DISTRICT COURT HOLDS THAT ANY TAA BREACH MUST BE “MATERIAL” FOR THE GOVERNMENT TO RECOVER DAMAGES
Despite the fact that two GSA Schedule contract holders had non-Trade Agreements Act (TAA) compliant items on their Schedule contract, the government was not harmed because the breach was not “material”, according to a recent US District Court ruling in United States ex rel. Folliard v. Comstor Corp. “Material” is defined as any noncompliance that has an effect on the government’s payment decisions. Before Schedule contractors get excited about the application of this test, though, it is vital to understand that the ruling was limited to the specifics of this case. Further, the Comstor decision makes it clear that materiality questions will be handled on a case-by-case basis. Other courts could disagree with the District Court’s methodology, as well. The ruling is also unlikely to have a substantial impact on federal TAA compliance efforts. Still, contractors that find themselves defending whistleblower suits or audit findings may find the Comstor decision useful. It shows that simply alleging a technical violation of a statute, regulation, or contract term is insufficient to claim actual harm to the government. Any whistleblower or DOJ attorney must be able to show that the government actually suffered harm as a result of the violation. Overall, it is best to make sure that your TAA compliance efforts remain robust and to use the Comstor decision only if required.