California Blocked From Seeking Damages Over 23andMe Data Breach

A U.S. bankruptcy judge ruled Friday that the state of California is barred from seeking financial damages from the successor company to 23andMe over the 2023 data breach that exposed the personal and genetic information of millions. The decision is a significant setback for the state's effort to levy civil fines against the company.

The Court's Decision

U.S. Bankruptcy Judge Brian Walsh in St. Louis stated that 23andMe's Chapter 11 reorganization plan precludes California from pursuing monetary relief against the successor entity, Chrome Holding Co. According to the ruling, the state was a party to the bankruptcy case and had the opportunity to challenge the court's jurisdiction at that time.

Judge Walsh wrote that because California had a fair chance to object during the Chapter 11 proceedings, it "cannot challenge it now" through a separate lawsuit. The court has given the state 14 days to either dismiss its May 28 lawsuit, filed in San Francisco Superior Court, or amend it to remove all claims for monetary damages. The state may still pursue non-monetary remedies.

State's Lawsuit Halted

The ruling directly impacts the lawsuit brought by California Attorney General Rob Bonta, who had accused 23andMe of ignoring warnings about its system vulnerabilities and downplaying the severity of the breach. Bonta's office was seeking potentially millions of dollars in civil penalties.

Ad

The attorney general had argued that bankruptcy courts do not have the authority to prohibit state-law enforcement actions in state courts, which could create a "haven for wrongdoers." However, Judge Walsh disagreed that the reorganization plan created such a haven and affirmed the bankruptcy court's authority over the claims.

Bankruptcy and Breach Context

The genetic testing company, then based in Palo Alto, California, filed for Chapter 11 bankruptcy protection in March 2025. This followed a 2023 data breach that compromised the information of an estimated 6.9 million customers.

Last July, the company's assets were sold for $305 million to TTAM Research Institute, a nonprofit controlled by 23andMe co-founder Anne Wojcicki. Separately, the bankruptcy court has approved a settlement fund to resolve most U.S. customer claims, authorizing total payouts of $46.75 million to affected individuals.