As many as 40,000 soldiers have been forced to extend their stay in the US army through the "stop-loss" emergency programme since the beginning of the Iraq war in March 2003, according to legal experts.
The plaintiff, who filed suit against Rumsfeld, Acting Army Secretary Les Brownlee and other top military officials with the Ninth US District Court on Tuesday, alleges a breach of contract and questions the constitutionality of the whole setup.
He has been identified by his attorney simply as John Doe to protect his privacy.
Court documents describe him as a decorated veteran who has already completed nine years of active service with the army and the US Marine Corps, including deployments in Somalia and unidentified war zones in the Middle East.
Last year Doe,the father of two daughters aged three and six, performed combat duty in Iraq, which he completed in December.
Doe's unit has been mobilised for
service in Iraq
Upon returning home to the San Francisco Bay Area, he joined the California Army National Guard on a one-year contract that expires on 21 December.
However, his commanders told him in July that because of the "stop-loss" policy, his one-year enlistment had been extended for an additional two years, and that his National Guard unit had been mobilised for service in Iraq, according to the lawsuit.
He is due to leave soon for six months of training at Fort Bliss, Texas, followed by deployment to Iraq immediately after the training is completed.
The lawsuit asserts that the emergency policy instituted in the wake of the 11 September 2001 attacks was "invalid" because Saddam Hussein's government had been removed from power and "Iraq cannot be considered to pose a threat of terrorist attack upon the United States".
"American citizens cannot constitutionally be required to serve involuntarily and indefinitely at whim"
Statement in lawsuit
While acknowledging that Doe's contract allows the military to retain him in the event of war, the filing notes that "Congress has not declared a war in Iraq or elsewhere", which makes involuntary retentions illegal.
"American citizens cannot constitutionally be required to serve involuntarily and indefinitely at whim," the lawsuit argues.
Attorney Michael Sorgen, who represents Doe, said the case will be certainly closely watched by thousands of military personnel and their families, particularly by the 123,000 US troops currently in Iraq.
"When their period of enlistment ends, they should be entitled to return to their families," Sorgen said.
Marguerite Hiken of the Military Law Task Force, a group that closely monitors enlistment policies, said the US military should not be allowed to create "a new category of indentured servitude".
The controversial Pentagon policy has already turned into a political hot potato this election year, as Democratic presidential nominee John Kerry decried it in his acceptance speech in Boston, Massachusetts, in July as "the backdoor draft".
The comment drew a testy response from Rumsfeld, who insisted in a radio interview that "anyone in the reserve is there voluntarily".