Steffen v. United States ( 2021 )

Case: 20-1562 Document: 42 Page: 1 Filed: 05/03/2021
United States Court of Appeals
for the Federal Circuit
______________________
TERRI L. STEFFEN, PAUL A. BILZERIAN,
Plaintiffs-Appellants
v.
UNITED STATES,
Defendant-Appellee
______________________
2020-1562
______________________
Appeal from the United States Court of Federal Claims
in No. 1:12-cv-00063-PEC, Judge Patricia E. Campbell-
Smith.
______________________
Decided: May 3, 2021
______________________
TERRI L. STEFFEN, PAUL BILZERIAN, Basseterre, Saint
Kitts and Nevis, pro se.
JANET A. BRADLEY, Tax Division, United States Depart-
ment of Justice, Washington, DC, for defendant-appellee.
Also represented by JOAN I. OPPENHEIMER, RICHARD E.
ZUCKERMAN.
______________________
Before NEWMAN, DYK, and REYNA, Circuit Judges.
Case: 20-1562 Document: 42 Page: 2 Filed: 05/03/2021
2 STEFFEN v. UNITED STATES
Opinion for the court filed by Circuit Judge REYNA.
Dissenting opinion filed by Circuit Judge NEWMAN.
REYNA, Circuit Judge.
This appeal is the latest in a protracted litigation span-
ning more than three decades in the federal courts. Pro se
appellants Terri L. Steffen and Paul A. Bilzerian are a mar-
ried couple seeking an $8.2 million tax refund pursuant to
26 U.S.C. § 1341. The money in dispute stems from trans-
actions that Mr. Bilzerian made in 1985 and 1986 related
to the purchase and sale of certain common stocks, for
which he was convicted of securities fraud. Because the
appellants’ complaint does not entitle them to the legal
remedy they seek, we affirm the decision of the United
States Court of Federal Claims granting the government’s
motion to dismiss and denying leave to amend the com-
plaint.
BACKGROUND
On September 29, 1989, Mr. Bilzerian was convicted
on nine counts of securities fraud, making false statements
to the Securities and Exchange Commission (SEC), and
conspiracy to commit certain offenses and defraud the SEC
and the Internal Revenue Service (IRS). United States v.
Bilzerian, 926 F.2d 1285, 1289 (2d Cir. 1991). The United
States District Court for the Southern District of New York
entered a judgment of conviction, sentenced Mr. Bilzerian
to four years in prison, and imposed a $1.5 million fine. Id.The court further ordered Mr. Bilzerian to disgorge
$62,337,599.53. Sec. & Exch. Comm’n v. Bilzerian,
112 F. Supp. 2d 12, 14 (D.D.C. 2000), aff’d, 75 F. App’x 3
(D.C. Cir. 2003).
On January 31, 2012, Mrs. Steffen filed a pro se com-
plaint in the Court of Federal Claims seeking an
Case: 20-1562 Document: 42 Page: 3 Filed: 05/03/2021
STEFFEN v. UNITED STATES 3
$8,243,145 tax refund pursuant to 26 U.S.C. § 1341. 1
S.A. 1. She amended the complaint on April 23, 2012. See
S.A. 5. On August 7, 2017, Mrs. Steffen and Mr. Bilzerian
filed a second amended complaint as joined parties.
S.A. 46.
On September 19, 2018, the government filed a motion
to dismiss with prejudice the appellants’ second amended
complaint for failure to state a claim upon which relief can
1 The appellants are not represented by counsel in
this appeal, but they are no strangers to judicial proceed-
ings and have appeared pro se dozens of times during the
last three decades. See generally, e.g., Sec. & Exch.
Comm’n v. Bilzerian, 811 F. App’x 3 (D.C. Cir. 2020); Stef-
fen v. United States, 147 Fed. Cl. 142 (2020); In re Steffen,
611 F. App’x 677 (11th Cir. 2015); In re Steffen, No. 8:13-
CV-1700-T-27, 2014 WL 11428827 (M.D. Fla. Mar. 13,
2014); Iberiabank v. Daer Holdings, LLC, No. 8:12-CV-
2872-T-30MAP, 2014 WL 345925 (M.D. Fla. Jan. 30, 2014);
Sec. & Exch. Comm’n v. Bilzerian, No. CV 89-1854 (RCL),
2012 WL 13070124 (D.D.C. Nov. 15, 2012); Steffen v.
Comm’r, 104 T.C.M. (CCH) 303 (T.C. 2012); Sec. & Exch.
Comm’n v. Bilzerian, 487 F. App’x 580 (D.C. Cir. 2012);
Sec. & Exch. Comm’n v. Bilzerian, No. CV 89-1854 (RCL),
2011 WL 13267160 (D.D.C. Oct. 3, 2011); Steffen v. Aker-
man Senterfitt, No. 8:04-CV-1693-T-24MSS, 2005 WL
8160099 (M.D. Fla. Nov. 30, 2005); Sec. & Exch. Comm’n v.
Bilzerian, 131 F. Supp. 2d 10 (D.D.C. 2001), aff’d, 75 F.
App’x 3 (D.C. Cir. 2003); Sec. & Exch. Comm’n v. Bilzerian,
127 F. Supp. 2d 232 (D.D.C. 2000), aff’d, 75 F. App’x 3
(D.C. Cir. 2003); Bilzerian v. Comm’r, 82 T.C.M. (CCH) 295(T.C. 2001); In re Bilzerian, 153 F.3d 1278 (11th Cir. 1998);
Bilzerian v. United States, 41 Fed. Cl. 134 (1998);
Bilzerian v. United States, 125 F.3d 843 (2d Cir. 1997); Sec.
& Exch. Comm’n v. Bilzerian, 29 F.3d 689 (D.C. Cir. 1994);
In re McReynolds, 166 B.R. 452 (Bankr. M.D. Fla. 1994).
Case: 20-1562 Document: 42 Page: 4 Filed: 05/03/2021
4 STEFFEN v. UNITED STATES
be granted. S.A. 65. The Court of Federal Claims granted
the motion on July 24, 2019, issued its order pursuant to
Rule 12(b)(6) of the Rules of the Court of Federal Claims
(RCFC), and sua sponte denied permission to file any fur-
ther amendments to the complaint. J.A. 2, 8. On Au-
gust 20, 2019, the appellants filed a motion for
reconsideration pursuant to RCFC 59(a)(1) and sought
leave to file a third amended complaint. J.A. 10–11. The
court denied the motion for reconsideration and request to
amend on January 6, 2020. Id. This appeal followed. We
have jurisdiction under 28 U.S.C. § 1295(a)(3).
DISCUSSION
We review de novo a dismissal for failure to state a
claim upon which relief can be granted by the Court of Fed-
eral Claims. Welty v. United States, 926 F.3d 1319, 1323
(Fed. Cir. 2019) (citing Boyle v. United States, 200 F.3d
1369, 1372 (Fed. Cir. 2000)). In a denial of a motion to
amend a complaint, we review the findings of the Court of
Federal Claims for an abuse of discretion. Intrepid v. Pol-
lock, 907 F.2d 1125, 1129 (Fed. Cir. 1990).
The Court of Federal Claims may properly grant a mo-
tion to dismiss under RCFC 12(b)(6) when a complaint does
not allege facts that show the plaintiff is entitled to the le-
gal remedy sought. Lindsay v. United States, 295 F.3d
1252, 1257 (Fed. Cir. 2002). The appellants’ second
amended complaint sought a tax refund pursuant to
§ 1341. To establish entitlement to a tax refund under the
statute, a taxpayer must satisfy two elements. First, the
taxpayer must show a reasonable belief that she had an
unrestricted right to the disputed funds when she first re-
ported them as income. See 26 U.S.C. § 1341(a)(1); Nacchio
v. United States, 824 F.3d 1370, 1374 (Fed. Cir. 2016) (ci-
tation omitted). Second, the taxpayer is required to tether
a claim for a tax deduction in excess of $3,000 to another
Case: 20-1562 Document: 42 Page: 5 Filed: 05/03/2021
STEFFEN v. UNITED STATES 5
section of the Internal Revenue Code (IRC). 2 See 26 U.S.C.
§ 1341(a)(2)–(3); Culley v. United States, 222 F.3d 1331,
1335 (Fed. Cir. 2000) (citations omitted). A plaintiff cannot
prevail under § 1341 unless both requirements are met.
The appellants’ complaint fails to establish a reasona-
ble belief of having an unrestricted right to the disputed
funds when the money was first reported as income. The
funds in dispute originated from Mr. Bilzerian’s securities
fraud, for which he was convicted in a court of law. This
court has held that a reasonable, unrestricted-right belief
cannot exist where a taxpayer knowingly acquires the dis-
puted funds via fraud. Culley, 222 F.3d at 1335 (Fed.
Cir. 2000) (citation omitted). The “taxpayer’s illicit hope
that his intentional wrongdoing will go undetected cannot
create the appearance of an unrestricted right.” Id.
at 1336. This principle applies with equal force here and
forecloses the appellants’ unrestricted-right claim to re-
cover the funds as a matter of law.
Because the appellants cannot, as a matter of law, have
a reasonable, unrestricted-right belief, they cannot plead a
claim under § 1341. As a result, further opportunity to
2 The text of the statute prescribes an allowance for
a tax-refund claim if:
(1) an item was included in gross income for a prior
taxable year (or years) because it appeared that the
taxpayer had an unrestricted right to such item;
(2) a deduction is allowable for the taxable year be-
cause it was established after the close of such prior
taxable year (or years) that the taxpayer did not
have an unrestricted right to such item or to a por-
tion of such item; and
(3) the amount of such deduction exceeds $3,000.
26 U.S.C. § 1341(a).
Case: 20-1562 Document: 42 Page: 6 Filed: 05/03/2021
6 STEFFEN v. UNITED STATES
amend their complaint would be futile. See Kemin Foods,
L.C. v. Pigmentos Vegetales del Centro S.A. de C.V.,
464 F.3d 1339, 1353 (Fed. Cir. 2006) (noting that leave to
amend may be denied when “the amendment would be fu-
tile”).
The second § 1341 requirement proves equally unavail-
ing for the appellants. The Court of Federal Claims noted
that, despite “hav[ing] had multiple opportunities to revise
their complaint,” the appellants failed to tether their tax-
refund claim to another section of the Tax Code as required
by statute. Steffen v. United States, 145 Fed. Cl. 1, 5
(2019), reconsideration denied, 147 Fed. Cl. 142 (2020).
The “fail[ure] to address th[is] deficiency in response to the
[government]’s motion to dismiss” for ten months in three
subsequent briefs is fatal to their claim. Steffen, 145 Fed.
Cl. at 5. The court therefore properly dismissed the com-
plaint.
The appellants argue that their failure to state a claim
under § 1341 should be excused because they are entitled
to pro se deference. See Appellants’ Br. 12. But the Court
of Federal Claims found that argument unpersuasive in
view of the appellants’ litigation history. See Steffen,
145 Fed. Cl. at 5. We acknowledge the long-held principle
that pleadings drafted by pro se litigants are generally held
to “less stringent standards” than pleadings filed by
trained attorneys. Haines v. Kerner, 404 U.S. 519, 520–21
(1972). But procedural leniency toward a specific class of
litigants does not translate to unfettered deference and
dereliction of judicial review. Courts may scour pro se
pleadings in search for a legal argument, but they cannot
excuse a litigant’s failure to bring a claim entitled to legal
remedy. See Henke v. United States, 60 F.3d 795, 799
(Fed. Cir. 1995) (“The fact that [a party] acted pro se in the
drafting of his complaint may explain its ambiguities, but
it does not excuse its failures.”). As is evident from their
extensive litigation history in the federal courts, the appel-
lants are anything but inexperienced pro se litigants. To
Case: 20-1562 Document: 42 Page: 7 Filed: 05/03/2021
STEFFEN v. UNITED STATES 7
the contrary, the appellants have demonstrated an ability
to draft a variety of legal documents, and they wield a legal
acumen uncommon among pro se litigants. The appellants’
complaint had already undergone three iterations before
the Court of Federal Claims denied permission to file any
further amendments. Under these circumstances, we con-
clude that the Court of Federal Claims did not abuse its
discretion in denying the appellants special deference.
Based on the foregoing, we hold that the Court of Fed-
eral Claims properly dismissed the case because the appel-
lants (1) did not have an unrestricted right to funds
acquired by fraud as a matter of law, foreclosing their abil-
ity to plead a claim under § 1341; (2) failed to tether the
§ 1341 deduction claim to another section of the IRC; and
(3) were not entitled to pro se deference under the facts pre-
sented. Because leave to amend would have been futile,
the Court of Federal Claims properly exercised its discre-
tion to deny leave to amend the complaint.
The dissent claims that the Court of Federal Claims
dismissed the suit for failure to “cite” applicable tax-code
sections. Dissent Op. at 2. This is not accurate. The Court
of Federal Claims explained that the appellants were
aware of the § 1341 requirements and had multiple oppor-
tunities to cure the defects in their complaint. Steffen,
145 Fed. Cl. at 5. Based on those facts, the court deter-
mined that “[a]bsent an allegation of the source of the de-
duction plaintiffs seek, the court cannot provide a legal
remedy.” Id. We agree.
The dissent also contends that the Court of Federal
Claims dismissed the action “without notice and without
opportunity to amend the complaint.” Dissent Op.
at 1–2, 3. This is also incorrect. The government undis-
putably moved to dismiss on the ground that the appellants
cannot establish a reasonable belief of an unrestricted
right to the funds. S.A. 82–91. We also note that the
§ 1341 requirement to tether a tax deduction to another
Case: 20-1562 Document: 42 Page: 8 Filed: 05/03/2021
8 STEFFEN v. UNITED STATES
section of the Tax Code was properly raised in the govern-
ment’s brief in support of its motion to dismiss the appel-
lants’ second amended complaint with prejudice. See
S.A. 81 (noting that a taxpayer must show “entitle[ment]
to a deduction under the [IRC] . . . , [which] must be ‘allow-
able’ under a provision of the [Tax] Code other than
§ 1341.”) (citations omitted). The appellants therefore had
clear notice of this ground and could have responded, but
did not do so, “in any of the subsequent three briefs they
filed.” Steffen, 145 Fed. Cl. at 5. Accordingly, we find no
abuse of discretion in the denial to amend the complaint for
a third time, so as to identify a potential provision of the
Tax Code to which the claim could be tethered as required
under § 1341. In any event, any amendment would have
been futile because the appellants could not have reasona-
bly believed that they had an unrestricted right to the
funds under the statute.
The extensive litigation history of this case reveals a
clear pattern: The appellants have, for decades, litigated to
no avail the same tax-refund claims. The appellants’ in-
volvement in other cases demonstrates they were aware of
the § 1341 requirements, including the need to tether a tax-
deduction claim to another section of the IRC. This litiga-
tion history belies the appellants’ claims that they had no
clear notice of the § 1341 requirements. 3 Even if, contrary
3 For example, during proceedings before the United
States Bankruptcy Court for the Middle District of Florida,
Steffen filed a “Debtor’s Motion for Partial Summary Judg-
ment on Tax Refund Claim,” S.A. 470, which explicitly
cited Culley and cross-referenced 26 U.S.C. § 162(I.R.C. § 162) as the other section of the IRC required for
entitlement to a deduction under § 1341. S.A. 480–81. In
a case before the Court of Federal Claims in 1998, the ap-
pellants filed suit challenging another IRS denial of a de-
duction, which the appellants claimed qualified as an
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STEFFEN v. UNITED STATES 9
to the facts above, the appellants somehow had inadequate
notice of the tethering requirement, there is a wholly inde-
pendent ground for denying leave to amend because, as a
matter of law, the appellants cannot demonstrate a reason-
able belief of an unrestricted right to the disputed funds,
making any amendment entirely futile.
We have considered the appellants’ remaining argu-
ments and find them unavailing. We discern no basis to
conclude that, under the facts of this case, the Court of Fed-
eral Claims abused its discretion in dismissing the appel-
lants’ complaint.
CONCLUSION
For the reasons set forth in this opinion, we affirm the
decision of the Court of Federal Claims granting the gov-
ernment’s motion to dismiss and denying leave to amend
the complaint.
AFFIRMED
COSTS
Costs for the appellee.
“ordinary and necessary business expense” under 26 U.S.C.
§ 162(a). Bilzerian, 41 Fed. Cl. at 135; S.A. 576. The rec-
ord shows other such instances of the appellants’ notice of
the § 1341 requirements.
Case: 20-1562 Document: 42 Page: 10 Filed: 05/03/2021
United States Court of Appeals
for the Federal Circuit
______________________
TERRI L. STEFFEN, PAUL A. BILZERIAN,
Plaintiffs-Appellants
v.
UNITED STATES,
Defendant-Appellee
______________________
2020-1562
______________________
Appeal from the United States Court of Federal Claims
in No. 1:12-cv-00063-PEC, Judge Patricia E. Campbell-
Smith.
______________________
NEWMAN, Circuit Judge, dissenting.
The Court of Federal Claims dismissed this tax refund
appeal on the pleadings and with prejudice, on the ground
of absence of jurisdiction or failure to state a claim. 1 The
dismissal was without prior notice to the plaintiffs of any
defect in their complaint, and without opportunity to cure
1 Steffen v. United States, 145 Fed. Cl. 1 (2019) (“Dis-
missal Order”); id., 147 Fed. Cl. 142 (2020) (“Recon. Dec.”).
Case: 20-1562 Document: 42 Page: 11 Filed: 05/03/2021
2 STEFFEN v. UNITED STATES
the defect, which was the omission from the complaint of
the numbers of the applicable sections of the Tax Code.
In its dismissal, the Court of Federal Claims did not
discuss the merits of this tax refund claim; this appeal to
the Federal Circuit is solely on the question of the
dismissal with prejudice, without notice and without
opportunity to amend the complaint. Thus in their briefs
neither the appellant nor the government discussed the
merits of the tax refund claim.
Nonetheless, my colleagues now decide the tax refund
claim, and on this basis they rule that the Court of Federal
Claims was correct in dismissing the complaint for lack of
jurisdiction. My colleagues ignore that the facts are not
presented and the law is not argued. There has been no
decision by the Court of Federal Claims. Thus the courts
deny these taxpayers their right to judicial review of the
IRS decision; on a ground so shaky that the government
never raised it in the Court of Federal Claims, although the
government filed three motions to dismiss. This is not full
and fair judicial process.
The only question before us is the dismissal with
prejudice because the complaint did not cite the sections of
the Tax Code, and refusal of the proffered amended
complaint. The government does not now support the
reasoning of the Court of Federal Claims, and devotes most
of its argument to impugning the character of these
plaintiffs. My colleagues on this panel undertake a sua
sponte decision of the tax refund claim as their reason for
supporting the improper dismissal.
The panel majority decides the tax refund claim
without briefing, without a record, without argument,
without trial and without decision. These plaintiffs are
thus evicted from the protection of the laws, for their claim
has never had judicial review. As Justice John Marshall
observed:
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STEFFEN v. UNITED STATES 3
The very essence of civil liberty certainly consists
in the right of every individual to claim the protec-
tion of the laws, whenever he receives an injury.
One of the first duties of government is to afford
that protection.
Marbury v. Madison, 5 U.S. 137, 163 (1803). The principle
of protection by judicial review is the foundation of a nation
ruled by law. Chambers v. Balt. & Ohio R.R. Co., 207 U.S.
142, 148 (1907) (“The right to sue and defend in the courts”
is “[i]n an organized society . . . the right conservative of
all other rights, and lies at the foundation of orderly
government.” This right “is one of the highest and most
essential privileges of citizenship”).
These plaintiffs are now deprived of this constitutional
right, without notice and without sound reason. I
respectfully dissent.
A
The Court of Federal Claims, after seven years of
litigation activity on this case, preceded by a decade of
litigation in IRS tribunals, dismissed the complaint with
prejudice and without notice, stating that: “Absent an
allegation of the source of the deduction plaintiffs seek, the
court cannot provide a legal remedy. As such, the court
must dismiss the complaint for failure to state a claim upon
which relief can be granted.” Dismissal Order at 5. The
court refused to permit amendment of the complaint,
although the IRS record is replete with citations to the
applicable Tax Code provisions.
Plaintiffs state, without contradiction, that this
asserted flaw was mentioned for the first time in the issued
Dismissal Order. The plaintiffs filed a request for
reconsideration accompanied by a request to file an
amended complaint, and were denied.
The Court of Federal Claims not only departed from
the rules governing the content of a complaint, but also
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4 STEFFEN v. UNITED STATES
departed from routine procedures for amendment of a
flawed complaint. Precedent is uniformly against denial of
remedial amendment; indeed, when “it appears plainly
from [the] record that jurisdiction exists, it best serves the
interest of justice to grant the motion for leave to amend
without requiring a perfunctory remand for that purpose.”
Carlton v. Baww, Inc., 751 F.2d 781, 789 (5th Cir. 1985).
B
The Court of Federal Claims did not review the merits
of the tax refund claim, but simply dismissed the complaint
for “fail[ure] to meet . . . the pleading standards,” Recon.
Dec. at 146. My colleagues now state that “the appellants
[] did not have an unrestricted right to funds acquired by
fraud,” Maj. Op. at 7. However, the Court of Federal
Claims’ dismissal was based solely on the “threshold issue”
of the plaintiffs’ failure to identify the applicable sections
of the Tax Code. Dismissal Order at 4.
The panel majority now decides the merits of the tax
refund claim, although the merits are not before us for de-
cision. My colleagues hold, sua sponte, that “appellants’
complaint does not entitle them to the legal remedy they
seek,” Maj. Op. at 2. Notably, the government never moved
to dismiss on that ground. The government had filed sev-
eral motions to dismiss, including for absence of a neces-
sary party and for a more definite statement, but the
government did not move to dismiss on the ground adopted
by the panel majority.
The merits are not presented for our appellate review.
There is no exposition and argument of the grounds on
which my colleagues purport to rely, and my colleagues’
recitation of facts and theories has no record citations, and
no opportunity for response. See Mullane v. Cent. Hanover
Bank & Trust Co., 339 U.S. 306, 314 (1950) (“An
elementary and fundamental requirement of due process
in any proceeding which is to be accorded finality is notice
reasonably calculated, under all the circumstances, to
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STEFFEN v. UNITED STATES 5
apprise interested parties of the pendency of the action and
afford them an opportunity to present their objections.”).
Complex issues warrant full briefing and due
consideration in the trial court. See Ferreiro v. United
States, 350 F.3d 1318, 1327 (Fed. Cir. 2003) (remanding the
government’s jurisdictional arguments because “[t]he
Court of Federal Claims did not rule on those grounds and
we decline to rule on them in the first instance on appeal”);
Centrak, Inc. v. Sonitor Techs., Inc., 915 F.3d 1360, 1369
(Fed. Cir. 2019) (declining to consider enablement in the
first instance on appeal); Valeant Pharm. N. Am. LLC v.
Mylan Pharm. Inc., 978 F.3d 1374, 1384–85 (Fed. Cir.
2020) (remanding to the district court to consider
additional Rule 12(b)(6) arguments in the first instance).
My colleagues stray from these foundations of due process.
C
The complaint herein was not incurably defective. A
complaint must state a plausible claim for relief, but “does
not require the plaintiff to set out in detail the facts upon
which the claim is based, but enough facts to state a claim
to relief that is plausible on its face.” Cary v. United States,
552 F.3d 1373, 1376 (Fed. Cir. 2009) (citing Bell Atl. Corp.
v. Twombly, 550 U.S. 544, 570 (2007)).
Dismissal of a complaint under Rule 12(b)(6) requires
prior notice of the perceived inadequacy, with an
opportunity to remedy any defect. “[A] plaintiff with an
arguable claim is ordinarily accorded notice of a pending
motion to dismiss for failure to state a claim and an
opportunity to amend the complaint before the motion is
ruled upon.” Neitzke v. Williams, 490 U.S. 319, 329 (1989).
The plaintiff must be enabled “meaningfully to respond by
opposing the motion to dismiss on legal grounds or by
clarifying his factual allegations so as to conform with the
requirements of a valid legal cause of action.” Id. at 329–
30; see also, e.g., Coates Reprographics, Inc. v.
Subligraphics, S.A., 845 F.2d 1034 (Fed. Cir. 1988)
Case: 20-1562 Document: 42 Page: 15 Filed: 05/03/2021
6 STEFFEN v. UNITED STATES
(vacating and remanding in part because “having acted sua
sponte, the court gave [plaintiff] no opportunity, prior to
entry of the order, to present its arguments with respect to
its being prejudiced by the dismissal.”).
Notice and an opportunity to remedy a defective
complaint is the general rule. Perez v. Ortiz, 849 F.2d 793,
797 (2d Cir. 1988) (“[T]he general rule is that a district
court has no authority to dismiss a complaint for failure to
state a claim upon which relief can be granted without
giving the plaintiff an opportunity to be heard.”) (internal
quotation marks and citations omitted). In the absence of
any reason to deny leave to amend the complaint, “[t]he
court should freely give leave when justice so requires.”
Fed. R. Civ. P. 15(a)(2). As the Supreme Court stated in
Foman v. Davis, 371 U.S. 178 (1962):
If the underlying facts or circumstances relied upon
by a plaintiff may be a proper subject of relief, he
ought to be afforded an opportunity to test his
claim on the merits. In the absence of any apparent
or declared reason . . . the leave sought should, as
the rules require, be ‘freely given.’ Of course, the
grant or denial of an opportunity to amend is
within the discretion of the District Court, but
outright refusal to grant the leave without any
justifying reason appearing for the denial is not an
exercise of discretion; it is merely abuse of that
discretion and inconsistent with the spirit of the
Federal Rules.
Id. at 182. The Court of Federal Claims departs from its
own precedent. See AAA Pharmacy, Inc. v. United States,
108 Fed. Cl. 321, 329 n.9 (2012) (“[I]n general, sua sponte
Rule 12(b)(6) dismissals are erroneous if parties have not
been afforded notice that the complaint insufficiently
states a claim and an opportunity to amend the complaint,”
unless “it is crystal clear that the plaintiff cannot prevail
Case: 20-1562 Document: 42 Page: 16 Filed: 05/03/2021
STEFFEN v. UNITED STATES 7
and that amending the complaint would be futile” (quoting
Chute v. Walker, 281 F.3d 314, 319 (1st Cir. 2002)).
Despite this solid practice, the Court of Federal Claims
and now the Federal Circuit deny these fundamentals of
fair process, and my colleagues dispose of the merits with-
out presentation of the merits.
D
The Court of Federal Claims stated that it was not per-
mitting an amended complaint “[b]ecause plaintiffs were
aware of the relevant standard, have had multiple oppor-
tunities to revise their complaint, and failed to address the
deficiency in response to defendant’s motion to dismiss, the
court will not permit further amendments in this case.”
Dismissal Order at 5; see also Recon. Dec. at 146. However,
there was no motion to dismiss on this ground. The plain-
tiffs had no notice that the court deemed the complaint de-
ficient, and this purported deficiency was never raised by
the government. To the contrary: jurisdiction was accepted
over seven years of litigation activity after the complaint
was filed.
The government on this appeal does not defend the
refusal to permit amendment of the complaint. Instead,
the government points to the past offenses of the plaintiffs,
for which they received civil and criminal penalties.
Persons who have committed offenses are not thereby
excluded from access to judicial review of other issues. See
Bounds v. Smith, 430 U.S. 817, 821 (1977) (“It is now
established beyond doubt that prisoners have a
constitutional right of access to the courts.”); Lewis v.
Casey, 518 U.S. 343, 350 (1996) (“The right that Bounds
acknowledged was the (already well-established) right of
access to the courts.”).
The right of reasonable access to the courts is “secured
by the Constitution and laws of the United States.”
Johnson v. Avery, 393 U.S. 483, 498 n.24 (1969) (Douglas,
Case: 20-1562 Document: 42 Page: 17 Filed: 05/03/2021
8 STEFFEN v. UNITED STATES
J., concurring). A complaint should be dismissed for failure
to state a claim only if it is clear that no relief could be
granted under any set of facts that could be proved
consistent with the allegations. Anaheim Gardens v.
United States, 444 F.3d 1309, 1314–15 (Fed. Cir. 2006)
(citing Hishon v. King & Spalding, 467 U.S. 69, 73 (1984)).
“The factual allegations must be enough to raise a right to
relief above the speculative level.” Cary, 552 F.3d at 1376.
This requires “enough facts to state a claim to relief that is
plausible on its face.” Id.; Scheuer v. Rhodes, 416 U.S. 232,
236 (1974), overruled on other grounds by Davis v. Scherer,
468 U.S. 183, 188 (1984) (a well-pleaded complaint may
proceed even if it appears “that a recovery is very remote
and unlikely”). The dismissal of the complaint with
prejudice and denial of opportunity to amend were a clear
abuse of discretion.
These plaintiffs are entitled to review of the merits of
their tax refund claim. From my colleagues’ contrary
ruling, I respectfully dissent.