What causes the problem which can be easily missed is a partially stripped output shaft spline where it fits into the transfer case adapter (Figures 1 through 5). Besides the output shaft spline stripping out the internal spline of the adapter also strips out. There have been other occasions on our help line when this adapter is left out causing this no move condition after a rebuild. The adapter rolled down the bench and was out of site. Of course it was then out of mind and the transfer case was bolted up without it.
Earlier Commanders and Grand Cherokees may also experience a transfer case electrical failure may result in an unintentional shifting of the transfer case into the neutral position. There is a campaign to reflash of the final drive controller which governs the transfer case. The Chrysler recall campaign number is N23 should this be a customer complaint that comes up in your shop.