferable; when an agreement to resist compe‐
tition would increase profits, there is a potential motive to
conspire. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp.,
475 U.S. 574, 588–92 (1986); In re Text Messaging, 630 F.3d at
628. But here, Schaumburg’s profits did not depend on con‐
spiring with NWCDS and Tyco. The complaint alleges that
Schaumburg and NWCDS have an arrangement by which
Schaumburg receives credits from NWCDS based on the
sums paid to NWCDS by Tyco. And in 2016, at the time of the
No. 18‐3316 21
alleged conspiracy, NWCDS and Tyco had been locked into a
ten‐year exclusive arrangement for at least five years.
Schaumburg, therefore, did not need NWCDS and Tyco’s
agreement to pass the Ordinance, issue the Notice, and collect
more credits. With or without a conspiracy, the profits for
Schaumburg were the same. The complaint therefore offers
no plausible reason for Schaumburg to have conspired with
NWCDS and Tyco to pass the Ordinance.
The Alarm Companies also point to emails from May and
June 2016, between Schaumburg and NWCDS, and between
NWCDS and Tyco, concerning the logistics of setting up an
area‐wide RSS model. These emails were not pleaded, at‐
tached to the complaint, or cited to the district court during
the motion‐to‐dismiss briefing. But even assuming we can
consider them, see Geinosky v. City of Chicago, 675 F.3d 743, 745
n.1 (7th Cir. 2012), the emails, like the complaint’s allegations,
do not suggest a conspiracy. Of course Schaumburg, a munic‐
ipality, had questions for its subject‐matter experts about how
to implement an RSS model; that is all the emails reflect. Ac‐
cord Omnicare, Inc. v. UnitedHealth Grp., Inc., 629 F.3d 697, 716
(7th Cir. 2011) (back‐and‐forth, “unilaterally initiated” emails
between the defendants suggested only independent action).
Perhaps these communications, like the complaint’s allega‐
tions, are consistent with a conspiracy. But that is not enough
under Twombly. 550 U.S. at 554.
The complaint therefore fails to plead a plausible antitrust
conspiracy. Because the § 1 claim is inadequately pleaded, the
§ 2 claim must fail too. Section 2 liability requires willful, an‐
ticompetitive conduct. E.g., Mercatus Grp., LLC v. Lake Forest
Hosp., 641 F.3d 834, 854 (7th Cir. 2011). The only predicate
willful conduct cited by the Companies is the alleged
22 No. 18‐3316
conspiracy. That conspiracy is not plausibly pleaded, and so
neither is the § 2 claim.
A few final points on the Sherman Act claims are worth
note. First, the facts alleged might present at least one plausi‐
ble Sherman Act claim—a challenge to NWCDS and Tyco’s
exclusive contract. Courts, to be sure, “often approve” of ex‐
clusive arrangements. Republic Tobacco Co. v. N. Atl. Trading
Co., 381 F.3d 717, 736 (7th Cir. 2004). They have recognized,
procompetitive benefits, e.g., Roland Mach. Co. v. Dresser In‐
dus., Inc., 749 F.2d 380, 394–95 (7th Cir. 1984), and contests to
win the exclusive contract are protected forms of competi‐
tion—especially where the contract terms are short, like the
one‐year renewals between NWCDS and Tyco, see, e.g., Pad‐
dock Publ’ns, Inc. v. Chicago Tribune Co., 103 F.3d 42, 45 (7th Cir.
1996). Still, exclusive dealing can pose an anticompetitive
threat when it forecloses a substantial amount of competition.
Republic Tobacco, 381 F.3d at 736. The Alarm Companies, how‐
ever, have chosen not to challenge NWCDS and Tyco’s exclu‐
sive dealing as anticompetitive, and so we do not address the
issue further.
Second, we do not know whether more allegations de‐
scribing pre‐Ordinance discussions among Schaumburg,
NWCDS, and Tyco could have pushed the antitrust claims
into plausibility territory. (Although we note that Noerr‐Pen‐
nington and state‐action immunity problems would persist.)
But we need not speculate. The Alarm Companies declined
the district court’s grant of leave to replead after the prelimi‐
nary‐injunction ruling, even after the court gave them an ex‐
tension to do so. The Companies opted to file a motion for
reconsideration instead, and they have never requested leave
to amend. They therefore waived any right to replead. See,
No. 18‐3316 23
e.g., Haywood v. Massage Envy Franchising, LLC, 887 F.3d 329,
335 (7th Cir. 2018).
Turning to the Clayton Act claims, we find waiver. Section
7 of the Clayton Act makes it unlawful to “acquire … the as‐
sets of another person” when that acquisition would “sub‐
stantially … lessen competition.” FTC v. Advocate Health Care
Network, 841 F.3d 460, 467 (7th Cir. 2016); 15 U.S.C. § 18. On
appeal, the Alarm Companies make a terse argument that the
account contracts constitute “assets,” such that Tyco’s threat‐
ened takeover of them should be scrutinized for its anticom‐
petitive effect. They failed entirely to make these arguments
below, however. As the district court correctly explained, the
Companies failed to “address[ ] their Clayton Act claim in
their response” during the motion‐to‐dismiss briefing. That
failure results in waiver, and so we will not address the claim.
E.g., Puffer v. Allstate Ins. Co., 675 F.3d 709, 718 (7th Cir. 2012).
D. State Tort Claim
The Alarm Companies also alleged tortious interference
and unjust enrichment against the defendants. The district
court dismissed these claims against Tyco before relinquish‐
ing jurisdiction over the claims against Schaumburg and
NWCDS for lack of subject‐matter jurisdiction. See 28 U.S.C.
§ 1367(c). The Companies briefly challenge the dismissal of
the claims against Tyco on appeal.
The district court’s decision was again correct. The com‐
plaint does not allege “intentional and unjustified interfer‐
ence” with the Companies’ account contracts by Tyco. See
Borsellino v. Goldman Sachs Grp., Inc., 477 F.3d 502, 508 (7th Cir.
2007). It pleads instead that the Ordinance and Notice have
forced accounts to Tyco. And as we explained earlier, Tyco is
24 No. 18‐3316
not plausibly responsible for the passing of the Ordinance or
the issuing of the Notice.
III. Conclusion
Because the district court properly dismissed the majority
of the complaint’s claims under Rule 12(b)(6), we need not ad‐
dress the Companies’ remaining arguments that the district
court erred in denying a preliminary injunction. We reverse
and remand the district court’s dismissal of the Contracts
Clause claim against Schaumburg. Otherwise, we affirm the
district court’s judgment.