Home Depot confirmed in June of 2011 that the Department of Justice (DOJ) is “taking a closer look” at allegations in a complaint filed in federal court that Home Depot violated the False Claims Act.[1] The complaint alleges that Home Depot violated federal law by selling products manufactured in China and other countries to the federal government, in violation of the Buy American Act. The Buy American Act requires that sellers to the federal government provide only products which were made in the United States, or one of the countries which the United States has a trade agreement with. China does not have a trade agreement with the United States, and so products manufactured in China may not be sold to the United States government under federal law unless the products fall under a recognized exception to the Buy American Act. Although news that the DOJ may intervene in the suit against Home Depot came recently, the DOJ has been investigating the case since the complaint was first filed in 2008. Recently, the Judge in this case denied Home Depot’s Motion to Dismiss—a positive sign for the plaintiffs.
Although the lawsuit against Home Depot has not yet been resolved, Staples, Office Depot, and Office Max have settled similar allegations. In 2005 Staples entered into a $7.4 million settlement with the Department of Justice regarding its alleged violations of the Buy American Act.[2] The DOJ also entered into a $9.8 million settlement with Office Max and a $4.75 million settlement with Office Depot regarding their alleged violations which arose under the same complaint.
Home Depot, Staples, Office Max, and Office Depot are not the only companies that have faced allegations that they violated the Buy American Act. In January of 2011 the DOJ announced that Fastenal, a Minnesota-based chain of hardware stores, reached a $6.25 million settlement with the DOJ over allegations that it violated the Buy American Act.[3] Whatever the outcome may be in the pending lawsuit against Home Depot, it is clear that the DOJ is taking a serious stand against companies which falsely certify that products sold to the government were made in the United States.
[1]Maxwell Murphy, Justice Dept Considers Joining Home Depot Whistle-Blower Suit, Wall Street Journal, June 27, 2011, http://online.wsj.com/article/BT-CO-20110627-711891.html.
[2] Minnesota-based National Hardware Store Distributor Fastenal to Pay U.S. $6.25 Million to Resolve False Claims Act Allegations, Department of Justice Press Release, January 13, 2011, http://www.justice.gov/opa/pr/2005/October/05_civ_549.html.
[3] Staples Pays United States $7.4 Million to Resolve False Claims Act Allegations, Department of Justice Press Release, October 18, 2005, http://www.justice.gov/opa/pr/2011/January/11-civ-042.html.
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Jennifer L. McIntosh is an attorney at Waters & Kraus, LLP, in the firm’s West Coast practice — Waters, Kraus & Paul. Her practice focuses on class action cases, qui tam (whistleblower), and commercial litigation.
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