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Commitments and Contingencies
3 Months Ended
Jun. 30, 2024
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies Commitments and Contingencies
Non-cancelable Purchase Obligations
In the normal course of business, the Company enters into agreements containing non-cancelable purchase commitments for goods or services with various parties, which include agreements to purchase goods or services that are enforceable and legally binding to the Company. Recognition of purchase obligations occurs when products or services are delivered to the Company, generally within accounts payable, or accrued and other current liabilities. As of June 30, 2024, the Company had a total of $64.4 million in outstanding non-cancelable purchase obligations with a term of 12 months or longer that have not been recognized on its balance sheet.
Legal Matters
Cyber Security Incident
On October 10, 2023, the Company reported that certain information was accessed from individual 23andMe.com accounts without the account users’ authorization (the “incident”).
As a result of the incident, multiple class action claims have been filed against the Company in federal and state courts in California, as well as in other U.S. and international jurisdictions, and the Company has received demand letters from attorneys purporting to represent customers seeking arbitration claims. The Company is also responding to inquiries from various governmental officials and agencies. The federal class action claims were coordinated for pretrial proceedings by the Multidistrict Litigation Panel, and on June 5, 2024, co-lead plaintiffs’ counsel were appointed. On July 15, 2024, the Company reached an agreement in principle to settle the putative class action lawsuits currently pending in the U.S. District Court for the Northern District of California (the “Court”).
The parties executed a confidential settlement term sheet on July 29, 2024. The proposed settlement contemplates an aggregate cash payment by the Company of $30.0 million to settle all claims brought on behalf of all persons in the United States whose personal information was impacted by the incident. In addition, the Company will document various business practice initiatives relating to cybersecurity.
The Company anticipates that, upon Court approval, the settlement will provide a full release of all claims arising out of the incident by the class action members (who do not opt out) against the Company. The settlement is not an admission of fault or wrongdoing by the Company; the Company believes that a resolution of these claims at this time is in the best interest of the Company and its stockholders given the costs and risks inherent in litigation. Approval by the Court, notice to the putative class, and the satisfaction of customary conditions to effectiveness will take at least six months.
During the three months ended June 30, 2024, the Company recognized an additional $9.4 million in net expenses related to the incident primarily consisting of $31.6 million legal fees incurred and the proposed settlement amount, partially offset by probable insurance recoveries of $22.2 million as of June 30, 2024, within general and administrative expense in the condensed consolidated statements of operations and comprehensive loss.
Indemnification
The Company enters into indemnification provisions under agreements with other companies in the ordinary course of business, including, but not limited to, collaborators, landlords, vendors, and contractors. Pursuant to these arrangements, the Company agrees to indemnify, defend, and hold harmless the indemnified party for certain losses suffered or incurred by the indemnified party as a result of the Company’s activities. The maximum potential amount of future payments the Company could be required to make under these agreements is not determinable. As of the date of this filing, the Company has never incurred costs to defend lawsuits or settle claims related to these indemnification provisions. As a result, the Company believes that the fair value of these provisions is not material. The Company maintains insurance, including commercial general liability insurance and product liability insurance, to offset certain potential liabilities under these indemnification provisions. In addition, the Company indemnifies its officers, directors, and certain key employees against claims made with respect to matters that arise while they are serving in their respective capacities as such, subject to certain limitations set forth under applicable law, the Company’s Bylaws, and applicable indemnification agreements. As of June 30, 2024, the Company was not aware of any known events or circumstances that have resulted in a material claim related to these indemnification obligations.