What is “excusable neglect” under Fed. R. Civ. P. 60(b)(1)? The answer is that it depends, but generally it’s not much. That’s the first lesson from the Seventh Circuit’s recent decision in In re Canopy Financial, Inc., No. 12-3239 (7th Cir. Feb. 28, 2013). The second is that what happens in Vegas doesn’t really stay in Vegas — particularly when it’s the consequences of spending over $80,000 of someone else’s money in a few nights at TAO, a Las Vegas nightclub at the Venetian “boast[ing] a 40-foot-long outside terrace with stunning views of the Las Vegas Strip, gorgeous go-go dancers, state-of-the-art audio and lighting systems, and two main rooms each featuring varying music formats” (according to TAO’s Web site).

Anthony Banas and Jeremy Blackburn ran Canopy Financial, an administrator of health-related savings and spending accounts. To say that they “ran” Canopy doesn’t tell the full story, however; they misappropriated more than $90 million from the company’s investors and from the funds it had under management, spending much of it on fun things such as those (hopefully legendary) nights at TAO.

Canopy’s trustee in bankruptcy had the task of clawing back as much as he could from the recipients of fraudulent conveyances, one of which was Buddha Entertainment, the operator of TAO, since, though someone received $80,000 worth of entertainment value from Buddha, it wasn’t Canopy.

Buddha had a registered agent, and the trustee served a complaint and summons on it. The trustee heard nothing, however, even after serving the agent with a motion for a default and with a default judgment. What finally caught Buddha’s attention was the trustee’s attempts to collect from Buddha’s assets in Nevada. Buddha filed two affidavits, which the court described as “phrased oddly” because they stated only that “two particular managers [did] not have an ‘independent recollection’ of receiving the complaint and summons.” They were silent as to the motion and the default.

This was too little and too late. The court explained that the cause of Buddha’s failure to respond could be due to one of eight possible reasons: (a) the agent never received the documents; (b) the agent received the documents but did not forward them; (c) the agent forwarded the documents, but they were lost in transit; (d) Buddha received the documents from its agent, but they were not routed properly within Buddha; (e) the proper people at Buddha received the documents, but these people were not the affiants; (f) the affiants received the documents but forgot about them; and (g) the affiants received the documents, but are not truthfully recounting what happened to them.

First let’s dismiss the easy ones: Reason “a” is excusable; reasons “e,” “f,” and “g” are not.

Reason “b,” the agent receiving the documents but not forwarding them, could be excusable, but the court believed that it would depend on whether Buddha had hired a competent service. “[T]rying to get by on the cheap” would not bode well. Reason “c,” the documents lost in transit between the agent and Buddha, would likewise depend on what sort of service Buddha had contracted for. Did it require documents to be sent via a trackable method? “Amazon uses trackable shipments for $10 movies”; the Seventh Circuit held that excusable neglect would require no less. Lastly, reason “d,” the documents misrouted within Buddha, might be excusable, if Buddha could prove that it used ordinary care when handling legal papers. If not, the default and default judgment would stand.

The Seventh Circuit offered one final lesson in Canopy, and an even more fundamental one at that: That is, when courts use a facts-and-circumstances approach to reaching decisions, the moving party (Buddha here) has to supply all the relevant facts and circumstances. Buddha did not, and it lost the case because it left the court to guess as to which of the eight scenarios might apply. Proof again that, regardless of the cliché, what happens in Vegas does not — and cannot — stay in Vegas.