Drucilla visits Victor and tells him that Neil has quit working for Newman. Nick has cut off two major projects that Neil has worked hard for and for no reason. Victor is disappointed by this news and wonders why Neil hasn't talked to Victor about this. Drucilla says that Neil is too prideful. She asks him to talk to Nick about this. Victor says that he will try.
Neil tries to convince Malcolm to stay in town. He says that this is a second chance for both of them. Malcolm says that he has made up his mind and that he must go. Neil wonders if it has something to do with Drucilla. Malcolm says maybe Neil should ask Dru. Neil gets a phone call from Victor asking him to come see him. Neil says he must go.
Neil goes to see Victor and they talk about Neil deciding to quit. Neil says that he doesn't want to talk badly about Nick but the truth is that they just don't see eye to eye about things. Besides that, Nick tries to run the company like Victor but he just doesn't have the know how. Neil says that he just cannot work for Victor. Victor says that he is greatly disappointed by this news.
Nick goes to see Victor and Victor asks how Newman Enterprises is going. Nick says everything is fine. Victor asks if they can talk about why Neil quit. Nick says maybe they really need to talk about whether he is running the company or not.
Olivia is pleased to see that Malcolm is still in town. She wonders if he will be staying after all. Malcolm says that he can't but hopes that Olivia has changed her mind about telling Nate that he is alive. Olivia says the only way that can happen is if he stays in town. She has offered her home to him; he can use it like a sanctuary. They are about to kiss when Drucilla pounds on the door. Olivia asks if it can wait, but Drucilla is adamant. When she opens the door and finds out Malcolm is there, Drucilla says that Malcolm better be there to say goodbye. Malcolm says that is the whole reason he is leaving, he doesn't want them to fight over him. He kisses Olivia goodbye and leaves. Olivia is furious with Drucilla. She says that Dru is the only person in the family that wants Malcolm to leave. She tells her to get out.
Kevin bursts in on Michael and Lauren kissing but runs in and out, not bothered at all. Lauren thinks that Kevin is getting better. Michael hopes that means he will be finding his own place soon. Lauren can tell that Michael is stressed and he tells her about his new relationship with Chris, with him working with Phyllis and Chris working with Damon.
Chris talks to Paul about the evidence she gathered from the jail in Georgia. The evidence would save Phyllis, but severely incriminate Damon. She wonders what she should do with the evidence. Paul says that Michael would do the same thing she wants to do. Michael comes in and wonders what Paul is talking about.
Kevin comes into the coffeehouse and sees Lily crying. He tries to talk to her but she doesn't want to speak to him. He tells her that he cares about her feelings and feels responsible for her pain. She shares the fact that Malcolm has decided to leave town. She says that she feels a great emotional attachment to him and is upset that he is leaving already. Kevin tries to touch her hand and Lily gets up angrily. Kevin says that he would never hurt her, but Lily isn't so sure. Malcolm sees them and after Lily leaves he confronts Kevin. Kevin says he was only trying to be her friend. Malcolm tells him that even though he is leaving, Kevin better stay away from Lily or he will personally come back for him.
Bobby walks into the living room at the Newman ranch and finds Nikki playing the piano. She is surprised to find him standing there. He tells her that he particularly likes opera, as he can identify with their tragedies which seem to parallel his life. Upon hearing this, Nikki looks at him with concern. Bobby has come to tell Nikki he is all packed and that he and Brittany will be heading out. Nikki tells him that she really wants them to stay and asks him to please reconsider. Bobby says they cannot stay there with Victor being so angry about the arrangement. Nikki becomes adamant and tells him she will handle Victor. Since Bobby still refuses to stay at the ranch, Nikki tells him in that case she will have to give he and Brit their wedding present now.
Over at the Winters' residence, Dru is rather irritable and appears a bit disheveled as she tells Neil about her latest encounter with Olivia regarding Malcolm. Neil tells her he has cooked spaghetti and meatballs for dinner. They begin discussing the fact that Devon had skipped class today. Evidently Devon cut his history class. They are discussing about how to handle the problem when Lily and Devon come in the door. The family then sits down at the table for dinner. Dru confronts Devon about cutting his history class today. Devon, without hesitation, admits that he did indeed skip his class because he didn't have his homework done. Neil then lays down the law about cutting school and lets Devon know there will be consequences if he skips class. Devon questions what kind of consequences and asks if he will be again sent away, and he abruptly leaves the table. Lily stays to defend him. Her parents want to change the subject and talk about her. Lily shares that she's still extremely upset about Malcolm leaving town and says she's not hungry. Damon and Dru look worried. Subsequently, they are relaxing on the couch, discussing Neil's decision to quit Newman Enterprises. They are interrupted by their phone ringing. It's Nicholas requesting a meeting with Neil in the morning. Dru immediately becomes enthusiastic and jumps to the conclusion that Nick has realized his mistake in letting Neil go. She insists on breaking out the champagne. Neil is thinking; he appears quite baffled.
Phyllis is having coffee at Crimson Lights. Jack comes in, spots her sitting alone at a table, sits down and joins her. Phyllis told Jack she had been put in jail and was now out on bail. Jack said Daniel called him and said he was really worried about her. Phyllis felt badly about that, as she feels Daniel should be out doing teenage things and not worrying about her. Jack expresses his concern that Phyllis and Damon have separate attorneys and warns her not to sacrifice herself to save Damon; don't be a martyr, he tells her. As he looks intently into Phyllis' eyes, Jack offers his help and assures her that he will come running if she calls him for help. He admits to her that he has always loved her and that his feeling will never change. Jack gives her a friendly kiss and leaves. He has obviously given Phyllis some things to think about....she seems lost in her thoughts.
Michael and Christine are in their office, both obviously worried about their respective clients. Chris then leaves to check on Damon's bail. Meanwhile, Paul has arrived, and Michael starts interrogating him, suspicious that he and Chris are forming some kind of alliance which excludes him. He stresses to Paul that he's there to provide investigative services for both law partners, not just Chris. Michael begins to question his decision for all three of them to share an office. In an effort to break the ice, Michael suggests he and Paul have a drink together, having a bottle handy in the office cabinet. Paul then inquires about Lauren which puts Michael on his guard once again. At that point, there's a knock on the door....it's Phyllis. Paul then leaves in a bit of a huff. Michael tells Phyllis of the ongoing tension between himself, Chris and Paul and of his feeling they may be hiding some sort of evidence. They both now suspect that Chris and Paul may have a piece of evidence that would vindicate Phyllis but possibly convict Damon. Phyllis implores Michael to get that information out of Chris because she knows if Chris has her way, she will keep it to herself. Michael says he's just not sure about Chris anymore.
Christine pays a visit to Damon in jail, inquiring how he's holding up, explaining that the Assistant D.A. will most likely grant bail, but it may be high. She makes Damon aware of the news from the prison warden in Georgia....Dominic and Phyllis' conversation was recorded after all. She tells him some parts of that conversation could very well further incriminate him and at the same time get the charges dropped against Phyllis. Chris says she is not obligated to share this will Michael, as Phyllis' attorney, but Damon sternly states she must tell him. Chris emphasizes that she does not advise this, as it could set Phyllis free, but not necessarily free Damon.
Victor has gone over to see Nicholas mainly to discuss Neil's resignation. Nick becomes defensive, stating "Either I'm running this company or not; either it's mine or it's not." Victor seems concerned but assures Nick he will not interfere. When Nick tells claims insubordination on the part of Neil, it's obvious that Victor is having a hard time believing such a thing, but tells Nick he will make no more suggestions and assures him the company is his to run now.
Back at the ranch, Nikki reveals to Bobby the wedding present she has for them. She wants to pay for the rest of the repairs on their condo. Bobby seems less than pleased with the idea and actually begins questioning her motives. He says this makes him feel that he's not able to provide for his own wife. Nikki is visibly upset and begins crying. Bobby now feels bad and puts his arms around her. At that very moment, Victor walks in.....devastatingly shocked to find the two them in an embrace.
After Victor walked inside the house to find Nikki in Bobby's arms, Bobby left to take a walk. Victor furiously demanded to know what was going on. Nikki said it was nothing illicit; she'd just been telling Bobby about the wedding present she intended to give him. Victor couldn't understand why Nikki would spend all that money to have Bobby's condo completed, and Nikki told him the truth about Bobby's past: that he was Joshua's little brother and his life had been ruined by his brother's death. When Victor wondered why she hadn't come to him with that information, she pointed out that she'd found out while Victor was gone. Victor insisted that throwing money at Bobby wasn't going to fix the situation, nor should Nikki even consider telling Bobby the truth. Nikki left the room with a pounding headache, and Victor thought about her accusation that his mysterious trips took an enormous toll on his family. When Bobby came in, Victor told him that he wanted to talk. Bobby was sure he knew what about, but Victor insisted that Bobby had no idea.
Christine took Damon to Crimson Lights after she managed to get a bail hearing and low bail for him. She warned him that the evidence she'd gotten would help Phyllis but implicate him even further in Dominic's injury. Damon said that he cared about Phyllis. As wrongheaded as she might be, she'd only been trying to protect him. After Christine left, Malcolm and Damon exchanged harsh words about Phyllis at the counter. Phyllis came in and interrupted, saying that she'd hoped they could be friends. She led Damon to the patio and told him Michael's suspicions that Christine had evidence that would help her case. She wanted to know what it was. The more she talked, the less Damon trusted her. He finally said that he wasn't going to discuss his case with her. She was a loose cannon whose actions had already gotten him arrested. Phyllis coldly said that if he was hiding something, she and Michael would uncover it.
Sharon and Nick were glad that Malcolm's job was working out at the coffee house, especially since he had such a rapport with kids and teenagers. Malcolm told them that he was leaving town; this was his last shift. They tried to talk him into staying, but Malcolm filled out his time sheet and left after helping Cassie with her homework assignment. Sharon and Nick agreed that with the demands of their new jobs, they needed to find someone reliable to run their two coffee houses. That way they could spend their evenings at home with the kids.
Malcolm was going through the park on his way out of town when he bumped into a woman new to Genoa City. He loaned her his coat and wondered why she was walking alone in the park late at night. She insisted that the dangers of a city park didn't really bother her. After Malcolm questioned her, she said that she'd come to Genoa City to take care of some business that she didn't look forward to. As they talked more, they learned that she'd been in Tanzania while he was in Kenya. They finally agreed to go somewhere out of the cold and eat dinner together.
Abby was excitedly talking to Ashley and Brad about decorating the Abbott house when John and Gloria came home. When Ashley went to box up some leftover takeout chicken that Abby wanted to take home, Brad joined her. Abby sat on the couch with John and Gloria, obviously enjoying their conversation. She asked Gloria why she wore so much makeup. John left for a few minutes, and Gloria told Abby that she wore more makeup than Ashley because she wasn't as young and pretty as Ashley. But Gloria still felt like a girl inside, and all that makeup and color made her feel happy. Abby said she understood and hugged Gloria while Ashley and Brad watched from the doorway. After Brad left with Abby and John returned, Gloria started making plans about decorating the house. Ashley said that she'd already promised Abby the two of them would decorate. John insisted that all of them could work together to make the house beautiful. When he asked Gloria if she wanted to invite her sons over during the holidays, Ashley got suspicious and tried to press the issue while Gloria attempted to evade the entire discussion.
Phyllis goes to see Damon and is saddened that their relationship is crumbling apart. Damon doesn't know what to do about it because he doesn't trust her anymore. He wishes that she would have stuck with Chris as her lawyer. Now it's as if they are on opposite sides. Phyllis wonders if this animosity will change their relationship forever. By Damon's silence; Phyllis understands that it will. As she Phyllis leaves crying, Damon wants to stop her.
Malcolm talks to his new woman friend at her hotel. They talk about their experiences in Africa. When they begin talking about Malcolm's family it seems like she can read him like a book. She says that he doesn't seem like the type of person who would run away from his problems. When she goes off to bed she offers to let Malcolm sleep on the couch and that he should think things over before he leaves. He says he might not stay. She tells him that she hopes she will see him in the morning.
Victor almost tells Bobby about the reason Nikki feels responsible for helping Bobby; but decides against it. They have a heartfelt conversation about Nikki. Victor asks that Bobby and Brittany stay at the Newman home. Nikki overhears their conversation and is overjoyed to hear that Victor changed his mind. Victor says that he did it because he loves her so much. He says that he understands her connection with Bobby now.
Brittany goes to Lauren to ask for her old job back at the Boutique. She apologizes for running out on her the last time and promises she will never do it again. Lauren agrees and asks if she can start right away. Brittany thanks her but makes her promise not to tell Bobby. Brittany thinks taking on another job would hurt Bobby's ego too much.
Bobby wonders where Brittany has been. Brittany says not to ask too many questions around Christmastime. Bobby says that Victor has offered to let them stay at the Newman home.
Gloria tells Michael and Kevin that she wants to give them a very special Christmas this year. Michael doesn't enjoy talking about Christmas and decides to leave. Kevin teases him about staying out all night and Gloria is overjoyed that Kevin and Michael are friendly with each other again. Kevin wonders if Gloria will give him a car or a computer for Christmas considering that she is now married to someone very rich. Gloria says she can't do that, but she wants to give her sons some Christmas spirit. They decide to decorate Michael's apartment to bring a little Christmas cheer into his home.
Michael tells Lauren that he had to get away from his apartment because Gloria and Kevin were getting too joyous talking about the holidays. He doesn't feel like talking about Christmas. Lauren says that she will change his feelings about the holidays this year.
Malcolm and his new female friend had a long talk after he woke up after sleeping on her couch. She explained that she had some unfinished business with her former husband. Although she wouldn't get into the details of it with Malcolm, she did say that she might need a friend to talk to afterward. However, she assumed he'd be gone. Malcolm explained that his niece's mother felt like he could bring unhappiness to his niece's life. It had never been his intention to hurt anyone. His friend told him that maybe he should start following his heart instead of letting other people tell him what to do.
Christine and Damon had a talk at Crimson Lights about his case. She urged him not to share any information with Phyllis. In the long run, they would use the information to ensure that Phyllis wouldn't stand trial, but for now, Christine needed to build a stronger defense for him without letting the prosecution have the information. Damon said it made him miserable to have to look at Phyllis and know he was keeping this from her.
Daniel noted Phyllis's morose mood and urged her to go and talk to Damon. Even though as her son he was always there for her, it was wrong for her to let this case ruin her relationship with Damon. Phyllis finally agreed. She approached Damon at the coffee shop. After giving Damon a warning look, Christine left them alone. Phyllis and Damon were trying to talk their way through their problems when Malcolm walked up. Damon lashed out at him for always getting in their business, and Phyllis rose to Malcolm's defense. Damon left, saying he wasn't going to be interrogated by Malcolm. After he was gone, Malcolm told Phyllis that he'd changed his mind about leaving town after a conversation he had with a woman he met. Back at his apartment, Damon answered a knock on the door and was stunned to see Malcolm's new friend, who happened to be Damon's former wife Adrian.
After spending a romantic night together in Lauren's boutique, Lauren and Michael had a serious conversation about the possibility of moving in together. Both of them seemed open to the idea, but Michael asked her to wait until after Christmas, when he'd be in a better mood. They left to go to his apartment. Kevin and Gloria had stayed up all night putting up Christmas decorations and a tree. Kevin was like a little kid enjoying his first Christmas, and Gloria was happy to see his enjoyment. The mood turned sour when Michael walked in with Lauren. In response to their yells of surprise, he ordered them to take everything out of there. If they ever listened to him, they'd know that he didn't want to celebrate Christmas. Lauren said that maybe he could at least let other people enjoy it. Michael agreed, as long as it was somewhere else. While Kevin hotly defended all his mother had done, Gloria tried to hide the ornament that said "Ashley's First Christmas" so that Michael wouldn't know where she'd gotten the decorations. Lauren was furious, telling Michael that she didn't know about the pain from his past, but she couldn't believe how he was acting. She walked out while Michael tried not to show his feelings.
Dru had a busy morning. First she put up some more decorations, then she sent Neil off to talk to Nick after they had a discussion about how to give Devon a good Christmas. They agreed to give him money so he could buy presents, but also to let him know that he didn't have to feel pressured to do anything elaborate. Later, she overheard part of a conversation between Lily and Devon while they were baking Christmas cookies to give away. Devon finally agreed to try to get in the Christmas spirit. He'd even go caroling with her to nursing homes and hospitals, although he wasn't sure after skipping class that her parents would let him go. Drucilla stepped in and had a long talk with the two of them about not sneaking around and accepting their responsibilities. Devon was deeply touched when Dru gave him two hundred dollars to buy presents. He and Lily left to go shopping, and Drucilla went to Newman Enterprises to see how things were going between Neil and Nick.
Neil's meeting with Nick began cordially. Nick told him that he respected Neil and really needed him there to be his right-hand man. But if Neil had quit over the beauty pageant, he should know that Nick hadn't changed his mind. Neil said that it wasn't just the pageant. Nick needed to learn how to show people that they were valued. He needed to listen to them. Nick thanked him for the HR lesson. Their conversation went sour, and Neil stormed out, running into Dru. When she saw that things had gone badly, she pushed her way past Neil into Nick's office to have a little talk with him.