Bill admits to Alice about the affair (not who it was with though). Laura gets upset at the dinner the Hortons remembering Kate and Bill together and leaves. Bill and Alice worry about her mental stability. Jenn and Peter begin to make love but are interrupted by Laura who gets mad at Jenn, forgetting how old she is, then apologises and admits to Jenn that her and Bill haven't been sleeping together but Jenn says she believes in their love and in true love because of them, and that with time they'll find each other again.
Alan tries to get Lucas to plot with him how to break up Austin and Carrie. Carrie comes along and her and Lucas have an arguement about whether Austin and Billie are Kate's kids, Lucas still insisting they're just after Kate's money.
Billie won't accept Kate's reasons for thinking they were dead. Austin reminds her she also believed Curtis' lies when he came to town and asks her not to let him win by hating Kate. Billie says he's already won because Bo has left her. For the millionth time Austin tells her Bo is not allowed to see her and is off trying to clear her.
Kate leaves the jail upset and has a car accident, nearly hitting Bill who's on his way home. They talk, remembering their past together, and about Lucas. Kate says there's enough going on for Lucas and that maybe sometime in the future they can tell him he's Bill's son, but not now. She says she hopes he works things out with Laura, he says he hopes everything keeps going well with Victor. They kiss goodbye and leave.
Billie tells Austin she never wants to see Kate again, and that Bo doesn't love her anymore (I think the scriptwriters have gone on holiday).
Bo saves John after Peter's guard at the warehouse knocks him out. They put together a tape from when Stefano was questioned about Curtis's murder and trick Fred over the 'phone into thinking he's talking to Stefano. Fred says he won't tell about the night of the murder but doesn't give away the details of what happened. The voice tells him he can take off and go where he wants so Fred runs out of the warehouse and John and Bo grab him and take him to the police station.
Lucas refuses to believe Austin and Billie are Kate's kids (yawn), he and Austin yell at each other, Kate tries to make them be friends, they yell at each other.... this episode wins boring of the year award.
Laura and Bill nearly make up but then she sees lipstick on his handkerchief from when Kate kissed him goodbye when they nearly crashed and she wiped the lipstick from his cheek.
The judge allows Kristen, Jenn, Carrie and Kate to give character references about Billie to the court. He then says he has to uphold the law and not be swayed by emotional testimony. (Thanks for nothing, judge). Tony tries to get Peter to help Billie on the legal side but he won't.
Bo and John keep working on Fred. Bo finally comes into the courtroom and persuades the judge to let him put Billie on the stand again.
Laura tells Bill everything she remembers, how she followed him to Kate's and saw them making love. He says that it only happened because she'd started to drift away from him and that the night she remembers was the night he broke it off with Kate. She says she confronted Kate the next day and Kate said she was pregnant and after that she lost touch with reality more and more. Bill goes out and Vivian comes in, having heard enough to work out Bill and Kate had an affair, but no more. Bill meets Marleana on the pier and he tells her what happened and tells her he's worried Laura's losing it again.
Sami shows Alan her fake I.D. Marleana tries to talk to Sami but has no luck. Lucas swears revenge on Lucas, with Alan prodding him along.
On the stand Bo presses Billie to remember the night of the murder, reminding her about hearing "Checkmate". Finally she remembers it was Stefano who said it, that he was threatening Curtis because Curtis had been blackmailing Kristen. Stefano told him to get out of town, they struggled and a gun went off, killing Curtis by accident. Bo brings Fred in who corroborates the story while Tony and Kristen listen in horror. Peter slips out and rings Stefano to tell him what's happening. The judge goes out to decide on his verdict.
The judge drops all charges against Billie. She is happy but still wondering whether Bo wants her anymore, and in fact what all her friends think of her. Carrie decides to throw a surprise party to reassure her so she gets Austin to take Billie home the long way. On the way out he tells Kate to give Billie some space and some time. Kate and Victor head off to dinner.
At the party Kristen can't believe what she heard and tells Billie she's sure Stefano only didn't tell the cops that it was him because he knew they wouldn't believe it was an accident, but that he must have been going to tell eventually because he'd never let an innocent person go to jail instead of him. John knows the seeds of doubt have been planted in her mind. He says to her he was right about Stefano killing Curtis so maybe he's right about Stefano still being alive. He talks about the puzzle Stefano is sending him and later Tony gets mad at Peter and asks him waht he and Stefano are up to now. Fred has agreed to tell where Stefano is hiding so John, Kristen and Tony go to the jail so John can prove to her he was telling the truth but when they get there Fred has hung himself. John says Stefano must have had him killed.
During all of this Sami has been shopping for a dress for her date with Alan while Jamie tells her she's dressing too old for her age. She bumps into Marlena but won't speak to her. At Carrie's Sami is surprised to hear Carrie on the 'phone inviting Alan to the surprise party and Alan obviously accepting, when he's supposed to being going on a date with her. When he gets there he tells her he only said yes so it wouldn't look suspicious.
Vivian seduces Mr Caldwell and takes him out to dinner so Ivan can find the tape of Kate's session with him. She bumps into Kate and Victor at dinner but manages to not let them see who she's there with. Kate asks Victor if he's sure he still loves her and wants to be with her after the embarrassment she's caused and he says yes. Jenn and Peter leave the party early and go to dinner but she's not into it, wondering about what his involvement in Curtis's murder was.
Billie and Bo talk on the roof and she asks if he still wants to make love with her and he says he can't make love to her.