Jack tells Carly that Aaron is back in Oakdale and that he has to go to the police station, then he tells Carly about Lucy's accident. Carly leaves the children with the nurse, Roberts, and rushes to the hospital to be with Craig. At the hospital, Rosanna is comforting a distraught Craig, reassuring him that he has been a wonderful father to Lucy, and Craig tells Rosanna that she has brought him back to life. They share a tender kiss, just as Carly arrives at the door.
Aaron confronts Alison, asking her what she had said to Lucy, causing Lucy to run toward him calling out that he was innocent, just before she was hit by the tram. Alison, not wanting to admit that she told Lucy that she herself had started the fire, tells Aaron that she and Lucy had an argument, and that Lucy was just running to find Aaron.
In Will's hospital room, Emily begs Barbara to tell her where Hal took Will. Barbara refuses, gloating that she knows where Hal is and Emily doesn't. Emily slaps Barbara, just as Margo enters the room. Barbara shouts, "Arrest her, Margo, right now!" Margo ignores Barbara, and Barbara continues to taunt both Emily and Margo that she is still the one that Hal needs most.
Ben comes in to tell the three women that they need the hospital room now for Lucy Montgomery. Barbara leaves to see how her son's trial is doing. Emily confides to Margo that she is feeling insecure about the distance between her and Hal. Margo leaves to go downstairs to find her brother, Craig.
Alison runs up and Emily embraces her and tells her how happy she is to have her home. Alison tells Emily that she is upset because she had lied to Lucy before her accident. Emily advises Alison to talk to Lucy. Ben accompanies Lucy to her new hospital room, just where Alison and Emily are talking. He tells them that Lucy can have only family as visitors, then Ben leaves to go tell Craig where Lucy is. Emily leaves to go tell Susan that Alison is home, leaving Alison standing outside Lucy's door. Alison immediately goes in to Lucy's room and tells Lucy that she had lied about starting the fire and asks her not to tell anyone what she had said. Lucy responds, "Who are you?" A nurse comes in and kicks Alison out, and Alison runs straight into Aaron, whom she tells that Lucy has amnesia.
Carly tells Craig that her heart is with him because of Lucy's accident, with tears in her eyes. Rosanna, resentfully standing between Craig and Carly, tells Craig that Carly slept with Mike the night before her wedding to Jack. Craig asks why Rosanna is telling her this, while he is in the hospital with his daughter clinging to life. Rosanna stammers around, and Ben comes in to tell Craig that Lucy is in her room in intensive care. Craig dashes toward the room. Rosanna tells Carly that as soon as she can, she will tell Craig about the discrepancy in the Monte Carlo books. Rosanna says that she will be happy if Monte Carlo fails, because Craig will have no reason to be near Carly. Just outside Lucy's room, Craig encounters Lucinda, who asks him to go pick Sierra up at the airport the next morning. Lucinda tells Craig that Sierra intends to take Lucy back to Montega.
At Paul Ryan's trial, the judge instructs Jessica to prepare a written motion to ask Marshall Travers to testify, then calls an end to the day's court proceedings, to resume the next day at 10 A.M. Paul tells Jessica that he thinks that Marshall will not tell the truth about his involvement with Stenbeck on the stand, but Jessica tells Paul that the oath in court is sacred to Marshall. In response to a veiled threat from James Stenbeck, Marshall tells James that if he lays a hand on Jessica or anyone in her family, Marshall will resign from office immediately and turn state's evidence. After James leaves, Marshall asks Jessica not to bring up his dead daughter in court in order to tie him to James Stenbeck. Jessica shows Marshall evidence that his daughter actually survived, then Travers tells Jessica that James had come to him with proof that he has a daughter in Rio, living on the streets. Marshall believes that because James Stenbeck is the only one who knows where his daughter is, and, t if he does not do what Stenbeck demands, Marshall will never find his daughter. Marshall begs Jessica not to put him on the stand, because, if she does, he will lie under oath in order to save his daughter's life. Jessica tells him that she will put him on the stand. "You will have to decide whether or not you are worthy of your child."
Jessica appeals to Ben to give their relationship another chance. Ben vents his anger, declaring that he hates Marshall to the point of wanting him dead. Later, Ben walks out on Jessica. James encourages Marshall to lie under oath, but Oliver, his father, reminds him of his obligations. Marshall is affected by his father's words but ultimately decides to do what is best for his daughter. Aaron frets to Alison about Lucy's memory loss. Sierra arrives to have Lucy transported to Montega, but John suggests that Oakdale is the best place for her to get her memory back. Craig informs Rosanna that he has to find a way to get Sierra to let Lucy stay in Oakdale for good, or he will go to Montega to be close to his daughter.
Simon receives a delivery from Australia and Katie is anxious for him to open it. The package contains information about Simon's uncle's farm and some family pictures of Simon and his sister as kids. Katie suggests going to Australia to see the farm but Simon says it is too big of a trip for Katie at this time. Katie wants him to see the sheep farm one last time and she vows not to let her husband down.
Holden, Emily, Alison and Aaron go to the farm where they are visited by Assistant District Attorney Evelyn Hart and Margo. They tell Aaron that all charges against him have been dropped. Alison, on the other hand, still has charges pending - theft of government property and aiding and abetting a criminal. Hal will be the one to decide Alison's fate. Aaron asks what will happen to Will and Evelyn says he could end up in juvenile hall. Alison gets very upset when she hears this. Then Evelyn says that Holden can sue Will's parents. Emily gets mad and soon everyone is arguing. Alison can't take it anymore and runs out of the room. She goes outside and remembers setting the fire. Aaron and Emily go out to check on her. Emily tells Alison that Hal won't press charges. Emily says she'll always stand behind her sister. Alison asks, "What if I did something totally unforgivable?" Emily says no matter what, she and Susan are always there for Alison.
Craig and Rosanna discuss the current situation. Rosanna says she won't let Lucy go back to Montega because Craig doesn't want her to go. She tells him that she won't let jealousy cloud their relationship. Craig says he doesn't want to upset Sierra who doesn't like the idea of Lucy living in a bachelor pad. Rosanna says he should buy a house but not to worry because Lucy will want to stay – especially for Aaron. After Craig leaves, Rosanna calls her doctor and says she wants to postpone the date of her surgery until after the holidays because of family commitments.
James, Paul, and Barbara argue. James wants Barbara to run off with him. Barbara says that James always confuses her and she is afraid of him. James asks if it is fear or exhilaration. He tells Barbara that he loves her and can't fathom life without her. James sees their life together like "a night at a ball – complete with candles and dancing." Barbara tells him he is going mad and runs over to the courthouse.
Ben goes to court and tells Jessica that he believes in her as a lawyer. He kisses her on the cheek and Isaac tells him that he is a class act. Isaac asks if they are together again. Ben replies no, he just wants to mess with Marshall's head. Brandy Taylor's parents show up at court and tell Marshall that they want their daughter's killer brought to justice. Paul gets nervous and tells Jessica to revoke the motion to have Marshall testify. Jessica says it is too late to do that. The judge begins the session and says that there is no tangible evidence and therefore, the request to put Marshall on the stand is denied. She tells Jessica that she needs to call another witness. Jessica hesitates, and then asks for a ten-minute recess. The judge also denies this request. Marshall looks behind him and sees Brandy's parents and James. He then asks the judge for permission to address the court.
Craig goes to Aaron for help with Lucy. Craig explains that Lucy has her long-term memory, but her short-term memory is not back yet. Aaron agrees to help Lucy. When Aaron and Craig get to Lucy hospital room door, Sierra is coming out into the hall. When she sees Aaron, she goes over to him and gives him a hug and he apologizes for everything that has happened. He tells Sierra that he should have made Lucy stay behind. Sierra tells him that she has learned that you don't make Lucy do anything. You just get out of her way and let her go. Aaron smiles and shakes his head in acknowledgement. Sierra tells him to go inside and see Lucy, but to take it easy, because her memory is still so fragile. Aaron goes inside the room. Sierra looks at Craig and tells him that he is so transparent. Craig asks what does she mean. Sierra tells him that the only reason that he went and got Aaron to visit Lucy was to help Lucy get her memory back of Aaron so she wouldn't want to go back to Montega with her. Craig says that he won't deny that he wanted to help his little girl.
Inside Lucy hospital room, Aaron sits next to Lucy's bed. She tells him that she remembers his name is Aaron. She tells him about a blond girl that visited her. Aaron tells her that girl's name is Alison and they had spent a lot of time together the last few weeks. Aaron asks Lucy if she remembers the motorcycle. At first she doesn't and then she says that they rode the motorcycle on grass. Aaron tells her that is right. He explains that her father didn't want her on the motorcycle, so they rode in the pasture at his grandmother's farm. Lucy asks about a barn. Aaron gets excited and says that they spent some time in a barn about a week ago. But Lucy starts remembering about Emma's barn and she says that she can't see Aaron because of all the smoke. Aaron realizes that she isn't talking about their time together in the barn when they made love. He asks Lucy if she remembers when they were together in the barn and she says that she doesn't. Aaron is disappointed. Lucy asks why did he asks about the barn and Aaron says that they were just happy, that's all.
As Paul's trial gets started, Jessica asks the judge for a recess. The judge denies her request and says that they have delayed the trial enough and she asks the bailiff to bring in the jury. Jessica is disappointed and Marshall stands up and asks if he can address the court. The judge tells Marshall that the court has been reconvened for the sole purpose of finding Paul Ryan innocent or guilty of the murder of Brandy Taylor. She asks if he is going to speak on that subject and Marshall says that he is. The judge tells him to go ahead. James is sitting at the back of the court and he is staring daggers into Marshall's back. Paul asks Jessica what is going on and Jessica tells him, "We'll see, we'll see." Marshall tells the court that Jessica does not have sufficient evidence to clear Paul Ryan and that is why he has to come forward. He adds that Paul Ryan is innocent and should not have been charged. The courtroom erupts in chatter and James looks like steam could come out of his ears. The judge asks if Marshall is prepared to substantiate his allegations. Marshall says that he was not present in the hotel room when Brandy Taylor was killed, but he knows for a fact that the accused is not the killer. He goes on to say that the man that committed the murder is in the back of the courtroom and he turns to point at James, but James is not there. Bonnie tells Isaac that James was just there and where did he go. Isaac says that he will call Jack and inform him and he rushes out of the courtroom. Marshall tells the judge that James couldn't be more than thirty seconds away and he asks that the judge have her bailiff alert the police department. The judge tells Marshall that he is out of order. The judge adds that Marshall will not be permitted to act as a one-man grand jury. Marshall says that he will provide evidence that will bring an indictment for Mr. Stenbeck. He says that he will be happy to sit down with the police and give a statement, but first he is resigning as D. A. and as his last act as D. A. he drops all charges against Paul Ryan. Paul asks Jessica what is happening and Jessica tells him that it is all over. The judge states that acting D. A. T. Marshall Travers has dropped all charges against Paul Ryan. She tells Paul that he is free to go. The judge tells Marshall that she will deal with him later. Everyone rushes over to Paul to give him a hug and wish him well. Marshall sits down in his chair and whispers to himself, "I'm sorry. Please forgive me." Jessica looks at Marshall with concern on her face. She knows what he has just given up to tell the truth.
Carly is talking to Jack on the phone when Mike walks into her office at Monte Carlo. She gets off the phone and hides her prenatal vitamins from Mike. Carly asks Mike where is Molly and Mike says that she is at work and he knows that she was just talking to Jack so they have some time to talk. Carly asks if they need to talk and Mike says that they do and she knows why. Mike tells her that he wishes that she would have told him about Henry when Henry first approached her and he would have had a talk with Henry. Carly tells Mike that it is all so far passed all of that. She tells Mike about Rosanna telling Craig about she and Mike sleeping together. She says that Rosanna is so jealous of her that she will do anything to keep her away from Craig. She adds that she is sure that Rosanna has told Craig about the fifty thousand dollars and she is there at the office just waiting for the axe to fall. Mike tells Carly that he will get fifty grand to replace the money. Carly asks how will he get his hands on fifty thousand dollars and Mike tells her that is his problem. He adds that Rosanna won't be able to hold that over Carly's head. Mike gives Carly a glass of water and tells her to take a drink and settle down. He turns his back and Carly quickly takes her vitamin. Mike walks back over to her and says that he wants to know the rest. Carly asks what does he mean. Mike reminds her that she was going to tell him something yesterday, but Molly and Jack interrupted them. She tries to cover and says that it is only the fifty thousand dollars and that is enough. Mike says that he can see the fear in her face. He begs her to tell him the truth. He takes her hand and as they are holding hands and looking at each other, Emily walks up to the door and sees the two together. Emily steps to the wall where they can't see her and says, "Oh my God!" Emily walks in and breaks the two up. She says hello and hugs Carly. Carly whispers to Emily to get rid of Mike. Emily acts like Carly asks her to model her clothes and she says that she makes a terrible model. Emily makes a comment about her husband still missing and Mike says that if he sees him, he will send him home, which is where he is headed. He tells Carly thanks for the investment advice (covering) and leaves. After he is gone, Emily says, "Anytime you need a room cleared...." Emily asks how Carly is feeling and Carly says fine. Emily asks about the baby and Carly tells her the baby is fine. Carly says, "It's just everything else." Carly starts rambling to Emily about being pregnant and what should she do about telling Jack and she doesn't know if the baby is Jack's and she will have to have a paternity test done. She tells Emily that she doesn't want to talk about it and she asks how Emily is doing. Emily looks at her and says, "Why was Mike here?" Carly looks at her and says, "Mike was....Mike and I....Mike...." Emily asks, "Mike is the father of your baby, isn't he?"
Mike meets Lucinda at the coffee shop. After some small talk, Lucinda asks what it is that he needs. Mike says that he needs to borrow fifty thousand dollars. Lucinda says, "Fifty thousand? You must be in some deep, deep trouble."
The whole town is in an uproar trying to find James Stenbeck. Barbara is missing and Paul is worried that James has taken his mother away. On the streets of Oakdale, there is a Santa Claus ringing a bell for orphan children. James pulls off his beard and makes a call on his cell phone. He calls Barbara and tells her that he is coming to get her and she is going to help him get out of town. James adds, "If you don't help me, I will kill Paul." He hangs up the phone and takes the beard and hat off and lays them down and rushes off.
At the Java Café, Mike asks Lucinda for a $50,000 loan so he can later give the money to Carly to repay the funds she stole from Monte Carlo. Lucinda agrees to take Mike's $72,000 life insurance policy as collateral, but first she wants to know why he isn't getting the money from Molly. He holds firm and won't give in to Lucinda's curiosity. Lucinda backs down and tells him to meet at her house in a half-hour to pick up the cash.
Across the room, Craig meets Rosanna for coffee. They agree that Craig's best chance in keeping Lucy in town is to willingly let Aaron into his daughter's life. Craig is coy when Rosanna shows interest in his past with Sierra. She says the best Christmas gift he could give her would be, "more of your self." Craig opens up and throws Rosanna a few bones. She encourages him to stand up to Sierra and fight for Lucy. Katie stops by toting gifts on her way to see Lucy at the hospital. Craig wonders where his gift is, but Katie said she already dropped it off at the Lakeview. She turns to Ro-zilla and says, "Oh, sorry. No gifts for you this year except a lump of coal in your stocking for hiring Henry to spy on Carly." She quickly leaves before Rosanna can zing something back. Craig's mood switches faster than Trent Lott's fortune, from romantic lover to protective guardian. Rosanna tries to explain what Carly has been up to while he was out of town, "Not only is Carly a liar and a slut. She's also a thief." Craig doesn't want to believe it, "If Carly has stolen from the company, we will need more than your opinion as proof." Rosanna backs off when she sees that Craig will get to the bottom of this accusation on his own. Rosanna leaves to finish her holiday shopping. Craig makes a call and schedules a meeting with Henry at Java.
At Monte Carlo, Emily guesses that Mike is the father of Carly's baby. Carly longs for the good old days when she and Emily were bitter enemies so she wouldn't be forced to confide in her as a friend. Emily says there are new rules now that they are friends. "We can lie for each other. We can even lie about each other, if it serves the purpose. But lying to each other is strictly forbidden." Carly whispers, "Mike's the father." Emily counsels Carly to never breathe a word of this to anyone else, and "Pray to God that that child looks like you." Carly struggles with telling Jack the truth, but Emily encourages her to keep her mouth shut, then walks away. Later, Carly is on the phone applying for a loan when Mike walks in with his own bag-full-of-money. Carly hangs up, listens to his story of how he got it, then declines his cash. Mike says she can pay him back when Monte Carlo becomes a huge hit. Carly relents and they both put the cash in the safe. She gives him a big hug.
In the cop shop interrogation room Marshall says he caved in at the trial all because of his feelings for Jessica. Marshall is worried the new DA will press charges against him and Jessica offers her services. Marshall asks her what Ben might think of this arrangement, then declines her offer. "I love you enough to let you be happy with someone else." Jessica starts to leave, but turns and says, "I'll never forget what we had together."
Barbara gingerly walks into the Old Mill looking for James. James grabs her from behind and says how much he loves the holidays. "And you're exactly what I want for Christmas."
In the main police office, the search for James and Barbara continues. Jack gets a call from Barbara at the Old Mill who tells him James is coming around with a car and plans to take her away with him. Jack tells her to stall. Paul overhears the conversation and rushes out to follow Jack to the Old Mill.
Outside the Old Mill, Jack bellows into a megaphone telling James to come out. The place looks and sounds deserted as the police move inside. Barbara slithers out from a corner and tells Jack that James isn't there any longer. Jack rushes outside and tells his officers to scour the area for any signs of James. "It's useless Jack. You'll never find him." Paul and Jack believe James will now go after Marshall. Jack gathers the troops and heads off in pursuit. Paul stays behind and offers his mother a ride home. Their ice begins to thaw.
Marshall sits down in the interrogation room and pulls out a photo of his father and reflects. His cell-phone rings, and James is on the line requesting a meeting with his former lackey. Marshall tells him he better get out of town. James is touched that Marshall is still concerned about his welfare, especially after Marshall accused him in open court of being responsible for Brandy's murder. James dangles the prospect of finding his daughter, then he again demands a meeting. Just outside Jessica walks up to the door and overhears Marshall telling James he knows where the docks are. Ben arrives and she shies away from the door. He congratulates her on her victory. Marshall bursts out of the room on his way to meet James. Jessica tries to run after him, but Ben forces her to choose who she wants. Margo arrives at the station and Jessica tells her Marshall is meeting James at the docks. Jessica turns to Ben and says, "I love you and only you, but I have to do this." Then she runs after Margo. Ben wipes his mouth in disgust.
Henry meets Craig at Java. Craig asks him about Carly, but before Henry will talk, he demands $5,000 for any information. Craig makes promises that Henry believes and then he tells Craig there is a witness who will place Mike and Carly at Monte Carlo the night before she got married. Henry also says he hasn't told this to Rosanna. Craig then asks if he's blackmailing Carly. Henry lies and says, no. Craig threatens him to never tell Rosanna any of this information, and to also never talk to Carly and Mike again. Henry agrees to stay away from all the parties involved. When Henry looks for his payment, Craig forgets the arrangement leaving Henry out in the cold.
Marshall arrives at the docks and James appears from the mist. He says, "Lucky for you I don't concentrate on the past and your betrayal. We're going to concentrate on the here and the now. I'm gonna find out what kind of man Marshall Travers really is."
After the money is tucked away back in the wall safe, Carly gives Mike a big hug. Neither wants to let go, and their eyes lock the way only lovers look at each other. They are seconds away from a kiss when Craig walks in the room and says, "Well, well, well. When Jack's away, his mouse will play." Mike and Carly instantly break their embrace and fumble for an excuse.