Mark is charged with attempted murder and arson; Alexis tells Blake and the police his motive was revenge. The other suspects-McVane, Hess and Adam, are questioned and released. After Alexis destroys Fallon's relationship with Mark, Krystle suggests she is seeking revenge because Mark rejected her. Kirby breaks down and tells Krystle her baby is not Jeff's; an unknown man in surgical garb tries to smother Alexis. Blake and Jeff receive a frantic call from Joseph, who is muttering incoherently. At the bungalow where Kirby was born, Blake and Jeff find the disturbed butler with a gun. Before they can stop him. Joseph pulls the trigger and kills himself.

Alexis receives a note written by the late Joseph, stating that he indeed set the fire to kill her because of the lives she's ruined with her manipulations. Alexis laughs it off, claiming she never intended to tell Kirby her mother was an ""attic nympho."" Blake lies to protect the girl, telling Kirby her father was worried Alexis would take control of Denver-Carrington and tried to kill her out of loyalty to his employer. When the murder attempt failed, the butler tragically killed himself. Claudia is released from the sanitarium and she and Steven make love. When Steven learns of Blake's plan to sue for custody of little Danny, he becomes enraged. Both men lose their tempers and wrestle each other to the ground.

Kirby angrily demands that Alexis divulge the real motive behind her father's murder attempt. In a fit of rage Kirby tries to strangle Alexis. Steven finds a social worker snooping around his apartment and orders her to leave. The incident later is brought up at the custody trial, and the woman describes Steven's behavior as a typical homosexual reaction. Steven's attorney and roommate Chris Deegan brings to the court's attention that Blake has previously been convicted of murdering a gay man and harbors a blind prejudice against homosexuals. Alexis testifies that Blake purchased the baby from Sammy Jo. When Blake loses his composure and lashes out at Alexis, the judge orders him to control himself and adjourns the hearing.

Alexis arrives home from the trial to find her apartment ransacked. Police Lt. Merrill speculates there may be a connection between the break-in and the recent attempts on her life. Fallon testifies on Steven's behalf. When she leaves for Montana, Alexis tells Adam that if her trip has anything to do with the poisoning incident, he's on his own. On the witness stand, Sammy Jo fabricates tales of Steven's sexual promiscuity. That night, Claudia barges into Sammy Jo's hotel room and demands she retract her courtroom statements. Claudia tells Steven she has devised a fool-proof method for him to retain custody of his son.

Following through on the plan to retain custody of Danny, Steven and Claudia fly to Reno and are married. When the judge receives the assurance they will jointly rear the child, the suit is dismissed. Attempting to win Krystle back, Blake offers her a public relations job at Denver-Carrington. Adam asks Alexis to sign three routine documents, but the second and third pages are positioned so only the signature line is exposed. When alone, Adam crumples the first page and carefully places the other two in his pocket. Fallon and Jeff investigate the poisoning incident in Montana. They are stunned to learn the name of the prosecuting attorney was Michael Torrance--the name Adam used before arriving in Denver.

At the store where he bought the poisonous mercuric oxide, Adam distracts the salesman and substitutes the authentic purchase order with the document Alexis unknowingly signed. Bill Rockwell, the retiring head of Denver-Carrington's public relations department, breaks the news to his disappointed assistant, Tracy that Krystle has been given the position she had planned on assuming. Mark proposes marriage to Krystle. When she refuses, he attacks her. Alexis is shocked to find her signature on the purchase order for the deadly chemical compound. She quickly realizes Adam has framed her. Blake threatens to call the press if she doesn't return Jeff's stock and cancel the corporate merger.

Jeff storms into Alexis' office and accuses her of attempting to poison him. Her claims of innocence fall on deaf ears as Jeff forces her to sign back his Colbyco stock. After an intruder attempts to enter Alexis' apartment, Mark takes a job as her bodyguard. Adam's doctor in Montana explains to Alexis that the drugs Adam used in his youth can distort judgment. Alexis informs the board members that the sudden merger cancellation was based on her assessment of Denver-Carrington's lack of creative growth. Farnsworth ""Dex"" Dexter, the sharp-minded son of an important board member, surprises Alexis with a passionate kiss and suggests they form a business partnership.

In her new position, Krystle launches a publicity campaign to counter Alexis' slanderous remarks against Denver-Carrington. Jeff rejoins Blake's firm. Dex continues his campaign to win Alexis. Jeff learns Kirby was pregnant when they wed and is shocked to learn that Adam raped her. Fallon accompanies Blake and Krystle to L.A. to consult an architect about expanding La Mirage. While at the track, Fallon is swept off her feet by a millionaire playboy, Peter DeVilbis.

At Alexis' office, Dex discovers a confidential file marked ""Tar Sand"" and beats her to the contract. Later, he offers her a 60-40 split. An enraged Jeff locates Adam at the summit of the Carrington Plaza. After exchanging vicious insults and violent punches, Adam tumbles halfway over the edge. As Jeff is about to finish him off, Adam frantically explains he had no idea he fathered Kirby's child, and Jeff allows him to crawl to safety. Jeff intercepts Kirby as she is about to leave for Paris. Blake proposes marriage to Krystle, who happily accepts.

Kirby proposes that she and Jeff divorce. Adam tells her he wants to be a father to their child. Dex and Alexis make love. Jeff is jealous to see Fallon with Peter DeVilbis. Peter's champion racehorse, Allegre, is up for sale, and Blake decides to buy the mare. At the Carousel Ball, the high point of Denver's social season, Blake and Krystle announce their intentions to remarry. Steven warmly wishes his father the best. Blake is touched by the gesture and welcomes his son back into the family.

Nervous about leaving her new job, Krystle gives Tracy final instructions as she prepares for her honeymoon in Rio de Janeiro. Tracy persuades Krystle to give her the company credit cards as well as the keys to the confidential files. Peter arrives at La Mirage asking for Fallon, and makes a pass at Claudia. As the wedding guests arrive, Adam demands Kirby tell their child the true identity of his father. Learning she intends to divorce Jeff, Adam asks Kirby to marry him. Krystle and Blake exchange vows and are pronounced husband and wife.

While Mrs. Gordon is walking Danny in the park, a strange man greets the child by name. Recalling little Blake's kidnapping, Claudia moves the family into the safety of the Carrington mansion. Laird discovers Tracy scanning confidential company files. Kirby and Jeff sign their divorce papers. After shelling out over $2 million to work on one of Peter's hotels, Ernesto the architect demands to know when he will be repaid. He wonders if the money is going toward Peter's ""habit."" Kirby's hand suddenly begins to swell uncontrollably, making it necessary to cut off her wedding ring

Kirby is diagnosed as suffering from hypertension. Adam is startled to find her slumped against the piano. After learning she will accept his marriage proposal, Adam confesses raping her to a shocked and disgusted Blake. Peter offers Fallon cocaine. Tracy purposely misplaces an urgent business memo from Blake to Krystle. As an agitated Blake awaits his publicity director at an important meeting, Tracy cunningly shows up and 'saves the day.' Allegre the racehorse is discovered missing. Claudia receives a box of violets with a note reading, ""Remember? Lancelot."" Trembling with fear, she recalls that Lancelot was her late husband's nickname.

Blake receives a note requesting $2 million in diamonds for the return of his racehorse, Allegre. Peter proposes to Fallon and then makes another pass at Claudia. Dex and Alexis close a lucrative oil contract. While pouring herself a glass of water, Kirby's hand begins to tremble uncontrollably. Diagnosed as suffering from hypereflexia, a condition that may lead to convulsions or heart failure, Kirby remains hospitalized while Adam keeps an all-night vigil in her room. Suddenly, her body becomes rigid and goes into convulsive seizure.

Peter has made arrangements for the ransom to be delivered to Allegre's captors. Blake grows suspicious of his refusal to call in the police and is unhappy about Fallon's decision to marry him. Kirby suffers a second seizure. To save the baby's life, the doctors decide to operate. Congressman McVane attempts to enlist Mark's help in blackmailing Alexis. Claudia receives another box of violets from 'Lancelot.' Beset with guilt, Adam confesses to Blake that he, not Alexis, attempted to poison Jeff. As Blake struggles to understand, Kirby's doctor appears to report that Kirby is alive, but they were unable to save her baby girl.

As Fallon plans to wed Peter, Claudia advises her of his womanizing. Fallon dismisses Claudia's concern, however, as she has with all the others who question the wisdom of her marrying Peter. Tracy sleeps with a newspaper reporter in exchange for a damaging story to scandalize Krystle. After Allegre is safely returned, Blake questions Jack Crager, the horse's trainer. After their meeting, Jack quickly phones Peter, who instructs the horse trainer to disappear until further notice. Distraught after learning that Peter has suddenly left the country, Fallon runs into the path of an oncoming truck. Jeff and Blake look on in helpless disbelief.

With the family at the hospital waiting for Fallon to regain consciousness, Blake races to the airport to intercept Peter. Passing through security, DeYilbis sets off an alarm and the guards find a cache of drugs in his briefcase. Blake blocks his escape, and Peter is taken to jail. Blake is offered an important political post. McYane informs Alexis of the appointment. He is sure she will try to topple him and wants to be there when she does to blackmail her. Kirby accepts Adam's marriage proposal. Fallon regains consciousness and finds she is paralyzed.

Fallon's doctors believe her paralysis to be psychosomatic. To prevent her from marrying Adam, Alexis offers Kirby a job in Paris. When the ploy fails, Alexis tells the girl her mother has long been confined to an institution for the criminally insane. Kirby had believed her mother to be dead. Fallon, under the care of physical therapists and a doting family, remains unable to walk--until her child's life is in jeopardy. At a family dinner to celebrate Fallon's recovery, Claudia receives a message containing a family snapshot taken by Matthew. She determines to unravel the mystery behind her tormentors.

When Krystle's doctor reveals she is pregnant, both she and Blake are overjoyed. Krystle insists Blake go ahead with a scheduled business trip to Hong Kong and sends Tracy to cover for her. Upon arrival, Blake is chagrined to learn the China Seas deal is to be negotiated by Rashid Anmed, a notoriously under- handed character. Fallon begins to suffer from painful, recurring headaches. Kirby is torn between finding her mother and leaving matters as they are. Claudia and Steven visit the site of Matthew's accident in the Peruvian jungle. Seeing the wreckage, Claudia is finally satisfied her husband and daughter are dead. Once home, however, she receives a phone call from Matthew.

Blake and Ahmed close their international China Seas oil deal. Alexis learns of the coup and makes plans for a counterattack. Blake confronts reporter Grayson regarding his deceptive behavior with Tracy, and then quits his political post. When Tracy makes sexual advances toward Blake, she is fired. Steven is suspicious to see Dex in Alexis' office bearing violets - the same flowers being sent mysteriously to Claudia. Kirby's search for her mother leads her to the cemetery and her mother's grave. In Hong Kong to do business with Ahmed, Alexis rekindles their former romance. Claudia receives yet another mysterious call, this time from Dex.

Dex follows Alexis to Hong Kong and is enraged to find her with Rashid, with whom she has just concluded a business deal to ruin Blake. Kirby explores the reasons behind her father's death. After reading his suicide note, she purchases a handgun. Fallon is overcome by a seizure. Dex and Tracy make love. When the mysterious caller phones again, Krystle takes the call and realizes it is a tape recording of Matthew's voice. Matthew's mother, who had long resented Claudia, sold the tape to an unnamed buyer. Blake pays a visit to Morgan Hess and spots the tape near the phone. Hess explains he intended to frame Alexis, but Blake does not believe his story.

Tracy and Krystle exchange angry words. As Alexis monitors all of the television news programs, Mark suggests she's waiting to see some late-breaking news-news she already knows. Blake learns Kirby has unearthed the truth about her father and is anxious to demonstrate he only lied to fulfill Joseph's wishes. As little Blake's birthday party gets underway, Krystle tells a stunned Alexis that she is expecting a baby. Alexis recovers quickly and dismisses Krystle with the fact that she's been through four pregnancies. Krystle catches the slip, and Alexis explains one pregnancy miscarried. Fallon and Jeff announce their plans to remarry. The Carringtons are stunned to hear that Rashid Ahmed has created an international incident by announcing that Blake is planning a military attack on another world power involved in the China Seas oil deal.

As Blake confronts Alexis with his knowledge of her plot with Rashid Ahmed, Mark, on the balcony, listens with interest. Alexis is prepared to buy his silence. Blake travels to Hong Kong and learns Ahmed has left the country, leaving Denver-Carrington's money with the government. In Joseph's old bungalow, Kirby confronts Alexis, but her plan to kill her is foiled. After Mark successfully blackmails Alexis, McVane arrives and reminds him they're in this business together. Nervous that McVane will learn of his $100,000 hit on Alexis, Mark quickly opens an account at a local bank, as McVane looks on.

Blake's fortune now rests on the decision of a group of bankers, who will decide whether to extend his loan or call in the debt immediately. Alexis hires Tracy to obtain confidential information on Averell Dawson, Blake's banker. Shortly thereafter, Blake learns his extension has been denied. Jeff and Fallon celebrate their engagement. Sammy Jo arrives unannounced at the mansion, claiming she's come to visit her son. Mark questions Alexis' motives for destroying Blake and is reminded he's been paid to keep his mouth shut. Not satisfied with the monetary arrangement, Mark demands she submit to him sexually. Alexis orders him from Denver. A police officer arrives and announces that Mark Jennings has died after falling from Alexis' penthouse balcony.

To raise the needed money, Blake sells his assets and mortgages the mansion. In a heated confrontation with Alexis, Tracy quits. Tracy tells Alexis of her ongoing affair with Dex. Alexis is again questioned by the police, who want the details of her affair with Mark. Fallon suffers another painful headache. Sammy Jo informs Steven she intends to stay in Denver and take custody of Danny. An unknown, beautiful woman, Dominique Devereaux, sweeps into La Mirage demanding the finest accommodations. When she attempts to question Fallon about Alexis, Fallon grows suspicious.

Alexis suffers recurring nightmares about Mark's death. Kirby again tries to kill Alexis. When she is unable to pull the trigger, Alexis offers to remain silent in exchange for Kirby's agreement to leave Adam. The truth behind the attempt to unhinge Claudia is revealed. Sammy Jo seduced Hess into handling it, and has returned to him now to solicit his help in regaining her child. In preparation for the wedding, Alexis and Krystle visit the same beauty salon. The two women exchange words, and a mud-slinging melee ensues. While dressing for the wedding, Fallon is gripped by a seizure. She drives off as the ceremony is about to take place. The police arrive and arrest Alexis for the murder of Mark Jennings.