Montana asbestos clinic seeks to reverse $6M in fines, penalties over false claims

BILLINGS (AP) — A health clinic in a Montana town that was polluted with deadly asbestos will ask a federal appeals court on Wednesday to reverse almost $6 million in fines and penalties after a jury determined it submitted hundreds of false claims on behalf of patients.

The jury verdict came last year in a lawsuit brought by Texas-based BNSF Railway, which separately has been found liable over contamination in Libby, Montana, that's sickened or killed thousands of people. Asbestos-tainted vermiculite was mined from a nearby mountain and shipped through the 3,000-person town by rail over decades.

After BNSF questioned the validity of more than 2,000 cases of asbestos-related diseases found by the clinic, a jury last year said 337 of those cases were based on false claims, making patients eligible for Medicare and other benefits they shouldn't have received.

Asbestos-related diseases can range from a thickening of a person's lung cavity that can hamper breathing to deadly cancer. Exposure to even a minuscule amount of asbestos can cause lung problems, according to scientists. Symptoms can take decades to develop.

BNSF alleged the clinic submitted claims based on patient X-ray evidence that should have been corroborated by a health care provider's diagnosis, but were not. Clinic representatives argued they were acting in good faith and following the guidance of federal officials who said an X-ray reading alone was sufficient diagnosis of asbestos disease.

Judge Dana Christensen ordered the clinic to pay $5.8 million in penalties and damages. BNSF would get 25% of the money because it brought the lawsuit on behalf of the government. Federal prosecutors previously declined to intervene in the false claims case and there have been no criminal charges brought against the clinic.

Clinic attorney Tim Bechtold said in court filings that the judge overseeing the lawsuit gave the seven-person jury erroneous instructions, essentially pre-determining the verdict. Attorneys for BNSF urged the 9th U.S. Circuit Court of Appeals to affirm last year's ruling.

Arguments from the two sides were scheduled for 9 a.m. local time on Wednesday in Portland, Oregon.

The judgment prompted clinic officials to file for bankruptcy, but the bankruptcy case was later dismissed at the request of government attorneys. They said the U.S. Department of Health and Human Services was the main funding source for the clinic but also its primary creditor, therefore any costs associated with the bankruptcy would come at taxpayers' expense.

The clinic has certified more than 3,400 people with asbestos-related disease and received more than $20 million in federal funding, according to court documents.

Under a provision in the 2009 federal health law, victims of asbestos exposure in the Libby area are eligible for taxpayer-funded services including Medicare, housekeeping, travel to medical appointments and disability benefits for those who can't work.

The Libby area was declared a Superfund site two decades ago following media reports that mine workers and their families were getting sick and dying due to hazardous asbestos dust from vermiculite that was mined by W.R. Grace & Co.

BNSF is itself a defendant in hundreds of asbestos-related lawsuits. In April, a federal jury said the railway contributed to the deaths of two people who were exposed to asbestos decades ago by tainted mining material was shipped through Libby.

The jury awarded $4 million each in compensatory damages to the estates of the two plaintiffs, who died in 2020. Jurors said asbestos-contaminated vermiculite that spilled in Libby's downtown rail yard was a substantial factor in the plaintiffs' illnesses and deaths.