In 1984, Norman Ackerberg (plaintiff) bought shares of stock in Vertimag Systems Corporation (Vertimag) from Clark Johnson (defendant). Prior to selling the stock, Johnson had owned the securities for at least four years. Piper, Jaffray & Hopwood, Inc. (PJH) (defendant), a brokerage firm, gave Ackerberg a memoranda containing information about Vertimag. Subsequently, Ackerberg signed a subscription agreement in which Ackerberg affirmed that his income met certain requirements and that he understood the Vertimag securities were unregistered and not transferable. Later, Ackerberg brought suit against Johnson and PJH for violating the Securities Act of 1933 (the 1933 Act) and other securities laws. The district court granted summary judgment in favor of Ackerberg and found that Johnson was not entitled to an exemption under § 4[(a)](1) of the 1933 Act. Johnson appealed, arguing that he was entitled to an exemption, because he was not, as Ackerberg contended, an underwriter.