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. CampbellSmith.

______________________

Decided: May 3, 2021

______________________

TERRI L. STEFFEN, PAUL BILZERIAN, Basseterre, Saint 

Kitts and Nevis, pro se.

 JANET A. BRADLEY, Tax Division, United States Department 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: 1 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 spanning more than three decades in the federal courts. Pro se 

appellants Terri L. Steffen and Paul A. Bilzerian are a married couple seeking an $8.2 million tax refund pursuant to 

26 U.S.C. § 1341. The money in dispute stems from transactions 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 complaint.

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 complaint in the Court of Federal Claims seeking an

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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 proceedings 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); Steffen 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-CV2872-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. Akerman 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).

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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 further amendments to the complaint. J.A. 2, 8. On August 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 Federal 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. Pollock, 907 F.2d 1125, 1129 (Fed. Cir. 1990).

The Court of Federal Claims may properly grant a motion to dismiss under RCFC 12(b)(6) when a complaint does 

not allege facts that show the plaintiff is entitled to the legal 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 reported them as income. See 26 U.S.C. § 1341(a)(1); Nacchio 

v. United States, 824 F.3d 1370, 1374 (Fed. Cir. 2016) (citation omitted). Second, the taxpayer is required to tether 

a claim for a tax deduction in excess of $3,000 to another 

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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 reasonable 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 disputed 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 recover 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 because 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 portion 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: 5 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 futile”).

The second § 1341 requirement proves equally unavailing 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 taxrefund 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 complaint.

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 appellants are anything but inexperienced pro se litigants. To 

Case: 20-1562 Document: 42 Page: 6 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 conclude 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 Federal Claims properly dismissed the case because the appellants (1) did not have an unrestricted right to funds 

acquired by fraud as a matter of law, foreclosing their ability 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 presented. Because leave to amend would have been futile, 

the Court of Federal Claims properly exercised its discretion 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 opportunities to cure the defects in their complaint. Steffen, 

145 Fed. Cl. at 5. Based on those facts, the court determined that “[a]bsent an allegation of the source of the deduction 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 undisputably 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 

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8 STEFFEN v. UNITED STATES

section of the Tax Code was properly raised in the government’s brief in support of its motion to dismiss the appellants’ 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 ‘allowable’ 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 reasonably 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’ involvement in other cases demonstrates they were aware of 

the § 1341 requirements, including the need to tether a taxdeduction claim to another section of the IRC. This litigation 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 Judgment 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 appellants filed suit challenging another IRS denial of a deduction, 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 independent ground for denying leave to amend because, as a 

matter of law, the appellants cannot demonstrate a reasonable belief of an unrestricted right to the disputed funds, 

making any amendment entirely futile.

We have considered the appellants’ remaining arguments and find them unavailing. We discern no basis to 

conclude that, under the facts of this case, the Court of Federal Claims abused its discretion in dismissing the appellants’ complaint.

CONCLUSION

For the reasons set forth in this opinion, we affirm the 

decision of the Court of Federal Claims granting the government’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 record shows other such instances of the appellants’ notice of 

the § 1341 requirements.

Case: 20-1562 Document: 42 Page: 9 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. CampbellSmith.

______________________

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) (“Dismissal Order”); id., 147 Fed. Cl. 142 (2020) (“Recon. Dec.”).

Case: 20-1562 Document: 42 Page: 10 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 protection 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 decision. 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 several motions to dismiss, including for absence of a necessary 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) 

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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: 15 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 without presentation of the merits.

D

The Court of Federal Claims stated that it was not permitting an amended complaint “[b]ecause plaintiffs were 

aware of the relevant standard, have had multiple opportunities 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 plaintiffs had no notice that the court deemed the complaint deficient, 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, 

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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.

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