In 1996, Douglas Colkitt (defendant), the principal shareholder of National Medical Financial Services Corporation (NMFS), sought capital for a business venture by entering an agreement with Berckeley Investment Group, Ltd. (Berckeley) (plaintiff). NMFS was a corporation with shares that were traded on the stock exchange. Under the agreement, Berckeley bought $2,000,000 in NMFS debentures, which granted Berckeley the option to convert the debentures into unregistered NMFS shares at a discount from market price. The agreement provided that Berckeley could convert half the shares 100 days after the closing of the agreement and the remaining shares 20 days after that. The entire agreement was structured to qualify under Regulation S of the Securities Act of 1933, 17 C.F.R. §§ 230.901-.04, which at that point established a 40-day restricted period on resales. The agreement specifically provided that Berckeley could not resell until 40 days after the date the offering was completed. The agreement also noted that Colkitt had relied on the accuracy of his attorneys regarding compliance with federal securities law. In 1997, the restriction period of Regulation S was expanded to one year. Berckeley gave notice of its intent to convert and receive NMFS shares, but Colkitt only allowed Berckeley to receive 18,320 shares before refusing to allow further conversion. Berckeley brought charges. Colkitt contended he was entitled to rescind the agreement pursuant to § 29(b) of the Securities Exchange Act of 1934 (Exchange Act), 15 U.S.C. § 78cc(b), because the agreement violated Rule 10b-5 of the Securities and Exchange Commission, 17 C.F.R. 240.10b-5, as well as § 5 of the Securities Act of 1933, 15 U.S.C. § 77e, and § 10(b) of the Exchange Act, 15 U.S.C. § 78j(b). The district court granted summary judgment in favor of Berckeley. Colkitt appealed.