*Pursuant to 5TH CIR. R. 47.5, the Court has determined

that this opinion should not be published and is not

precedent except under the limited circumstances set

forth in 5TH CIR. R. 47.5.4.

United States Court of Appeals

Fifth Circuit

FILED

November 17, 2006

Charles R. Fulbruge III

Clerk

UNITED STATES COURT OF APPEALS

for the Fifth Circuit

No. 05-30927

STATE OF LOUISIANA, DIVISION OF ADMINISTRATION,

Plaintiff-Appellant,

VERSUS

U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES; 

MICHAEL O. LEAVITT, Secretary of the U.S. Department of

Health and Human Services,

Defendants-Appellees;

Appeal from the United States District Court

for the Middle District of Louisiana

(3:03-CV-856)

Before GARZA, DeMOSS, and STEWART, Circuit Judges.

PER CURIAM:*

The State of Louisiana, Division of Administration

(the “State”) appeals a decision of the district court
1However, HHS allowed the State a $387,044 reimbursement

for allowable costs that the State had incurred but

failed to bill to the federal government during the years

1999-2000.

2

granting summary judgment to the U.S. Department of

Health and Human Services (“HHS”) on the State’s claims

for declaratory and injunctive relief with respect to two

adverse decisions rendered by HHS. We affirm.

In early September 2003, HHS determined that from

1997-2000, the State had charged the federal government

for certain costs associated with state-administered

federal programs that were not allowable under the

relevant federal guidelines. HHS also determined that the

State was not entitled to reimbursement for various

allowable costs that the State had incurred but failed to

bill to the federal government during the years 1989-

1998.1 Pursuant to these determinations, HHS requested an

immediate cash refund from the State of $19.2 million.

The State appealed this decision to HHS’s Departmental

Appeals Board, which affirmed the agency’s decision.

Later, in early November 2003, HHS determined that the

State owed it an additional $8.7 million for similar
2However, the letter containing the decision advised the

State that the decision would constitute a final decision

if the State did not appeal. Accordingly, the decision

was a “final agency action” subject to judicial review

under 5 U.S.C. § 704.

3

overages, resulting in a total debt of approximately

$27.8 million. The State did not appeal this decision.2

In late November 2003, the State filed suit against

HHS and its Secretary, seeking (1) a declaration that the

agency’s decisions were arbitrary and capricious, an

abuse of discretion, and contrary to law and (2) an

injunction to prevent HHS from recovering the money owed.

The parties filed cross-motions for summary judgment,

which were referred to a magistrate judge. The magistrate

judge recommended that the court deny the State’s motion

for summary judgment and grant HHS’s motion, reasoning

that HHS’s decisions were not arbitrary and capricious,

an abuse of discretion, or contrary to law under the

relevant standard of review. The district court adopted

the magistrate’s report and recommendation without

opinion, granted summary judgment in HHS’s favor, and

entered final judgment against the State. The State

timely appealed.
4

On appeal, we review a grant of summary judgment de

novo, applying the same standard as the district court.

City of Shoreacres v. Waterworth, 420 F.3d 440, 445 (5th

Cir. 2005). Agency decisions are reviewed under the

standard set forth in the Administrative Procedures Act;

therefore, we will “hold unlawful and set aside” HHS’s

decisions only if we determine that they were

“‘arbitrary, capricious, an abuse of discretion, or

otherwise not in accordance with law.’” Id. (quoting

Administrative Procedures Act § 706(2)(A), 5 U.S.C.

§ 706(2)(A) (2000)). This so-called “arbitrary and

capricious” standard of review is highly deferential, and

it requires us to “accord the agency’s decision[s] a

presumption of regularity.” Pension Benefit Guar. Corp.

v. Wilson N. Jones Mem’l Hosp., 374 F.3d 362, 366 (5th

Cir. 2004) (internal quotation marks omitted). “[W]e are

prohibited from substituting our judgment for that of

the agency.” Id. (internal quotation marks omitted).

Further, to sustain an agency action, only a rational

connection between the facts found and the decisions made

is required, and “[i]t is well-established that an
5

agency’s action must be upheld if at all, on the basis

articulated by the agency itself.” Id. at 366-67

(internal quotation marks omitted).

The State’s primary argument, as we read it, is that

the district court erred in upholding HHS’s decisions

because they were arbitrary and capricious: the decisions

obligated the State to repay its debt immediately in

cash--as opposed to permitting the State to credit the

debt against future billings or adjust future billings to

reflect the debt--and prohibited the State from obtaining

an offset of $28.9 million for allowable costs that the

State incurred but did not charge to the federal

government. The State also argues that we should reverse

the district court because the court did not conduct a de

novo review of contested portions of the magistrate

judge’s report and recommendation and because the court,

by adopting the magistrate judge’s report and

recommendation, improperly accorded great deference and

controlling weight to HHS’s rationale for its decisions.

Having carefully reviewed the briefs, the record, and

the oral argument, we affirm the decision of the district
3Contrary to the State’s allegations on appeal, the

district court had access to the administrative record.

Also, there is no requirement that the district court

explicitly state that it is reviewing contested portions

of a magistrate judge’s report and recommendation de

novo. See Bannister v. Ullman, 287 F.3d 394, 399 (5th

Cir. 2002).

6

court essentially for the reasons articulated by HHS.

HHS’s decisions were not arbitrary and capricious.

Further, we cannot agree with the State that the district

court failed to conduct a de novo review,3 and we find no

error with respect to the district court’s deferential

review of HHS’s rationale for its decisions.

AFFIRMED.