California Barred From Seeking Damages From 23andMe Successor Over 2023 Data Breach

A U.S. bankruptcy judge has blocked the state of California from seeking monetary damages from the successor company to 23andMe over a 2023 data breach that compromised the personal information of approximately 6.9 million customers. The ruling shields the new entity, Chrome Holding Co., from potentially millions of dollars in civil fines sought by the state.

The Court's Decision

In a ruling on Friday, U.S. Bankruptcy Judge Brian Walsh in St. Louis stated that 23andMe's Chapter 11 reorganization plan prevents California from pursuing monetary relief against Chrome Holding Co. According to the decision, the state, having been a party to the bankruptcy case, cannot now challenge the court's jurisdiction through a separate lawsuit.

Judge Walsh has given California 14 days to either dismiss its May 28 lawsuit, which was filed in San Francisco Superior Court, or amend its complaint to remove all claims for monetary relief. The state is, however, permitted to continue seeking non-monetary remedies.

Background of the Dispute

The legal battle stems from a major data breach in 2023 that exposed genetic and other personal data. California Attorney General Rob Bonta subsequently sued 23andMe, accusing the company of failing to act on warnings about system vulnerabilities and downplaying the severity of the incident.

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The original company, 23andMe, filed for Chapter 11 bankruptcy protection. Last July, its assets were acquired for $305 million by TTAM Research Institute, a nonprofit controlled by 23andMe co-founder Anne Wojcicki, which now operates as Chrome Holding Co.

Implications for Stakeholders

This ruling represents a significant setback for the California Attorney General's office but provides legal clarity for 23andMe's successor. It effectively protects the new company from a major financial liability stemming from the prior entity's operations.

While the state's action is now limited, a separate fund was established through the bankruptcy proceedings to resolve customer claims. Judge Walsh recently authorized a payment of $32.46 million from this fund, bringing the total approved payout for affected U.S. customers to $46.75 million.