Waiving the California National Guard Debt

Written by Charlee Fox (’17) – Wake Forest School of Law Veterans Legal Clinic Student Practitioner 

The news of the California National Guard call for enlistment bonuses repayment has shaken many service members across the United States. In short, a recent audit found that around $22 million in unauthorized bonuses were given to soldiers.[1] The money included reenlistment bonuses and student loan forgiveness bonuses. Out of 11,000 soldiers in the audit: (1) 1,100 soldiers had received an unauthorized payment that they are required to pay back, (2) 5,400 soldiers had missing paperwork or lack of documentation of eligibility, and (3) only 4,000 soldiers were found to have eligibility for the payments they received. This dilemma poses multiple legal issues. Thus, one relevant issue is contractual obligations of the service members.

Many recipients of the enlistment bonuses claim that they both: (1) signed the contract in good faith[2], and (2) detrimentally relied on the money they received. Chapter One §1 of the Second Restatement of Contracts defines a contract as “a promise or a set of promises for the breach of which the law gives a remedy, or the performance of which the law in some way recognizes as a duty.” A promise “may be stated in words either oral or written, or may be inferred wholly or partly from conduct.[3]” The development of a contract requires more than one party (each having capacity) as well as mutual assent[4] and consideration[5]. However, the presence of detrimental reliance “may make a contractual remedy appropriate even though uncertainty is not removed.[6]

Here is an example of a re-enlistment contract. Section V of this document promises that “[b]onus payments will be received IAW USAR SRIP.” Further, it states that “[r]etaining this bonus once paid is contingent upon satisfactory participation in the Selected Reserve and subject to current recoupment policy.” Thus, in Section IX, it states “I understand that calculated overpayments will be recouped and calculated underpayments will be paid to me.”

Unfortunately, if the re-enlistment documents signed by soldiers in California had a clause similar to that stated in Section IX above, then a remedy may not be as easily available. In the present California situation, there were two parties (i.e. the soldier and the government), one of which made a written promise (an offer) to the other. The soldier accepted the promise with consideration and able capacity when he signed the contract with the idea that he would be compensated. However, if the contract that the California soldiers signed had a clause acknowledging what happens in the event of a miscalculation, there may be little that can be done.

A contract is only deemed unenforceable if certain situations such arise. Two relevant situations for the California service members include mistake and public policy grounds. The factors for avoiding a contract based on a unilateral mistake (i.e. mistake from the government) are: (1) a unilateral mistake, (2) of a fact in existence at the time the contract was made, (3) the basic assumption upon which the contract was made, (4) which has material and important effect on the value of what’s being exchanged if (5) the mistake is observable, or (6) the enforcement of the contract is unfair. Thus, the California soldiers affected by this re-pay requirement may have a claim for mistake if their re-enlistment bonus contracts have no clause discussing miscalculations, or if the clause is present but soldiers can show the enforcement to be unfair (e.g. via detrimental reliance).

Alternately, it is possible that the California soldiers may have a claim regarding public policy. Chapter 8, § 198 of the Second Restatement states: “[a] party has a claim in restitution for performance that he has rendered under or in return for a promise that is unenforceable on the grounds of public policy if he was excusably ignorant of the facts or of legislation of a minor character. . . or he was not equally in the wrong with the promisor.” In California, the soldiers were not equally in the wrong with the promisor because they were unaware of their ineligibility. Additionally, Chapter § 199 states “[a] a party has a claim in restitution. . . if he did not engage in serious misconduct and . . . allowance of the claim would put an end to a continuing situation that is contrary to the public interest.” Therefore, the California soldiers may have a case for contract voidance based on public policy because the issue affects soldiers who have put their life on the line to protect all Americans.

It appears that the best solution to the re-enlistment repay issue is likely Congressional intervention. It was stated that “the California National Guard welcomes any law passed by Congress to waive these debts.”[7] Soldiers may submit individual petitions and the military has the authority to waive individual repayments, but not all at once.[8] Consequently, it will be interesting to see how Congress handles this million dollar issue.

If you are a soldier affected by re-enlistment bonus repayment and would like to petition, please view this website.

Since the writing of this article, Secretary of Defense Ash Carter has suspended “all efforts to collect reimbursement” until he is “satisfied that our process is working effectively.”  This post will be updated in the event of any change in the Mr. Carter’s position.

 


[1] See http://www.cnn.com/2016/10/24/us/national-guard-recruitment-bonus-repayment/

[2] In accordance to Comment a in Chapter 9 § 205 of the Second Restatement of Contracts, good faith is defined as “honesty in fact in the conduct or transaction concerned.”

[3] Chapter 1, §4 Second Restatement of Contracts

[4] Mutual Assent is explained in Chapter 3 § 17 by stating “the formation of a contract requires a bargain in which there is a manifestation of mutual assent to the exchange and a consideration.” This can be thought of as the making and accepting of an offer.

[5] Chapter 4 §71 states that “[t]o constitute consideration, a performance or a return promise must be bargained for.” Further, “[a] performance or return promise is bargained for it if is sought by the promisor in exchange for his promise and is given by the promise in exchange for that promise.” That is, consideration acts as an assumption that the contract will be enforced.

[6] Chapter 3 § 34

[7] See http://www.cnn.com/2016/10/24/us/national-guard-recruitment-bonus-repayment/.

[8] Id.