Libby Clinic Files for Bankruptcy After Asbestos Claims Ruling

Legislation & Litigation

The Center for Asbestos Related Disease in Libby, Montana, has filed for Chapter 11 bankruptcy protection. The decision comes after a jury ruled in June that CARD had submitted 337 false asbestos claims, forcing the clinic to pay nearly $6 million in penalties and damages. 

BNSF Railway filed the lawsuit against CARD under the federal False Claims Act. The act allows private parties to file a lawsuit on the federal government’s behalf. The suit accuses the clinic of failing to get outside confirmation that hundreds of patients had an asbestos-related illness.

The railroad company, owned by billionaire Warren Buffett, is a defendant in lawsuits over its role in toxic asbestos contamination that impacted thousands of people. In 2020, the Montana Supreme Court found BNSF liable for shipping asbestos-contaminated vermiculite through Libby. 

Libby is a former vermiculite mining town. Because vermiculite forms in such close proximity to asbestos underground, the vermiculite deposits became contaminated with the toxic mineral. Libby was placed on the U.S. Environmental Protection Agency’s Superfund list more than 20 years ago. Cleanup of the site is nearly complete, but because of the long latency period for asbestos-related diseases such as mesothelioma, locals are now dealing with long-term health issues. 

False Claims Act Lawsuit Fallout

The nonprofit CARD clinic opened in 2000. It provides screenings and other health resources to residents affected by the asbestos exposure. In spite of the False Claims Act judgment, It has denied any wrongdoing and will remain open, serving patients while appealing the jury’s verdict. 

“We filed [for bankruptcy] because we want to continue to offer the same services and keep our doors open to pay our employees,” clinic director Tracy McNew told The Western News. “My understanding is that depending on the appeal’s outcome, CARD could come out of bankruptcy because the judgment is lifted, or CARD could be restructured with a plan to resolve our debts over time while continuing to offer our services.”

CARD’s director said they have no plans to change their day-to-day operations.

“CARD’s only reason for filing is the judgment that came about following a 2019 BNSF Railway False Claims Act lawsuit against us,” McNew said. “CARD does not otherwise have any long term debt and our bills are paid in a timely manner each month. We also have a federal financial audit conducted by outside accountants annually to ensure compliance with our grant requirements and relevant laws. CARD will continue to operate and pay bills as usual for services received after the bankruptcy was filed.”

Libby’s Asbestos Legacy

Libby is considered one of the country’s worst human-caused environmental disasters. An estimated 694 residents died and thousands more became sick due to asbestos exposure in the Libby area. The asbestos contamination was caused by tainted vermiculite mined by W.R. Grace & Co. The mine shut down in 1990 and the company filed for bankruptcy in 2001. A $3 billion trust fund was later set up to compensate those who were affected. 

Thousands of lawsuits have also been filed by Libby residents and former mine workers against Montana state agencies. They claim they weren’t warned about the dangers of asbestos contamination in the area. So far there have been several large settlements with the state totaling $68 million.

Asbestos contamination is associated with a variety of conditions, including: 

It can take decades after being exposed to asbestos for an asbestos-related condition to develop. Cancers such as mesothelioma may take 20 to 60 years to exhibit symptoms. Asbestosis can develop in as few as 10 years. 

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