dissenting:
Lawrence Powers, a sophisticated lawyer and businessman, serving as CEO, director, and shareholder of Spartech, a publicly traded company specializing in the processing of plastics, found his debt-ridden company in need of financial assistance. BV, a publicly held British corporation, offered to supply $23.6 million in needed capital for 29 percent of Spartech’s stock. In 1989 Spartech and BV negotiated three agreements to protect their respective interests. Ultimately Powers concluded that it was in the best interests of Spartech for him to release BV from some of the commitments it had made when it came to Spartech’s rescue. Released from these commitments, BV proceeded to increase its stake in Spartech, advancing more funds for an increased equity position. Powers now sues BV, claiming that it has breached the agreements it made when it first invested in Spartech and that the breach was planned from the outset, thereby constituting fraud. The District Court dismissed the suit, correctly analyzing it for what it is — a crybaby attempt by a businessman to achieve success in the courtroom that he could not achieve in the real world of corporate finance. Regrettably, the majority has kept a portion of the complaint alive, thereby giving Powers the opportunity to try to extract an undeserved settlement. From this unfortunate result, I respectfully dissent.
To keep Powers’s suit in court, the majority takes several steps that are either factually or legally unsupportable. First, the majority characterizes Powers as having “succumbed” to BV’s offer to put up $23.6 million in exchange for 29 percent of Spartech’s stock. Yet nothing in Powers’s detailed complaint remotely supports the implication that BV did anything improper to coerce Powers’s agreement. Powers did not “succumb”; he leaped at the opportunity.
Second, the majority cites as circumstances supporting a fraudulent intent to breach the investment agreements the fact that BV’s chairman “began to avoid” Powers, that Powers’s picture was omitted from a BV newsletter, and that board members of Spar-tech appointed by BV “openly criticized” Powers at Spartech board meetings. None of these allegations is the stuff of fraud; the first two tell us more about Powers’s ego than about any plot by BV to breach agreements, and the third is precisely what directors are supposed to do at board meetings when they become dissatisfied with an officer’s performance.
Third, the majority characterizes Powers’s agreement to terminate the key Voting Agreement, the first of the three 1989 agreements, as the result of “pressure.” The “pressure,” it turns out from the face of Powers’s complaint, is BV’s statement that it would exercise its contractual right to terminate the Voting Agreement because the value of Powers’s stock in Spartech had fallen below $2.5 million and that it would sue Powers if he did not abide by the termination provisions of the Agreement. Rather than press his view as to how his shares were to be valued for purposes of triggering the termination clause of the Agreement, Powers chose to terminate the Agreement, a step he presumably thought was in the best interests of Spartech, a company to which he owed a fiduciary obligation as a director. Powers also found it personally advantageous to agree to resign as president in order to protect his severance benefit.
Fourth, the majority points to the recapitalization plan that the directors of Spartech ultimately adopted, whereby BV increased its stake in Spartech, without mentioning that Powers, as a director with fiduciary obligations to Spartech, voted for the plan as being in the best interests of the company. See Powers v. British Vita, P.L.C., 842 F.Supp. 1573, 1578 (S.D.N.Y.1994).1
*192On the legal issues, the majority acknowledges that a fraud plaintiff must allege “with particularity” circumstances that give rise to a “strong inference” of fraud. See Beck v. Manufacturers Hanover Trust Co., 820 F.2d 46, 50 (2d Cir.1987), cert. denied, 484 U.S. 1005, 108 S.Ct. 698, 98 L.Ed.2d 650 (1988). The majority next notes that the sufficient inference of fraudulent intent may be alleged either by showing a motive for committing fraud and a clear opportunity for doing so, or by showing circumstances indicating “conscious behavior” by the defendant. See id. The majority then finds the complaint deficient under the motive and opportunity test, but sufficient under the “conscious behavior” approach. In doing so, the majority has taken the “conscious behavior” approach out of the limited context in which it was announced and pressed it into service in an entirely different context — one in which it can too readily permit most garden-variety state breach of contract actions to be routinely repackaged as federal fraud (and even RICO) lawsuits.
Beck permitted a fraud allegation to withstand a motion to dismiss where the plaintiffs alleged, with supporting documents, that the defendants had sold collateral at an artificially low price in order to defeat the security interest of creditors. We ruled that the allegations sufficed to permit the plaintiffs to prove that the defendants “consciously engaged in activities enabling [foreign third parties] to acquire the U.S. collateral at a fraudulently low price.” Id. at 50. It made sense to recognize that the defendants’ conduct was alleged to have been undertaken with the “conscious” purpose of defeating the creditors’ security interests. But the recognition in that context of a “conscious behavior” approach to scienter cannot mean that scienter is adequately pleaded whenever a plaintiff alleges that a defendant is “conscious” of what it is doing. Every defendant alleged to have engaged in conduct claimed to breach a contract can be said to be “conscious” of its conduct. What the defendants in Beck were conscious of was not simply the fact that they had sold collateral, but the aggravated facts that they had fraudulently permitted the collateral to be sold at an artificially low price to defeat the security interest of the creditors. Beck had nothing to do with a claim of an original intent not to perform a contract. To apply its “conscious behavior” rationale in the context of this case risks considerable mischief.
Though the majority agrees that the complaint does not sufficiently allege proximate cause with respect to defendants’ alleged violation of the Memorandum of Understanding, see 57 F.3d at 186-87 n. 1, it nevertheless appears to include the allegations of breach of this agreement as part of the “conscious behavior” that enables the complaint to survive the motion to dismiss. However, the Memorandum of Understanding obligated BV and Spartech to deal with each other in an evenhanded, fair, and reasonable manner “with the objective of maximizing Spartech’s shareholder value.” The complaint provides no basis for inferring that BV did anything that failed to pursue the objective of increasing Spartech’s shareholder value.
The majority acknowledges that “mere non-performance of promises is insufficient to create an inference of fraudulent intent,” 57 F.3d at 185 (citations omitted), but then risks erosion of this long-standing principle by suggesting that “intent may be found when a defendant violates an agreement so maliciously and so soon after it is made that his desire to do so before he entered into the agreement is evident.” Id. No authority is cited for this sweeping proposition. If it were so that breach soon after contract formation could support an inference of fraudulent intent not to perform, a very large number of breaches of contract could be readily pleaded as fraud causes of action, with the adverb “maliciously” routinely added. See Kotick v. Desai, 123 A.D.2d 744, 746, 507 N.Y.S.2d 217, 219 (2d Dep’t 1986) (“The addition of an allegation of scienter will not transform a breach of contract action into one to recover damages for fraud.”). Since the majority has not relied on any New York cases for its broad suggestion, I can only assume that it is not inviting all instances of early breach to be pled as fraud claims, but instead concludes that the allegations of the complaint in the particular case before us present especially aggravated circumstances that *193raise, at least at the pleading stage, an inference of intent not to perform.
I disagree and find no support for even this limited conclusion in the majority’s citation of Ouaknine v. MacFarlane, 897 F.2d 75, 81-82 (2d Cir.1990). Ouaknine is readily distinguishable. The allegations at the cited pages were that the defendants promised to pay one of the plaintiffs money out of the first proceeds of a sale, ample cash was available to make the payment out of the proceeds, and the defendants paid substantially less than was due. What made the allegations sufficient to support a claim of fraud was not that breach occurred soon after the agreement was made, but that the breach occurred under circumstances so completely unjustifiable, with abundant cash available to fulfill the agreement, that an inference arose that the defendants never intended to perform.
What should fundamentally require dismissal of Powers’s complaint is the lack of any adequate pleading of the reliance element of fraud. Powers now contends that he was lulled into thinking that BV would not try to increase its stake in Spartech. The claim is refuted by the very nature of his allegations. These reveal that Powers, properly wary that any major investor might one day try to increase its stake in the company, negotiated detailed provisions concerning the circumstances under which such an increased position could be achieved. Powers cannot be heard to say that he relied on any assurance by BV that it would not seek to increase its equity position. He negotiated the conditions under which such an increase could be achieved. Then, when it became advantageous to his company in general and to himself in particular, he agreed to relax those conditions. He is not the victim of any fraud; he is merely a disappointed former officer of a company that needed to make its best deal with outside financiers in order to survive.
When a sophisticated businessman finds a business partner willing to put $28.6 million into a company in which he is shareholder, director, and CEO, and negotiates the deal he thinks provides him with adequate protection against a takeover, he cannot cry fraud when circumstances arise that make it advantageous for him and his company to abandon those protections and permit the takeover to occur, with his assenting vote as a director.
Judge McKenna acted forthrightfully in dismissing this complaint, in a particularly thoughtful opinion. I dissent from the partial reversal of his ruling.
. Though Powers does not allege that he voted against the recapitalization plan, he does allege that he was excluded from negotiations concem-ing the plan, Complaint ¶ 91, and that he dissented from board resolutions refusing to recognize the rights of option holders, id. ¶ 86.