try adding a line to your /etc/hosts file that looks something line
This will will give sendmail an IP address when it attempts to resolve the name localhost.locacaldomain
A follow up question that might be worht asking is, Are you, or do you intend to, use sendmail? If the answer is no, you might want to look into the option of removing sendmail from the startup scripts, so that you do not have to deal with this. If you do want to use it then getting this problem resolved is indeed in order.