Abdallah v. Xybion Corporation

Background

Mustafa Abdallah sued his former employer, Xybion Corporation, alleging employment discrimination and retaliation. Abdallah alleged that he is an Arab American man of Palestinian descent who practices Islam and identifies as Muslim. He worked for Xybion beginning around May 2022 as Executive Director, Quality/Compliance Services, worked remotely most recently from Fremont, California, and managed a team of five to ten consultants.

Abdallah alleged that Xybion imposed higher sales expectations on him than on coworkers performing the same or similar work. He also alleged that Xybion hired unqualified or inexperienced consultants for client projects while representing that clients would receive qualified and experienced personnel. He said he repeatedly opposed that practice and worked with human resources and his supervisor, Kamal Biswas, to ensure that consultants were qualified.

According to the complaint, Xybion assigned allegedly unqualified consultants to a Mumbai, India project. After the client questioned the consultants’ qualifications and canceled its contract, Abdallah informed Xybion’s Executive Vice President and CFO, Steven Porfano, about the alleged problem. Abdallah alleged that Xybion terminated his employment days later, on February 7, 2025, in retaliation for opposing the company’s practices and because of discriminatory bias against him.

He asserted five claims: race discrimination under California’s Fair Employment and Housing Act; religious discrimination under that Act; failure to prevent discrimination and retaliation under that Act; retaliation under California Government Code section 1102.5; and wrongful termination in violation of public policy based on the discrimination and whistleblower-retaliation allegations.

The Motion to Dismiss

Xybion moved under Federal Rule of Civil Procedure 12(b)(6), which allows dismissal when a complaint does not adequately state a claim for legal relief. Xybion argued that Abdallah did not plausibly allege that race or religion motivated the challenged employment actions. It also argued that the section 1102.5 claim failed because Abdallah did not identify a law, rule, or regulation that he believed Xybion was violating and did not adequately allege that he opposed unlawful conduct.

FEHA Claims

The court stated that a discrimination claim under the Fair Employment and Housing Act requires allegations showing that the plaintiff was in a protected group, was qualified for the job, suffered an adverse employment action, and either was treated less favorably than similarly situated people outside the protected group or experienced other circumstances suggesting discrimination.

The court found that Abdallah adequately alleged the first three elements. His allegations that he is Arab American and Muslim supported protected-group status. His allegations that he performed competently and was often among Xybion’s top sales performers supported an inference that he was qualified. The court also treated the alleged higher sales expectations and termination as adverse employment actions.

The court found the fourth element insufficiently pleaded. Abdallah did not allege that the coworkers with lower sales expectations were non-Arab or non-Muslim. He also did not allege that he was Xybion’s only Arab American or Muslim employee. Therefore, the court said it could not infer from the complaint that the coworkers with lower quotas were outside his protected groups. The court dismissed the race- and religion-discrimination claims, as well as the related failure-to-prevent-discrimination-or-retaliation claim and the public-policy claim based on those discrimination allegations.

Section 1102.5 Retaliation Claim

California Government Code section 1102.5 protects employees from retaliation for reporting suspected violations of law to someone with authority to investigate or correct them and for refusing to participate in activity that would violate a law, rule, or regulation.

The court found that Abdallah adequately alleged that he disclosed the practice he believed was unlawful. His allegation that he repeatedly expressed disagreement with hiring unqualified consultants to his supervisor was sufficient at the pleading stage. The court also found that he adequately alleged that he refused to participate in illegal activity by instructing the consultants on the Mumbai project to be truthful about their qualifications when questioned by the client.

The court nevertheless found the claim insufficient because Abdallah did not identify in the complaint the specific law, rule, or regulation that he believed Xybion’s conduct violated. The court did not consider statutes that Abdallah identified only in his opposition brief because those statutes were not referenced in the complaint. For the same reason, the court dismissed the public-policy claim based on the section 1102.5 allegations.

Disposition

The court granted Xybion’s motion to dismiss and dismissed all of Abdallah’s claims. Because the court found that the defects might be corrected, it granted Abdallah leave to file an amended complaint by September 4, 2025. The opinion also vacated the scheduled motion hearing and continued the case-management conference to October 29, 2025.