Memorial Day weekend in Washington, D.C., is always an affair, from the 20,000-plus motorcycle-riding members of Rolling Thunder in town to raise awareness of POW/MIA issues, to the concerts and fireworks on the mall, and thousands of flags flying everywhere. Being in the midst of all this causes my mind to turn to the men and women who serve in our armed forces and the special legal protections we afford them in the world of consumer credit.

Many of you are aware of the Service Members Civil Relief Act (SCRA), a federal law that provides all military members with important rights. It allows military members to suspend or postpone some civil obligations so he or she can devote full attention to military duties. In my experience, this is a well-intentioned law that has a lot of landmines for even the most well-meaning creditor. A recent case out of the Western District of Arkansas (Donahou v. Presidential Limousine and Auto Sales Inc., 2007 WL
1229342 (W.D.Ark.)) provides a good illustration of the problems creditors get themselves into with the SCRA.

Andrew Donahou bought a truck from Presidential Limousine and Auto Sales Inc. on June 9, 2006.A few months later he stopped making payments on the vehicle because of his military duty. Presidential then repossessed the truck. Donahou sued Presidential, claiming that the truck was illegally repossessed because there was no court order for its repossession as is required under the SCRA.

Both parties agreed that Donahou enlisted in the military on Jan. 18, 2006. However, it was in a Delayed Entry/Enlistment Program (DEP), which meant he was not required to report for duty until Aug. 14, 2006. Presidential argued that the SCRA did not apply because Donahou’s actual enlistment date was Jan. 18,

2006, and the SCRA only applied to contracts entered into before military service commences. Donahou argued that the SCRA did apply because he bought the truck before beginning his military service, which he claimed began in August 2006. That was when he was required under the terms of the DEP to report for duty.

For all you armchair attorneys out there, you may have figured out that this case asks (and answers) the question, “When did Donahou enter military service for purposes of the SCRA?” If it was his January enlistment date, then he has no protection under the SCRA because it only applies to contracts entered into before military service. However, if he didn’t enter “military service” until his active duty date in August 2006, he is fully protected.

The SCRA defines military service as “active duty” for a service member who is a member of the Army, Navy, Air Force, Marine Corps, or Coast Guard. “Active duty” is defined as “full-time duty in the active military service of the United States.” It includes “full-time training duty, annual training duty,” etc. It also includes “any period during which a service member is absent from duty on account of sickness, wounds, leave, or other lawful cause.”

Presidential argued that the DEP period is “leave or other lawful cause,” and that Donahou was in “military service” as of his enlistment date in January 2006. In fact, his enlistment documents expressly stated that the period of time Donahou was in the DEP counted toward fulfillment of his military service obligation or commitment.

I have to tell you, that’s exactly the argument I would have made (we get paid big bucks to come up with gems like this). After all, if the military says the DEP period counts toward the enlistment period, isn’t it reasonable to conclude that you belong to the military as of that date? Of course it is. But of course it’s never that simple.

Ignoring the plain language of the statute, the judge would have to decide what Congress really meant by “active duty.” Tea leaves anyone?

The judge decided that Congress intended the SCRA to kick in when it was most likely a service member would experience some financial distress. However, while he shared Congress’ view that such distress only arises once the service member is on “active duty,” he decided that the DEP was not active enough to warrant the statute kicking in.

According to the judge, Donahou’s DEP permitted him to have a full-time civilian job. At the time of his January enlistment, he was not issued a military ID or uniform. Nor was he otherwise prepared for any military duties. In the eyes of the court, Donahou only had the promise of service for his country, and, like many other service members, the civilian jobs and paychecks ceased upon entering active duty. The latter may be so, but my military friends tell me that the government views the enlistee’s obligation as a bit more than just a promise.

The language at the crux of the decision (the “absence for other lawful cause”) was summarily disposed of by the judge. In an exercise reminiscent of angels on the head of a pin, the judge declared that this language should be read as an exemption from active duty after active duty has started, not an exemption before a service member’s active duty has begun. I respectfully disagree, and I hope Presidential appeals. But in the meantime, you may want to err on the side of caution and inquire whether the service member standing in your store has already reported for duty. It may make a difference.

Michael Benoit is a partner in the Washington, D.C., office of Hudson Cook LLP. He is a frequent speaker and writer on a variety of consumer credit topics. He can be reached at michael.benoit@bobit.com. Nothing in this article is intended to be legal advice and should not be taken as such. All legal questions should be addressed to competent counsel.