California Blocked From Seeking Damages Over 23andMe Data Breach by Bankruptcy Court

A U.S. bankruptcy judge ruled Friday that the state of California is barred from seeking monetary damages from the successor company to 23andMe related to a 2023 data breach that compromised the data of an estimated 6.9 million customers. The decision hinges on the terms of the genetic testing company's Chapter 11 reorganization plan.

The Court's Decision

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

While monetary relief is now off the table, the judge noted that California could still seek non-monetary remedies. The state has been given 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 financial compensation.

Background of the State's Lawsuit

The ruling is a setback for California Attorney General Rob Bonta, who had accused 23andMe of failing to act on warnings about system vulnerabilities and downplaying the severity of the breach. The state's lawsuit sought potentially millions of dollars in civil fines.

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Bonta's office had argued that federal bankruptcy courts should not be permitted to prohibit state-level law enforcement actions, which could create a "haven for wrongdoers." However, Judge Walsh disagreed that the reorganization plan established such a haven and affirmed the finality of the approved bankruptcy proceedings.

23andMe's Bankruptcy and Restructuring

Palo Alto-based 23andMe filed for Chapter 11 bankruptcy protection in March 2025. The company's assets were subsequently purchased for $305 million by TTAM Research Institute, a nonprofit controlled by 23andMe co-founder Anne Wojcicki.

Separate from the state's lawsuit, the bankruptcy court approved a compensation fund for affected customers. Judge Walsh recently authorized a payment of $32.46 million from this fund, bringing the total approved payout to U.S. customers to $46.75 million.