23andMe Holding Co.
25-40976
| Bankr. E.D. Mo. | Jun 27, 2025Background
- Debtors (23andMe Holding Co. et al.) operate a consumer genetic-testing business with ~13 million customers and >80% participating in research; they filed Chapter 11 amid financial strain and a 2023 data breach.
- After an auction, TTAM Research Institute (a nonprofit founded and funded by co-founder Anne Wojcicki) submitted the $305 million winning bid; the proposed structure is an "Equity Toggle": assets sold to a newly formed Debtor-owned Newco, then Newco equity sold to TTAM.
- Multiple States (notably California, Kentucky, Tennessee, Texas, Utah) objected on genetic-privacy grounds; a Consumer Privacy Ombudsman (Prof. Neil Richards) was appointed and recommended opt-in consent and other safeguards.
- Debtors’ long-standing Privacy Statement (in effect on petition date) disclosed that personal data may be transferred in an asset sale; TTAM agreed to preserve Debtors’ privacy policy and adopt certain enhancements.
- The court held a two-day evidentiary hearing and concluded the sale could proceed: Section 363(b)(1) does not broadly preempt state law; the relevant privacy policy is the formal version in effect on the petition date; statutory transfer-consent requirements did not bar the proposed transaction; the sale was approved and the usual 14-day stays shortened to 10 days.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Bankruptcy Code preempts state restrictions on transfers of PII | States: state privacy laws govern and restrict transfers; sale requires compliance | Debtors/TTAM: §363(b)(1) permits sale consistent with debtor's privacy policy and preempts state limits | Court: §363(b)(1) does not broadly preempt nonbankruptcy law; preemption limited and state law remains relevant |
| What privacy policy counts as "in effect" on petition date | States/Ombudsman: policy may vary by customer and include prior representations; consider full history | Debtors: only the formal, publicly posted policy on petition date matters | Court: use the formal privacy policy in effect on petition date (not every historical representation) |
| Whether state genetic-privacy statutes require separate opt-in consent for transfer to Newco/TTAM | States: statutes require separate express consent for transfers/disclosures to any "person" or "third party," so Equity Toggle violates state law | Debtors/TTAM: transfer to wholly owned Newco (and ultimate ownership change) does not trigger opt-in; many statutory exceptions and practical limits apply | Court: statutes construed not to forbid transfers within corporate family or routine operation; transfer to Newco and sale of Newco equity do not require separate opt-in consent |
| Whether court should impose opt-in or other additional protections (ombudsman recommendations) | Ombudsman/States: court should require opt-in consent or impose strict safeguards (fiduciary duty, deceased-customer rules) | Debtors/TTAM: opt-in would likely scuttle deal or force costly Plan Toggle; existing privacy commitments and opt-out/delete rights suffice | Court: declines to impose opt-in or fiduciary-duty conditions (would risk deal collapse or worse outcomes); recommends—but does not order—ombudsman suggestions to purchaser |
Key Cases Cited
- In re Schauer, 835 F.2d 1222 (8th Cir. 1987) (trustee may not sell estate property contrary to state or contractual transfer restrictions)
- Board of Trade v. Johnson, 264 U.S. 1 (1924) (bankruptcy court follows state law when property rights are regulated by state law)
- Mission Prod. Holdings, Inc. v. Tempnology, LLC, 587 U.S. 370 (2019) (estate cannot possess more than debtor had prebankruptcy)
- Freightliner Corp. v. Myrick, 514 U.S. 280 (1995) (obstacle preemption requires clear conflict with federal objectives)
- Whitman v. American Trucking Ass'ns, 531 U.S. 457 (2001) (courts should not find dramatic statutory consequences from ambiguous text)
- Butner v. United States, 440 U.S. 48 (1979) (property rights in bankruptcy generally governed by state law)
- In re Trism, Inc., 328 F.3d 1003 (8th Cir. 2003) (§363(m) protection applies to integral provisions of a sale)
- In re Polaroid Corp., 611 F.3d 438 (1st Cir. 2010) (§363(m) moots certain appellate challenges to sale orders)