On March 3, 2023, the U.S. Department of Justice (DOJ) filed a complaint against a towing company located near a Marine base alleging violations of the Servicemembers Civil Relief Act’s (SCRA) prohibition against default judgments against SCRA-protected servicemembers. The case, filed in U.S. District Court for the Eastern District of North Carolina, alleges that the towing company failed to make a good faith effort to ascertain the military status of defendants before filing affidavits in court cases claiming military status could not be determined.
The case centers around a Marine Corporal, Cameron Chancellor, who had his SUV towed from a parking lot at an apartment complex near Marine Corps Base Camp Lejeune in Jacksonville, North Carolina, while he was deployed in Okinawa. The towing company, Goines Towing & Recovery (Goines), is also located close to the base. According to the DOJ complaint, Camp Lejeune has a population of almost 40,000 active duty servicemembers and over one third of the individuals living in Jacksonville (population 73,000) are also active duty military. Besides the vehicle’s proximity to the base, other indications that the owner might be in the military included a Marine decal on the window, photos of the owner and other servicemembers in uniform in the center console, and 16 military patches velcroed to the interior roof.
The SUV was registered and titled under two addresses – one at Camp Lejeune, and the other at Cpl. Chancellor’s mother’s home in Alabama. A notice received by Cpl. Chancellor’s mother from the North Carolina Department of Motor Vehicles stated that Goines had towed the vehicle, intended to sell it, and claimed a storage lien of $5,880 for towing and storage fees. After learning of the letter, Cpl. Chancellor called Goines to tell them that he was an active duty Marine deployed in Japan. Goines’ agent informed Cpl. Chancellor that he needed to pay the lien in cash to release the car or it would be sold. The towing company then filed a civil action seeking a court order allowing it to sell the SUV at a public auction. Despite the indications of military service mentioned above – and Navy Federal Credit Union holding a title lien – Goines’ agent filed a “Servicemembers Civil Relief Act Declaration” stating she was unable to determine Cpl. Chancellor’s military status or check the Department of Defense’s Manpower Data Center Database (DMDC) because she did not have his Social Security Number. A default judgment was then granted by the Court.
The complaint alleges that Cpl. Chancellor’s experience was not unique, and that Goines has auctioned off, sold, or disposed of vehicles and personal effects belonging to multiple SCRA-protected servicemembers since 2017 after failing to file or filing inaccurate affidavits in default judgment proceedings against servicemembers. The SCRA requires plaintiffs in civil proceedings to file an affidavit stating whether or not the defendant is in military service and showing necessary facts to support the affidavit, or, alternatively, that they are unable to determine military status. 50 U.S.C. § 3931(b)(1). The statute also includes processes for appointment of an attorney to represent defendants in military service, posting of a bond until military service is determined, or a stay of proceedings until a defense can be presented. 50 U.S.C. §§ 3931(b)(2) and (3); 3931(d). It also allows for vacation or setting aside of default judgments after they have been entered against an SCRA-protected servicemember during the period of military service and up to 90 days after active duty ends. 50 U.S.C. §§ 3931(g).
In addition to the default judgment violations under Section 3932, the DOJ complaint alleges that Goines’ actions constitute a pattern or practice of SCRA violations under Section 4041, which authorizes the Attorney General to commence a civil action. 50 U.S.C. §§ 4041(a)(1). Interestingly, DOJ chose to focus the action entirely on the SCRA’s default judgment provision and chose not to include a cause of action for violations of another SCRA provision prohibiting the enforcement of storage liens against active duty servicemembers. 50 U.S.C. §§ 3958. DOJ has brought a series of SCRA enforcement actions against other defendants, including several towing companies, under the storage lien provision in recent years. (See here, here, here, and here.)
While the factual allegations in the Goines case appear to be particularly egregious, the case is a good reminder of the importance of a diligent search in determining SCRA-status in any situation where a search is required. Checking the DMDC database forms the foundation of any process to determine active duty status, but companies should ensure that their procedures also incorporate other indicators of military service beyond the DMDC check. As anyone who uses the DMDC regularly can attest, it is occasionally unavailable for periods of time due to system maintenance or technical issues. In other situations, loan servicers or others who rely on the database may lack information necessary to check the database, such as the Social Security Number or Date of Birth of a party that needs to be named in litigation (like Cpl. Chancellor in the instant matter, or a defendant in a foreclosure action who is on the mortgage but did not sign the Note). The affidavit filed in the Goines case appears to have accurately stated that the affiant was unable to check DMDC, but omitted any mention of other indicia of military service, including a call from the servicemember advising he was deployed.