Escondido production company challenges NLRB's authority to award damages

An Escondido television production company is challenging the National Labor Relations Board's authority to adjudicate unfair labor practice cases and award monetary damages, arguing in a filing Monday that the agency's proceedings violate employers' constitutional rights to jury trials.

X Factor S2 LLC, represented by Pacific Legal Foundation, asked the 9th U.S. Circuit Court of Appeals to reject an NLRB order requiring the company to reinstate four television crew members allegedly fired for attempting to unionize a production in 2023.

The case could have implications beyond the entertainment industry, potentially affecting the NLRB's longstanding practice of resolving labor disputes through administrative tribunals rather than federal courts.

"The government cannot sidestep the Constitution by moving damages claims into an agency courtroom," said Oliver J. Dunford, a senior attorney at Pacific Legal Foundation. "The right to a jury trial is a fundamental safeguard against government overreach, and all individuals and businesses deserve the chance to defend themselves in a real court before being ordered to pay damages."

The challenge invokes a U.S. Supreme Court's 2024 decision which restricted the Securities and Exchange Commission's ability to impose civil penalties through administrative proceedings without jury trials. Securities and Exchange Commission v. Jarkesy et al., 2024 DJDAR 5853 (S. Ct., filed March 8, 2023).

The dispute arose during production of the second season of X Factor (Beyond Belief), a television series produced for a German company.

According to the filing, executive producer Daniel Castro hired several crew members, including gaffers Noah Kelly and Andrew Choe and grips Sean Hunt and Steven Miller.

Shortly before filming began, crew members contacted a union representative about organizing the production to obtain health and welfare benefits. After learning of the effort, Castro questioned the production's director of photography about the organizing activities.

The four employees were subsequently replaced. X Factor denies unlawfully discharging the workers or retaliating against them for union activity.

Following an administrative hearing in January, an NLRB administrative law judge found that X Factor had unlawfully discharged the workers. The board adopted that decision in August, ordering reinstatement, backpay and compensation for additional financial losses resulting from the terminations.

Pacific Legal Foundation argues that the agency's administrative process improperly allows the NLRB to investigate, prosecute and adjudicate allegations without the constitutional safeguards provided by an independent federal judge and jury.

X Factor contends that both backpay and compensation for consequential losses constitute legal damages that cannot constitutionally be imposed without a jury.

The company also challenges the NLRB's authority to award compensation for indirect financial harms, including credit-card penalties, mortgage payments and childcare expenses, under a remedial policy established in the board's 2022 Thryv Inc. decision.

The filing acknowledges that recent 9th Circuit decisions have upheld the board's authority to award such remedies, but urges the court to reconsider those precedents.

Other federal appellate courts, including the 3rd, 5th and 6th circuits, have taken a narrower view of the agency's authority to impose consequential damages.

X Factor additionally contends that Article III requires disputes involving private rights to be adjudicated by federal judges rather than administrative law judges.

The company faces a procedural obstacle because it did not fully participate in the administrative proceedings or preserve its objections before the board. Its attorneys argue that extraordinary circumstances excuse those omissions because administrative tribunals cannot resolve structural constitutional challenges.

A representative for the NLRB could not be reached immediately for comment. The agency's answering brief is due Nov. 25.

The case is National Labor Relations Board v. X Factor S2 LLC, 26-5501 (9th Cir., filed Aug. 25, 2026).