concurring, in part,1 and dissenting in part.
As the majority correctly concludes Connecticut law controls the question of the defendant corporation’s right to terminate Joy’s derivative suit. Since Connecticut’s courts have not yet addressed the issue now before us, we are relegated to predicting what the Connecticut Supreme Court would decide in this case. Because it is an “iffy” business to prophesy what view a state’s highest court will take in the future, and since Connecticut’s Supreme Court could at any time render what we say here irrelevant, the discussion should be as simple as is possible.
I
The highest courts of only two states have addressed the question currently before us. In Auerbach v. Bennett, 47 N.Y.2d 619, 419 N.Y.S.2d 920, 393 N.E.2d 994 (1979), New York’s Court of Appeals held that the substantive merits of an independent director committee’s decision to terminate derivative litigation against defendant corporate directors are beyond judicial scrutiny and that a court’s role in such cases is limited to determining whether the committee acted independently, thoroughly and in good faith. In so holding, the Auerbach court recognized and applied the business judgment doctrine which it stated “bars judicial inquiry into actions of corporate directors taken in good faith and in the exercise of honest judgment in the lawful and legitimate furtherance of corporate purposes.” Id. at 629, 419 N.Y.S.2d 920, 393 N.E.2d 994. In Zapata Corp. v. Maldonado, 430 A.2d 779 (Del.1981), the Delaware Supreme Court expressly refused to adopt the business judgment rationale. Instead it fashioned a two-step analysis. Under the first, which mirrors Auerbach, the corporation seeking dismissal must establish the independence, good faith and thoroughness of the investigative efforts of the committee of the board reaching the decision to terminate the litigation. As a second step the trial court in its discretion may apply its own “independent business judgment” in determining whether to accept the board’s decision to terminate the derivative suit.
Faced with these opposing views, the majority has concluded that Connecticut would not adopt the “business judgment” doctrine of Auerbach, but would adopt the “independent business judgment” test of Maldonado. In fact, the majority goes beyond Maldonado by requiring that the court must proceed to apply its own business judgment, rather than leaving the decision to resort to the *898second step within the trial court’s discretion. I respectfully dissent from that conclusion and propose, first, to set forth briefly what I perceive to be the inherent deficiencies in Maldonado and the adoption of its rationale by the majority and, then, to indicate why I believe the Connecticut Supreme Court will take a position similar to Auerbach.
II
Under Maldonado’s two-step analysis and the majority position unanswered questions abound. For example, reasonable inquiry could be made with regard to the following: under what circumstances can the trial court conclude that the director’s decision satisfied the step one criteria, but not the “spirit” of those criteria as required by step two of Maldonado; will evidence be considered by the court that was not before the independent committee; in the exercise of its “business judgment” will the court consider facts not in the record; will the court need to appoint its own experts?
The majority proposes a calculus in an attempt to resolve additional issues engendered by its analysis. This calculus is so complicated, indefinite and subject to judicial caprice as to be unworkable. For example, how is a court to determine the inherently speculative costs of future attorneys’ fees and expenses related to litigation, time spent by corporate personnel preparing for trial, and mandatory indemnification “discounted of course by the probability of liability for such sums.” How is a court to quantify corporate goodwill, corporate morale and “the distraction of key personnel” in cases in which it “finds a likely net return to the corporation which is not substantial in relation to shareholder equity?” Should a court also take into account the potential adverse impact of continuing litigation upon the corporation’s ability to finance its operations? Should future costs be discounted to present value and, if so, at what rate? Must the income tax ramifications of expected future costs be considered and, if so, how? This veritable Pandora’s box of unanswered questions raises more problems than it solves.
Even more fundamentally unsound is the majority’s underlying premise that judges are equipped to make business judgments. It is a truism that judges really are not equipped either by training or experience to make business judgments because such judgments are intuitive, geared to risk-taking and often reliant on shifting competitive and market criteria. Auerbach, 47 N.Y.2d at 630, 419 N.Y.S.2d 920, 393 N.E.2d 994 (courts are “ill-equipped” to make essentially business judgments). Reasons of practicality and good sense strongly suggest that business decisions be left to businessmen. Whether to pursue litigation is not a judicial decision, rather, it is a business choice. Burks v. Lasker, 441 U.S. 471, 487, 99 S.Ct. 1831, 1842, 60 L.Ed.2d 404 (1979) (Stewart, J., concurring) (“A decision whether or not a corporation will sue an alleged wrongdoer is no different from any other corporate decision .... ”). As perceptive commentators have observed, if Maldonado’s statement is true that “[u]nder our system of law, courts and not litigants should decide the merits of litigation,” Maldonado at 789 n. 13 (quoting Maldonado v. Flynn, 413 A.2d 1251, 1263 (Del.Ch.1980)), then its corollary “that boards, and not courts, are entitled to exercise business judgment” is equally true. Coffee and Schwartz, The Survival of the Derivative Suit: “An Evaluation and a Proposal for Legislative Reform, 81 Colum.L.Rev. 261, 329 (1981).
Public policy concerns also strongly militate against the second step of the majority’s two-tiered analysis. The sudden urge for stricter corporate accountability under judicial aegis arises, one Connecticut commentator suggests, not from corporate misconduct, which he asserts is no greater now then at previous times in history but, rather, because of an anti-business bias present in our society amidst an atmosphere of pervasive government regulation. Wolfson, A Critique of Corporate Law, 34 U.Miami L.Rev. 959, 988-89 (1980). In a land weary of overregulation and the kind of judicial activism embodied in the second step of *899Maldonado, there may well be a strong inclination for business to incorporate in states more hospitable to them. See, e.g., Genzer v. Cunningham, 498 F.Supp. 682, 688 (E.D.Mich.1980).
Moreover, when one considers that even a meritorious lawsuit can have a detrimental effect upon a company’s stockholders due to the significant and rising costs of litigation, disruption of corporate work force and adverse publicity, it becomes plain how wasteful it will become for corporations not to believe it worthwhile to move to dismiss a nonmeritorious case. The Business Round Table, a group of over one hundred chief executive officers of America’s largest corporations has publicly stated that a view like the one adopted by the majority will lead to more derivative lawsuits being brought, make it more difficult for corporations to have them dismissed, discourage risk-taking and make fewer candidates willing to serve on boards of directors. N.Y. Times, June 10, 1982, at D6. Such real fears overcome in large measure what the majority implicitly assumes to be the advantages of limiting directors’ control over the pursuit of the derivative suit.
Ill
Review of Connecticut law lends support to a belief that something closer to the business judgment rule of Auerbach is more likely to be adopted by Connecticut’s highest court than the independent judgment rule of Maldonado. Under Connecticut law a director is not civilly liable for the consequences of his official actions if in the exercise of his duties as a director he acts prudently and in good faith. Conn.Gen.Stat. Ann. §§ 33-313(d),2 33-321(b)(2), 33-455(b)(2) and 33-447(d) (West Supp.1982). See Davenport v. Lines, 77 Conn. 473, 59 A. 603 (1905). Liability has been confined to cases in which a director has not performed (dereliction of duty), eases in which a director has used his fiduciary position for personal advantage (breach of a duty of loyalty), and conflict of interest cases. S. Cross, Corporation Law in Connecticut, at 298 (1972). Business decisions honestly made are treated as discretionary, even when the interests of stockholders are adversely affected. Carter v. Spring Perch Co., 113 Conn. 636, 155 A. 832 (1931).
Because these statutory standards provide that a director may avoid liability when he acts in good faith and with prudent care, they lend support to the rationale underlying the business judgment rule, i.e. courts should not second-guess the merits of business decisions honestly and prudently made.
Additionally, independent committees similar to the one appointed by defendants in this case are recognized and approved under Connecticut law. See Conn.Gen.Stat. Ann. § 33 — 318(b) (West Supp.1982). Therefore, I believe the Supreme Court of Connecticut would refrain from reviewing the recommendation of independent committees sanctioned under state laws.
IV
My colleagues advance two arguments as to why they believe Connecticut would not adopt the Auerbach test. First, they contend that director committees simply cannot be expected to act independently. Where a special litigation committee does not act independently and in good faith, its decision to terminate derivative litigation will not survive judicial scrutiny under Auerbach. Thus the contention that director committees will not act independently and in good faith does not support the conclusion that the Auerbach standard is inadequate to protect shareholder rights. *900Second, the majority argues that limiting judicial review to the Auerbach test would effectively eliminate the fiduciary obligations of directors and officers because the sole method of enforcing these obligations, shareholder derivative suits, could be eliminated upon the recommendation of persons appointed by the officers and directors whose conduct is being challenged. Even if shareholder derivative suits are the only effective method of enforcing the fiduciary obligations of officers and directors, this second objection to Auerbach again assumes that director committees reviewing derivative litigation will not act independently and in good faith. Since Auerbach will require judicial intervention if the director committees do not so act this second objection to the use of the Auerbach standard is similarly without merit. All this, as well as the majority’s distinction between “demand-excused” cases and “demand-required” cases, serves only to reveal the true rationale underlying its opinion — it simply does not believe that special litigation committees will act independently and in good faith.
Our Court has been down this path before. When Burks was before us we took the same position that the majority now does, i.e., that directors could never be wholly disinterested in deciding whether to pursue claims against fellow directors. Lasker v. Burks, 567 F.2d 1208, 1212 (2d Cir.1978). On appeal that view was rejected by the Supreme Court which concluded that lack of impartiality of disinterested directors is not a determination to be made as a matter of law. Burks, 441 U.S. at 485 n. 15, 99 S.Ct. at 1841.
Plainly Connecticut’s Supreme Court will be influenced to some degree by the number of cases that have followed Auerbach’s teaching that an unbiased board’s power to terminate derivative litigation is essentially unreviewable.3
V
Applying the Auerbach analysis to the facts in this case, the district court correctly found that the Committee’s recommendation should be adopted. The committee would be deemed “independent” under Connecticut law because none of the directors had any of the relationships prohibited under Section 33-319 of the Connecticut General Statutes. For the reasons stated in Judge Eginton’s extensive opinion below, I believe that the committee acted thoroughly and in good faith when it recommended termination of the litigation against some, but not all, of the defendants. Moreover, a district judge’s interpretation of the law of the state in which he sits should be accorded substantial deference.
Based upon the foregoing, I would therefore affirm the grant of summary judgment dismissing the derivative suit as to the 23 defendants and its continuance as to the others as recommended by the independent committee.
. I concur with the majority insofar as it vacates the order placing the independent committee report under seal.
. § 33-313(d) provides in relevant part:
A director shall perform his duties as a director, including his duties as a member of any committee to the board upon which he may serve, in good faith, in a manner he reasonably believes to be in the best interests of the corporation and with such care as an ordinarily prudent person in a like position would use under similar circumstances .... A person who performs his duties in accordance with this subsection shall be presumed to have no liability by reason of being or having been a director of the corporation.
Conn.Gen.Stat.Ann. § 33-313(d) (West Supp. 1982).
. See Gaines v. Haughton, 645 F.2d 761 (9th Cir.1981); H.M. Greenspun v. Del E. Webb Corp., 634 F.2d 1204 (9th Cir.1980); Lewis v. Anderson, 615 F.2d 778 (9th Cir.1979), cert. denied, 449 U.S. 869, 101 S.Ct. 206, 66 L.Ed.2d 89 (1980); Abbey v. Control Data Corp., 603 F.2d 724 (8th Cir.1979), cert. denied, 444 U.S. 1017, 100 S.Ct. 670, 62 L.Ed.2d 647 (1980); Joy v. North, 519 F.Supp. 1312 (D.Conn.1981); Abramowitz v. Posner, 513 F.Supp. 120 (S.D.N. Y.1981), aff’d, 672 F.2d 1025 (2d Cir.1982); Genzer v. Cunningham, 498 F.Supp. 682 (E.D. Mich. 1980); Maldonado v. Flynn, 485 F.Supp. 274 (S.D.N.Y.1980), modiffed, 671 F.2d 729 (2d Cir.1982); Rosengarten v. International Telephone & Telegraph Corp., 466 F.Supp. 817 (S.D.N.Y.1979); Siegal v. Merrick, 84 F.R.D. 106 (S.D.N.Y.1979); Our own Court eschewed second-guessing by the courts of what is the responsibility of a corporate board of directors and, until today, may properly have been included in the above group. Galef v. Alexander, 615 F.2d 51 (2d Cir.1980); Abramowitz, supra.