Sydney plans to leave town to avoid her problems with Chris, but Jake convinces her to stay and give their relationship a chance. Alison claims to have accepted Billy's relationship with Susan, but begins hitting the bottle. She gets into a catfight with Susan at a client party, prompting Susan to move in with Billy. Michael asks Amanda to manipulate Peter into rehiring him. Amanda agrees, provided that Michael surrender his share in the design firm. Jane promises to give Amanda 25 percent of the business if she can arrange this. Once Michael has returned to work, he backs out of the deal and tries to blackmail Amanda. Peter encourages Amanda to seek control of D&D. Matt learns that Jeffrey, an ex-lover, is back in town. He is stunned when Jeffrey reveals that he has left the Navy and is HIV positive. Jo prepares for the custody trial.

The trial to determine custody of Jo's baby begins. The Carters' attorney raises many doubts about the character of Jo's friends and neighbors, but Jo shines on the stand. Kimberly learns that she cannot have children because of injuries suffered in the car accident. Alison gets drunk at a client party and leaves with a hard-living music business scout named Zack Phillips. Bruce suffers a heart attack while dancing at the event, and Peter suggests that Amanda use the opportunity to seize control of the agency. Alison is unable to testify on Jo's behalf because she is stoned following a night of partying with Zack. The judge awards custody of the baby to the Carters. Matt questions his relationship with Jeffrey due to the illness, but the two decide to commit to each other.

Alison clashes with a man in her group meeting, NFL quarterback Terry Parsons. When Billy fails to show for a meeting featuring loved ones, Alison sneaks out to a bar and gets hammered. Terry helps her get sober and explains his earlier behavior. Billy is outraged when he learns that Susan failed to tell him about Alison's meeting. He lights into her, prompting Susan to move out. Peter displays increasingly controlling behavior toward Amanda. Jane sends a note and flowers from Michael back to the beach house, and Kimberly threatens to divorce him. The baby becomes very ill and is raced to the hospital. Michael refuses to return the child to Jo, even after a blood test proves she is the mother. Jeffrey is livid when Matt reveals his HIV positive status to the neighbors (to explain Jeffrey's panic over a bleeding cut). Jake breaks up with Sydney after learning that she slept with Chris.

Jake and Jo see the Carters arrive at the cabin with Emily and the baby. While Jake is calling the police, Jo disobeys his wishes and confronts the Carters. Mr. Carter shoots her in the back. Mrs. Carter sneaks into Jo's hospital room in the middle of the night, and threatens to kill Austin if she does not receive custody. The judge nullifies the previous custody arrangement, and agrees with Jo's suggestion that the baby be given up for adoption. Amanda is fired after testing positive for illegal drug use. Amanda and Matt discover that Peter prescribed pills for Amanda that contained the active ingredient in marijuana. Although Amanda has no proof, Peter believes her bluff. He knocks her out and plans to kill her on the operating table. Michael pulls the scalpel away and breaks Peter's nose. Michael and Amanda interrupt a D&D meeting where Caitlin is to be appointed president, and discredit her. Alison stops Terry from drinking after he loses a playoff game. He expresses his gratitude

Rikki commits acts of vandalism against Jo, Jane and Jake, who believe that Syd is responsible for the crimes. The isolated Sydney is forced to turn to Martin's cult for comfort. The visiting Meredith admits that she has never slept with a man because of the trauma of the childhood abuse. She tries to seduce Billy. The new chief-of-staff institutes mandatory psychological testing for the staff. Kimberly's test proves that she is extremely disturbed and highly dangerous. She has some men on the street assault test coordinator Matt, then changes her results while he is out of commission. John Rawlings, the police detective investigating the case, befriends Matt. Billy is concerned by Amanda's deteriorating health, and asks Michael to check her out. Amanda is horrified when tests reveal that she has Hodgkin's Disease.