VeroBlue Farms USA, Inc. v. Cassels Brock & Blackwell LLP

UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF IOWA
IN RE:
VeroBlue Farms USA, Inc.,
Debtor
______________________________
VeroBlue Farms USA, Inc.,
Plaintiff
vs.
Cassels Brock & Blackwell LLP,
Defendant
Chapter 11
Bankruptcy No. 18-01297
Adversary No. 19-09015
OPINION AND ORDER ON MOTION TO ENFORCE PROTECTIVE ORDER AND
MOTION TO COMPEL AND FOR SANCTIONS
The matters before the Court are a Motion to Enforce Protective Order (Doc.
352) filed by Cassels Brock & Blackwell LLP (“Cassels”) and a Motion to Compel
and for Sanctions (Doc. 256) filed by VeroBlue Farms USA, Inc. (“VBF”). The
Court held a hearing and took the matters under advisement. Robert Lang and Dan
Childers appeared for VBF. Michael D. Schwartz, Brandon M. Schwartz, and
Thomas C. Verhulst appeared for Cassels.
I. BACKGROUND
This is an old adversary case with a less than stellar record (for which the
Court bears some blame). It is part of other larger disputes that have also wallowed
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in the courts. Unfortunately, much of the following history is necessary to understand
the matter at hand. VBF filed this adversary proceeding on March 27, 2019, seeking
turnover of files. On October 17, 2019, Cassels filed a Motion for Protective Order
(Doc. 32), which the Court issued on February 7, 2020 (Doc. 55) in order “to
facilitate discovery and the production of relevant evidence.” Shortly after the
Protective Order was entered, VBF filed a Motion to Compel Discovery, arguing
that Cassels improperly asserted claims of attorney-client privilege, failed to provide
a privilege log to specify what documents were privileged, and failed to comply in
other ways with relevant discovery requests. The Court granted VBF’s Motion and
entered an order directing Cassels’ compliance. On March 13, 2020, Cassels
provided responses to discovery requests. Those responses reiterated objections
which Cassels had asserted in its original responses, including claims of attorney-
client privilege. Cassels again failed to provide a privilege log to support these
assertions.
VBF filed a Motion for Contempt on April 9, 2020 (Doc. 67), asserting that
Cassels failed to comply with the Court’s February 12, 2020, Order compelling
discovery. Cassels had still not filed a privilege log, despite the Court’s clear
instruction that a log was required to support any assertion of attorney-client
privilege. Cassels responded with another assertion that the documents were
privileged and argued that they were otherwise irrelevant and subject to a “solicitor’s
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lien” under Canadian law. Cassels asserted its responses complied with the Court’s
Order in all other respects, even though Cassels had not provided the privilege log.
Cassels later argued that it could not file a privilege log because such a log would
reveal the location of the documents and give VBF an improper advantage. Cassels
argued that a privilege log “would be a waste of the parties’ resources and a waste
of judicial resources,” even though the Court had specifically ordered a privilege log
if Cassels continued to assert attorney-client privilege. Cassels continued to assert
the privilege without the log.
The Court granted VBF’s Motion for Contempt on April 22, 2021 (Doc. 117),
finding Cassels in contempt of court for failing, among other things, to provide a
privilege log. The Court ordered sanctions of $1,000 per day until full compliance
was achieved. On September 23, 2021, Cassels filed a Motion to Reconsider the
Court’s Contempt Order (Doc. 182). VBF filed an objection to the Motion (Doc. 187).
The Court granted Cassels’ Motion to Reconsider in part on April 21, 2022 (Doc.
196). The Court limited the contempt ruling to the issue of the privilege log and
ordered Cassels to pay VBF’s attorney’s fees and a $5,000 fine instead of the $1,000
per day initially ordered. The Court also ordered a stay in proceedings because
related litigation in Texas could lead to confusion and inconsistent rulings.
The stay of proceedings was lifted on June 6, 2023, after the Texas litigation
failed to progress as expected. VBF filed a Motion to Compel and a Motion for
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Summary Judgment on January 11, 2024. The next day, Cassels filed its own Motion
for Summary Judgment. After several hearings related to the summary judgment
motions, the Court agreed to review the documents in camera in hopes of clarifying
the 	attorney-client 	privilege 	issues. 	Nearly 	seven 	thousand 	documents 	were
delivered to chambers in thirty-nine four-inch binders. Each binder was labeled with
a volume number and the range of documents included within. The documents were
identified only by the numbers Cassels had assigned to them – CBB00001 through
CBB06965. After many hours of review over many months, the Court eventually
concluded that in camera review was slowing the process and doing little to clarify
the privilege issues. The Court discussed its views in telephonic hearings with the
parties and decided to hold an evidentiary hearing where Cassels could identify the
privilege, clarify which documents it asserted were privileged, and make its
argument that the privilege applied to those specific documents.
The Court held an evidentiary hearing on all pending issues. Cassels called no
witnesses and provided no admissible evidence to support its claims of privilege—
or any other positions related to summary judgment. The Court found Cassels
entirely failed to support or explain its attorney-client privilege assertion. Cassels
simply argued that the privilege applied to all the documents in a blanket fashion.
The Court entered an Opinion and Order on Motions for Summary Judgment (Doc.
307) on April 18, 2025. In that Opinion, the Court granted VBF’s Motion for
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Summary Judgment on its claim for turnover of recorded information related to
VBF’s property or financial affairs under 11 U.S.C. § 542(e) and denied summary
judgment on the remaining claims. The Court denied Cassels’ Motion in its entirety.
In granting VBF’s Motion, the Court found that the files at issue constituted
recorded information that related to estate property or VBF’s financial affairs.
Specifically, the files related to several causes of action listed in VBF’s schedules,
including VeroBlue Farms USA, Inc. v. Wulf, Case No. 3:19-cv-00764, in the
Northern District of Texas. Cassels appealed this decision to the United States
District Court for the Northern District of Iowa and asked this Court to stay further
proceedings pending resolution of the appeal (Doc. 315). The Court denied the
Motion to Stay Pending Appeal on June 10, 2025. VBF filed a Motion to Enforce
Judgment (Doc. 332) on June 30, 2025. The Motion was held in abeyance pending a
ruling on the appeal from the District Court (Doc. 343). On July 9, 2025, Cassels
moved for a stay pending appeal in District Court. The court denied the motion to
stay (Doc. 344), finding that Cassels was unlikely to be successful on appeal. VBF
then filed a Notice of Denial of Motion to Stay Enforcement of Judgment and
Request for Immediate Turnover of Files (Doc. 345). The Court granted VBF’s
Motion to Enforce Judgment (Doc. 348) on September 26, 2025. Cassels finally
turned the documents over to VBF at the end of October, indicating via e-mail that
the documents were being produced as confidential under the Protective Order
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issued by this Court in early 2020. VBF did not initially respond to this assertion.
However, on December 19, 2025, VBF responded, stating that the Protective Order
was not applicable and that VBF was obligated to produce the documents in the
Texas litigation. The same day, VBF filed a Request for Ruling on its Motion to
Compel and for Sanctions. Cassels then filed the Motion to Enforce Protective Order,
asking the Court to deny VBF’s Motion to Compel and for Sanctions, hold VBF’s
counsel in contempt for “the intentional and willful violation of the Protective
Order,” and to inform the Texas court with respect to VBF’s violation of the
Protective Order.
On January 8, 2026, the Honorable Kelly K.E. Mahoney, Chief United States
Magistrate Judge, issued a Report and Recommendation in which she recommended
affirming this Court’s decision and entering judgment in favor of VBF. On March
13, 2026, the District Court adopted the Report and Recommendation and affirmed
this Court’s decision. The pending Motion for Sanctions and Motion to Enforce
Protective Order are now ready for decision.
II. Discussion
A. Motion to Enforce Protective Order
Cassels argues that VBF has violated the Protective Order and asks the Court
to hold VBF’s counsel in contempt. According to Cassels, VBF violated the
Protective Order when it produced the documents Cassels turned over to fulfill
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discovery obligations in a separate lawsuit. Cassels designated those documents
“confidential” under the Protective Order and argues that those documents could
therefore “be used solely for the purpose of this action.”
In response, VBF argues that the Protective Order is inapplicable because the
files were not produced through discovery, but through a final judgment on VBF’s
turnover claim under 11 U.S.C. § 542(e). VBF also points out that the Court ordered
turnover for the purpose of administering VBF’s property and financial affairs,
including the Texas action. VBF asserts that if Cassels can simply mark the files as
confidential and prevent VBF from using them in any capacity, it would get the same
benefit as if the Court concluded those documents were privileged. The Court
concluded they were not privileged. VBF also requests an award of costs and
attorney’s fees incurred in responding to this Motion pursuant to 28 U.S.C. § 1927.
1. Protective Order
Rule 26 allows for broad discovery but permits courts to limit the scope of
discovery through the issuance of protective orders. Fed. R. Civ. P. 26(c). “The most
common kind of order allowing discovery on conditions is an order limiting the
persons who are to have access to the information disclosed and the use to which
these persons may put the information.” 8A Charles Alan Wright & Arthur R.
Miller, Federal Practice and Procedure § 2043 (3rd ed.)
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The Court issued a Protective Order on February 27, 2020, in order “to
facilitate discovery and the production of relevant evidence.” The Protective Order
allowed the parties to designate certain documents as confidential and outlined the
procedure for doing so. Documents, defined in the Protective Order as “all materials
within the scope of Fed. R. Civ. P. 34,” could be designated confidential to protect
the following:
(a) Information prohibited from disclosure by statute;
(b) Information that reveals trade secrets;
(c) Research, technical, commercial, or financial information
that the party has maintained as confidential;
(d) Medical information concerning any individual;
(e) Personal identity information;
(f) Income tax returns; and
(g) Personnel or employment records of a person who is not
a party to the case.
The Protective Order dictates that the documents “shall be used solely for the
purpose of this action and no person receiving such documents shall, directly or
indirectly, use, transfer, disclose, or communicate in any way the documents or their
contents” to anyone but those individuals specified in the Protective Order. Further,
“[a]ny party may object to the propriety of the designation of the documents as
‘Confidential’ by serving a written objection on the designating party’s counsel. …
The party asserting the material is Confidential shall have the burden of proving that
the information in question is within the scope of protection afforded by Fed. R. Civ.
P. 26(c).”
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On October 28, 2025, counsel for Cassels sent an email to counsel for VBF,
stating in part that “[w]hile the Bankruptcy Court has determined that the attorney-
client privilege has been waived, the VBF Canada documents nevertheless remain
confidential documents of VBF Canada. As such, the VBF Canada documents are
being produced as confidential subject to the provisions of the Protective Order in
place.” (Doc. 352 at ¶ 11). Counsel for VBF responded, asking when the documents
would be produced and whether they would be electronic or hard copy. (Doc. 352 at
¶ 12). Cassels points out that VBF did not object to the confidentiality designation in
that response. Cassels counsel informed VBF counsel that the documents would be
produced electronically and that they had been stamped confidential. (Doc. 352 at ¶
13). VBF counsel responded providing e-mail addresses and other information
Cassels requested. (Doc. 352 at ¶ 14). Cassels points out that VBF again did not assert
any objections to the confidential designation. Cassels reiterated that the documents
would be produced as confidential “pursuant to the terms of the Protective Order
signed by Judge Collins on February 27, 2020.” (Doc. 352, ¶ 15). Cassels counsel
also attached a copy of the Protective Order. The documents were produced October
31, 2025. (Id. ¶ 16). On December 19, VBF counsel responded, stating that the
protective order was inapplicable because “[t]he documents were not produced in
discovery or pursuant to Rule 26, but instead adjudicated to be turned over to our
clients pursuant to 11 U.S.C. § 542.” Id. at ¶ 17. VBF explained that it now had an
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obligation to produce the documents in the ongoing Texas litigation, but that the
documents would be marked confidential under the protective order in that case.
Cassels responded, reasserting that the protective order in this case was applicable
and prevented VBF from producing the documents in the Texas case.
The Court is not persuaded by Cassels’ argument. Cassels cites no authority
in support of its contention. The Protective Order, by its very terms, was intended to
facilitate discovery. The Order was issued under Fed. R. Civ. P. 26, “General
Provisions Governing Discovery.” To reap the benefits of the Protective Order, the
documents must fall within the scope of Fed. R. Civ. P. 34, which further narrows
the category of documents protected as part of discovery. The Rule “is not a blanket
authorization for the court to prohibit disclosure of information whenever it deems
it advisable to do so, but is rather a grant of power to impose conditions
on discovery in 	order 	to 	prevent 	injury, 	harassment, 	or 	abuse 	of 	the 	court's
processes.” Bridge C.A.T. Scan Assocs. v. Technicare Corp., 710 F.2d 940, 944-45
(2d Cir. 1983) (citing Int’l Products Corp. v. Koons, 325 F.2d 403 (2d Cir. 1963);
Rodgers v. United States Steel Corp., 536 F.2d 1001 (3d Cir. 1976)). A protective
order, like the one issued here, “prevents a party from disseminating only that
information obtained through use of the discovery process.” Seattle Times Co. v.
Rhinehart, 467 U.S. 20, 34 (1984).
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The major problem with Cassels’ argument, as VBF points out, is that Cassels
did not produce the documents in response to a discovery request. Cassels never
produced the documents in discovery. It fought production of the documents
throughout the whole case. The discovery process provided no documents to VBF.
The Court ultimately ordered Cassels to turnover the documents as recorded
information related to VBF’s property or financial affairs pursuant to section 542(e)
of the Bankruptcy Code. That section allows the Court to order a party “that holds
recorded information … relating to the debtor’s property or financial affairs, to turn
over or disclose such recorded information to the trustee.” 11 U.S.C. § 542(e). The
party must turn over the recorded information “subject to any applicable privilege.”
Id. Cassels had asserted throughout the case that no documents could be produced
and claimed that all of the documents were confidential and protected by attorney-
client privilege. It never attempted to narrow the assertion of privilege to particular
documents. It refused to even do a privilege log for most of the case. When it did,
the log was not in proper form. Cassels could have produced a category of non-
privileged 	documents 	in 	discovery 	and 	attempted 	to 	have 	them 	labeled
“confidential.” It did not. It chose not to provide any of the documents in discovery
or to otherwise limit the blanket assertion of privilege. The Court then moved to the
merits. Despite numerous opportunities throughout discovery and during a hearing
on the merits, Cassels did not carry its burden to show that the documents were
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actually privileged. The Court thus rejected Cassels’ blanket assertion of privilege
and ordered it to turnover the documents. The district court affirmed this decision.
The opportunity to argue for the confidentiality of the documents has long passed
and Cassels’ Motion is without merit. The Protective Order simply does not apply to
the documents at issue because they were not produced in discovery. Thus, VBF has
not violated the Protective Order by producing those documents in a separate
proceeding. Cassels’ Motion to Enforce the Protective Order is denied, and the Court
will not consider the request to hold VBF counsel in contempt.
2. 28 U.S.C. § 1927 – Sanctions
VBF requests an award of its costs and reasonable attorney’s fees incurred in
responding to Cassels’ Motion under 28 U.S.C. § 1927. That section provides that
the court may require an attorney “who so multiplies the proceedings in any case
unreasonably and vexatiously… to satisfy personally the excess costs, expenses, and
attorneys’ fees reasonably incurred because of such conduct.” 28 U.S.C. § 1927.
VBF’s request is not properly before the Court. The Bankruptcy Rules require that a
party seeking relief from the court file a motion. Fed. R. Bankr. P. 9013 (“A request
for an order, except when an application is authorized by these rules, shall be by
written motion, unless made during a hearing”). VBF did not raise this request
though a motion, but instead through its Response to Cassels’ Motion.
B. Motion to Compel and for Sanctions
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VBF has, however, reiterated its request to rule on the monetary sanctions
requested in the original Motion to Compel and for Sanctions. This matter was
pending at the time of the Court’s ruling on the motions for summary judgment. That
ruling disposed of or made moot some issues—like the motion to compel an
additional deposition. VBF asks for sanctions based on the failure of Cassels to
produce a prepared witness under Rule 30(b)(6), and for improper conduct by
attorneys at the deposition. The Court agrees with VBF on both arguments but
chooses to award no further sanctions. This case was brought for the purpose of
getting Cassels to turn over whatever VBF files it had under section 547 of the
Bankruptcy Code. This should have been a simple case. Instead, the case became
largely about bitter discovery fights that spent untold sums of money and wasted
huge amounts of time. The Court allowed this to happen and is responsible in part
for this case becoming a runaway train. But the parties’ and lawyers’ combined
overzealous pursuit and intransigent obstruction resulted in relentless motions and
demands for Court action that should have been wholly unnecessary.
The case is now over, except for more allegations of discovery violations. The
Court’s ultimate ruling on the merits of turnover, however, really encompassed these
remaining issues. The Court found absolutely no basis for Cassels’ blanket assertion
of attorney-client privilege, finding that Cassels offered no evidence to support it. At
the time of ruling, the Court was already aware of the problems in the 30(b)(6)
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deposition. The Court factored all of Cassels’—and its attorneys’—improper
assertions and actions into the final ruling. One of the toughest discovery sanctions
can be to award relief on the merits—which is essentially one of the reasons Cassels
lost. Cassels’ bad behavior and the continued improper assertion of the privilege—
and zealous fight to keep baselessly asserting it—was factored into the Court’s easy
decision.
The relief in the lawsuit has been granted to VBF entirely. Cassels has already
been sanctioned and paid $5,000 for its improper conduct. While the 30(b)(6)
witness 	was 	probably 	inadequately 	prepared 	and 	Cassels’ 	lawyers 	were
unnecessarily obstructive in the deposition, the Court sees little additional value in
adding more sanctions. VBF won everything it originally wanted in this case—and
was awarded sanctions along the way. Cassels lost and the Court has written opinions
on the lack of support for Cassels’ assertions throughout the case—and the improper
obstruction along the way. The Court concludes that this is where the case should be
left. Thus, the Court denies the Motion for Sanctions.
III. CONCLUSION
For the reasons set forth herein, Defendant’s Motion to Enforce Protective
Order is DENIED.
Further, Plaintiff’s Motion to Compel and for Sanctions is DENIED.
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Ordered:
Thad J. Collins
Chief Bankruptcy Judge
April 27, 2026
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