Sept 18 (Reuters) - A panel of U.S. appeals court judges

on Wednesday seemed to struggle to pinpoint the outer limits of

the National Labor Relations Board's powers to remedy illegal

labor practices, grappling with the issue in a case involving

Starbucks ( SBUX ).

A three-judge 3rd U.S. Circuit Court of Appeals panel during

oral arguments in Philadelphia expressed confusion, and at times

frustration, with lawyers on both sides in Starbucks' ( SBUX ) appeal of

an NLRB ruling that said the coffee chain illegally fired two

pro-union baristas at stores in the city.

The case is one of dozens to accuse Starbucks ( SBUX ) of unlawful

labor practices amid a nationwide campaign to unionize its

stores, and part of a growing series of challenges claiming the

board's in-house proceedings and enforcement powers are

unconstitutional by companies including Amazon, SpaceX and

Trader Joe's. Wednesday's case is the first involving broader

challenges to the NLRB to be argued at an appeals court.

The judges focused almost exclusively on Starbucks' ( SBUX ) claim

that the NLRB lacks the power to order employers to reimburse

workers for any direct or foreseeable expenses stemming from

being unlawfully fired.

The board had for decades ordered reinstatement, backpay and

lost benefits in such cases, but in a 2022 decision said workers

who are wrongfully fired should also be paid back for other

financial harms that stem from their firing such as credit card

debt and out-of-pocket medical expenses. Starbucks ( SBUX ) has been

accused of firing hundreds of workers for organizing or

supporting unions, which it has denied.

Circuit Judges Kent Jordan, Theodore McKee, and Thomas Ambro

repeatedly pressed Sarah Harris, who argued for Starbucks ( SBUX ), and

NLRB lawyer Eric Weitz on whether a June U.S. Supreme Court

ruling in Jarkesy v. U.S. Securities and Exchange Commission

applies to the labor board and forecloses those novel awards.

The court in Jarkesy said the SEC's practice of imposing

civil penalties in administrative cases rather than seeking them

in court was unconstitutional.

The 3rd Circuit judges said they were not sure whether the

expanded remedies sought by the board were "legal remedies"

traditionally imposed by courts, like the ones at issue in

Jarkesy, or "equitable remedies" designed to make workers whole

but not punish employers like Starbucks ( SBUX ).

Jordan said he was "flummoxed" by the distinction, and did

not seem satisfied with the lawyers' attempts to address the

issue.

"If you can't tell us where the line is, then just say 'I

don't know,'" Jordan, an appointee of Republican former

President George W. Bush, said to Harris. "But if it's something

beyond backpay, then give us the line."

Harris said NLRB remedies are only valid "if you're clawing

something back from the defendant that the defendant should not

have kept," such as backpay and benefits. Weitz argued that the

distinction between legal and equitable remedies did not matter,

because Congress granted the NLRB broad authority to decide what

kinds of remedies would make workers whole.

McKee seemed to be leaning toward concluding that NLRB

remedies are equitable and not covered by Jarkesy. But the judge

was surprised when Weitz began arguing that some board remedies

may be legal in nature but that the agency still had the power

to impose them.

"The purpose here ... is purely one which has historically

been labeled as equitable," McKee said. "You start calling it

legal and you're in a hole you can't dig yourself out of."

McKee and Ambro are an appointees of Democratic former

President Bill Clinton.

Starbucks ( SBUX ) is backed by the U.S. Chamber of Commerce, the

nation's biggest business lobby, and other business groups that

filed a brief last year echoing the company's claims about the

limits on the board's remedial powers.

Michael Kenneally of Morgan, Lewis & Bockius, who represents

the groups, was permitted to make brief arguments on Wednesday.

He told the panel that allowing money damages beyond backpay to

be imposed in an administrative NLRB case would violate

employers' constitutional right to a jury at trial.

Kenneally also represents SpaceX in a pair of lawsuits the

rocket maker has filed challenging the board's structure.

The case is Starbucks Corp ( SBUX ) v. NLRB, 3rd U.S. Circuit Court

of Appeals, No. 23-2241.

For Starbucks ( SBUX ): Sarah Harris of Williams & Connolly; Maurice

Baskin of Littler Mendelson

For the NLRB: Eric Weitz

For the business groups: Michael Kenneally of Morgan, Lewis

& Bockius

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