ADT Sec. Servs., Inc. v. Lisle-Woodridge Fire Prot. Dist.

• Decision Date: 17 February 2015
• Docket Number: Case No. 10 C 4382.
• Parties: ADT SECURITY SERVICES, INC., et al., Plaintiffs, v. LISLE–WOODRIDGE FIRE PROTECTION DISTRICT, et al., Defendants.
• Court: U.S. District Court — Northern District of Illinois

86 F.Supp.3d 857

ADT SECURITY SERVICES, INC., et al., Plaintiffs

v.LISLE–WOODRIDGE FIRE PROTECTION DISTRICT, et al., Defendants.

Case No. 10 C 4382.

United States District Court, N.D. Illinois, Eastern Division.

Signed Feb. 17, 2015.

A. Christopher Young, Robert L. Hickok, Pepper Hamilton LLP, Philadelphia, PA, Bruce Lee Goldsmith, Dykema Gossett Rooks Pitts PLLC, Lisle, IL, Jason Lawrence Pyrz, John A. Leja, Polsinelli Shughart PC, Kara Bledsoe Murphy, Dykema Gossett, Chicago, IL, for Plaintiffs.

Martin K. LaPointe, Susan Marie Troester, LaPointe Law, P.C., Northbrook, IL, Christopher W. Carmichael, Christopher James Murdoch, Martin G. Durkin, Peter Michael Friedman, Simon B. Auerbach, Holland and Knight, LLP, Chicago, IL, for Defendants.

MEMORANDUM OPINION AND ORDER

MILTON I. SHADUR, Senior District Judge.

Before this Court are memoranda and supplemental memoranda from plaintiffs Alarm Detection Systems, Inc. and other alarm companies (collectively “Alarm Companies”) and defendants Lisle–Woodridge Fire District (“District”) and Chicago Metropolitan Fire Prevention Company (“Chicago Metro”),¹ addressing the only issue left to be resolved in this long-running litigation: Alarm Companies' entitlement to attorney's fees and expenses under the Civil Rights Attorney's Fees Award Act of 1976 (42 U.S.C. § 1988 ) and the Clayton Act (15 U.S.C. §§ 15, 26 ).² For the reasons set out below, Alarm Companies are held to be entitled to such attorney's fees and expenses, albeit at an amount somewhat lower than they have demanded.

Factual and Procedural Background

Although it would be tedious to relate at length the facts that gave rise to this litigation, not to mention the tortuous history of the proceedings before this Court and the Court of Appeals, a brief review of both is necessary to give some context to this final (it is devoutly wished) opinion. What follows is a factual summary condensed from one prior published opinion by this Court (799 F.Supp.2d 880 (N.D.Ill.2011) ) and two opinions by our Court of Appeals (672 F.3d 492 (7th Cir.2012)(“ADT I ”) and 724 F.3d 854 (7th Cir.2013) (“ADT II ”)).³

District is a municipal corporation organized under the Illinois Fire Protection District Act (“Illinois Act,” 70 ILCS 705/1 to 705/24 ), with power to regulate fire safety within its bounds. Alarm Companies provide fire alarm monitoring services to private businesses and residences within the bounds of the District. In September 2009 District passed an ill-starred ordinance requiring all businesses and residences within its jurisdiction to obtain fire alarm monitoring services solely from District—while at the same time District purchased certain alarm equipment solely from Chicago Metro. That ordinance, along with a letter sent to businesses declaring their contracts with Alarm Companies “null and void,” were part of a scheme to increase District's revenue and set up an alarm-monitoring monopoly. After passage of the ordinance, the fire alarm monitoring regime operating within the Lisle–Woodridge District boundaries was less safe and less effective than the one that had previously prevailed. That drop in safety resulted in no small part from the fact that District had to abandon nationally-recognized fire safety standards in order to oust Alarm Companies from the local market and install itself (and Chicago Metro) in their place. And, roughly speaking, it was District's abandonment of those standards that violated the Illinois Act.

Alarm Companies filed this action against District and Chicago Metro, alleging violations of the Constitution (specifically, the Contracts Clause and the Fourteenth Amendment), the Sherman Antitrust Act and the Illinois Act. This Court granted partial summary judgment to Alarm Companies on the question whether District exceeded its authority under the Illinois Act and, finding that it did, issued a preliminary injunction against District barring it from enforcing its ordinance (see this Court's opinion at 799 F.Supp.2d 880 ). District appealed, and in ADT I the Court of Appeals affirmed in major part, reversed in lesser part and remanded the matter to this Court. After an evidentiary hearing this Court made findings of fact and issued the Modified Permanent Injunction (see its August 7, 2012 opinion at 2012 WL 3241562 and the Injunction itself at Dkt. 391), which the Court of Appeals upheld with some minor modifications in ADT II.

Alarm Companies, District and Chicago Metro then proceeded with discovery regarding the still-unresolved damages claims under the Clayton Act and 42 U.S.C. § 1983 (“Section 1983 ”). Somewhere along the line ADT Security Systems, Inc., which up to that point had participated fully as a plaintiff in the litigation, then entered into a consent decree with both defendants that settled its damages claims and its outstanding demands for injunctive relief as to Chicago Metro and that presumably contained some sort of fee award (Dkt. 550). But the remaining Alarm Companies—which have filed the fee petition with which this opinion treats—continued to litigate the damages claims until District and Chicago Metro tendered the modest maximum amount to which Alarm Companies would be entitled had they prevailed. Because that mooted the controversy (Alarm Companies' demand for equitable relief already having been satisfied by the entry of a permanent injunction), this Court dismissed the case for lack of subject matter jurisdiction (Dkt. 563).

That brought the parties to the fees stage of litigation. Negotiations over fees proved fruitless: Alarm Companies blamed District and Chicago Metro for clinging to a narrow view of what it means to “prevail” in litigation (see Sep. 17, 2014 Status Hrg. Tr. 4:20–5:3, 7:6–9:4 (Dkt. 566)), which made it impossible to negotiate productively, while defendants argued that Alarm Companies were not negotiating in accordance with the guidelines set out by this District Court's LR 54.3 (A. Mem. Ex. A at 2). Apparently fed up after months of wrangling, Alarm Companies filed a motion for attorney's fees. Defendants responded in opposition, and this Court ordered supplementary briefing on the question whether (and to what extent), in the course of making a fee award, it could consider a prevailing party's motivation for continuing to litigate a lawsuit. With those supplemental memoranda having been filed, the fee issue is at last ripe for decision.

Legal Principles Underlying the Award of Attorney's Fees

In the absence of a contrary statutory command, the default rule in the United States is that each party to a lawsuit bears its own costs, including attorney's fees (see Hardt v. Reliance Standard Life Ins. Co., 560 U.S. 242, 252–53, 130 S.Ct. 2149, 176 L.Ed.2d 998 (2010) ). In this case there are three statutory provisions that provide a possible basis for the award of attorney's fees to Alarm Companies: Section 1988, the Clayton Act's provision for private suits for damages (Section 15 ) and the Clayton Act's sister provision for private suits for equitable relief (Section 26 ). This opinion needs to address defendants' potential liability for fees under each of those statutes because both equitable relief and damages were at issue during the litigation, because non-formal-state-actor Chicago Metro's liability for fees under Section 1988 is in some doubt⁴ and because District cannot be held liable for fees under Section 15 as a result of the Local Government Antitrust Act (15 U.S.C. § 35 ).⁵ Hence a quick review of each potential statutory basis for fee-shifting in this case is in order.

Section 1988(b) creates an entitlement to attorney's fees for the prevailing party in any action to enforce certain enumerated civil rights statutes, including Section 1983 :

In any action or proceeding to enforce a provision of sections 1981, 1981a, 1982, 1983, 1985, and 1986 of this title ... the court, in its discretion, may allow the prevailing party, other than the United States, a reasonable attorney's fee as part of the costs.

Buckhannon Bd. & Care Home, Inc. v. W. Va. Dep't of Health & Human Resources, 532 U.S. 598, 603, 121 S.Ct. 1835, 149 L.Ed.2d 855 (2001) held that “a ‘prevailing party’ is one who has been awarded some relief by the court.” That distinguishes prevailing parties from those who obtain relief via a voluntary settlement or a unilateral tender of complete relief by the defendant (id. at 605, 121 S.Ct. 1835, emphasis in original):

A defendant's voluntary change in conduct, although perhaps accomplishing what the plaintiff sought to achieve by the lawsuit, lacks the necessary judicial imprimatur on the change. Our precedents thus counsel against holding that the term “prevailing party” authorizes an award of attorney's fees without a corresponding alteration in the legal relationship of the parties.

Thus it is a judicially sanctioned “alteration in the legal relationship of the parties” that triggers a plaintiff's eligibility for an award of fees under Section 1988 (see Nat'l Rifle Ass'n of Am., Inc. v. City of Chicago, 646 F.3d 992, 994 (7th Cir.2011) ).

As to the two provisions of the Clayton Act at issue in this case, each provides for attorney's fees. But because they do so in different language, separate analysis is called for.

First is Section 15, which allows a private party to sue for damages under the antitrust laws:

[A]ny person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws may sue therefor in any district court of the United States ... and shall recover threefold the damages by him sustained, and the cost of suit, including a reasonable attorney's fee.

Under that provision, the prerequisite for an award of attorney's fees is a showing of injury (see, e.g., Gulfstream III Assocs., Inc. v. Gulfstream Aerospace Corp., 995 F.2d 414, 418–19 (3d Cir.1993) ). Unlike Section 1988, Section 15 does not include a “prevailing party” requirement (id. at 418 n. 5, 995 F.2d 414). Also in contrast to Section 1988, ...