Following Brandon's arrest, sparks fly between him and Kelly over his ongoing refusal to reveal the name of his source, until Erica proposes a way to help him entrap Riggs in a sting operation. Meanwhile, Valerie seeks to learn who anonymously helped David pay off his loan shark, and learns the truth about Noah and his wealthy background. At the same time, David's jealousy and pride get the worst out of him after he rejects help from Donna after a fire breaks out at After Dark. Steve & Jodi, then Steve & Rush, talk about paternity and if he is ready for fatherhood; Steve goes to Carly for comfort. Kelly volunteers for a new job at the free clinic and meets the volunteer doctor Monahan. Noah starts dating Donna after telling her about his wealthy family.

After parting ways with After Dark, David takes a retail job at a department store and continues to reject friendly overtures from Noah, who takes over ownership of After Dark. Meanwhile, Brandon hires Emma Bennett, an attractive young writer, for important articles at the Beverly Beat. Kelly questions the professionalism of Dr. Monahan after he makes a pass at her. Valerie lobbies Noah to let her manage the Peach Pit After Dark, much to Donna's suspicions and jealousy. Elsewhere, Steve and Carly search for time alone together, while Donna's mother disapproves of her dating Noah.

At Donna's urging, Kelly returns to modeling for a few days' shoot, and later calls Dr. Monahan on his alleged conduct. Meanwhile, David gets a new job at a car wash and tries to help a troubled, gay, teenage co-worker, Ben, who's tormented by their other co-workers and shunned by his conservative parents. Steve takes the stage on comedy night at the Peach Pit After Dark to impress Carly. Also, Brandon finds Emma - who's determined to bag him - almost irresistible, while an unsuspecting Kelly stands by. Valerie schemes with David to make Noah and Donna jealous by making it seem that they are having an affair, but it doesn't work due to David's lack of lying skills.

In the week before Christmas, an administrator asks Kelly to give a speech praising Dr. Monahan, which leaves her in a dilemma, knowing his true nature. Meanwhile, Donna reacts to Noah's lack of Christmas spirit due to his history. Carly's son, Zack, questions the existence of Santa Claus, and Steve sets out to prove that he's real, with a little help from Nat. At David's urging, a depressed Ben delivers gifts to his parents, and later he and Valerie help out a suicidal Ben. Emma refuses to back off from flirting with Brandon, and gives him a valuable watch as a Christmas present; he finally gives into her charms and has sex with her.

Carly and Zack temporarily move in with Donna at the beachfront apartment after they are evicted from their house, which was needed earthquake retrofitting. Carly gives Donna advice on her love life as Donna questions whether or not to sleep with Noah. Meanwhile, Dr. Monahan angrily confronts Kelly about her sexual harassment charge against him. David finally admits to Donna that his relationship with Valerie is a farce, but that soon changes when Valerie admits to developing feelings for him again. After Emma quits her job at Brandon's newspaper agency, she puts pressure on him. Brandon is determined to hide their Christmas fling at any cost, and Brandon hires a new writer, Janet Sosna, as Emma's replacement. Valerie as a run-in with Duke, Brandon's former bookmaker, who she tells to stay away from the Peach Pit After Dark, until he offers her a cut of his winnings. Elsewhere, Steve and Brandon rescue David from his carwash job by offering him another job as a music critic for their paper. Zack unknowingly draws on Donna's design sketches just before her meeting with a new potential employer.