Olivia welcomes home her best friend, the newly single Grace Sherman, who has returned to Cedar Cove earlier than expected. She has been on vacation in Sedona for a month, but she's feeling the sting after receiving divorce papers from her husband Dan while away. Grace breaks down at the thought of starting over as after 26 years of marriage. Olivia offers nothing but encouragement, portraying Grace's bright future as a "sequel" to her previous life.
Justine arrives at the Cedar Cove lighthouse to meet Warren, who is making plans to tear down the town's iconic old structure. Justine is shocked by his decision, knowing how much the lighthouse means to the town. Warren is not interested in what she has to say, which only cements her resolve to end their relationship: she breaks off their engagement on the spot. Warren protests that he was planning on breaking up with her himself. Justine doesn't care who gets the credit for the break-up; she just wants the relationship over with.
Bob & Peggy Beldon, who own the "Thyme & Tide" Bed and Breakfast, visit Jack in his office to discuss placing an ad for their business in the newspaper. When Jack reveals in passing that Warren is going to tear down the lighthouse, Bob is furious; the lighthouse once helped save his life when he was a fisherman. He's determined to put a stop to the project, and Jack realizes he's got a story on his hands.
Olivia and Grace stroll through town talking about the fact that Olivia has recently turned down a federal judgeship in order to stay in Cedar Cove. Grace can't believe that Olivia would pass up such an opportunity, but when they run into Jack, Grace immediately notices the chemistry between her friend and the new guy in town. Jack confirms his date with Olivia for the next night. When Grace teases Olivia about the date, Olivia protests that it is nothing serious, but Grace doesn't believe her.
Olivia stops by Moon's, and Justine tells her about the break-up with Warren. Olivia is happy to hear it; she never liked the relationship but is supportive of Justine. Justine brings up the fact that Warren had intended to break up with her, but Olivia hides the fact that she had encouraged Warren to do so.
Meanwhile, when Charlotte visits a local convalescent center where she volunteers, she gets a new case. A 90-year-old stroke victim was found unconscious, with no ID. He's lost the power of speech, so Charlotte decides to keep him company. Curiously, the man seems familiar to her, but he doesn't respond to her questions.
Later, Bob presents a petition to save the lighthouse to Warren, and the document is signed by almost everyone in Cedar Cove. Warren callously ignores the town's request. Jack presents other options, none of which will benefit Warren financially-his project is all about economics.
At Moon's, Justine is surprised when her old flame Seth arrives to see her. He's heard the rumors about her break-up with Warren, and Justine is happy to confirm them. They head to a restaurant for dinner and run into Olivia and Jack, who are discussing the lighthouse situation. Olivia is thrown a little off balance, since Justine doesn't know she and Jack are seeing each other. Justine notes that Jack and Olivia are on a date, and Olivia balks, calling it a "dinner". After the awkward moment, Justine and Seth move on, and Olivia has to explain her uncertainty to Jack about revealing their status to her daughter. But she also reaffirms that she and Jack are definitely on a date, which eases his mind.
The next day, Bob appears at Olivia's office to file a motion for an injunction against the lighthouse demolition, on the grounds that it's an historic building. He leaves the matter in Olivia's hands. She hunts down Warren and continues to ask him to stop the demolition, but he doesn't care at all about being seen as a pariah by the town.
In Olivia's chambers later that night, Grace arrives (with a chocolate cake in tow) to celebrate Justine's break up with Warren. But Olivia is consumed with the lighthouse case; she can't stand the idea of losing it. The conversation turns to the subject of why Olivia turned down the judgeship, and despite herself, Olivia confesses she was afraid of too much change, especially around having to sell a home filled with memories.
Although the town is counting on Olivia to stop the destruction of the lighthouse, she can find no legal way to do it. When she refuses to grant the injunction, people are furious, especially Bob. Jack runs an article on Olivia's decision, further inflaming the town's bad feelings toward her. Jack worries that the article might spoil things between him and Olivia. When he asks her if they are okay, she tells him honestly that she is not sure. He asks her not to give up on them.
Seth and Justine take a walk together; he wants to start dating, but she's not sure she's ready. Freshly out of her relationship with Warren, she needs a break. But Seth is patient-he'll wait.
At home, Olivia is in the garden when Charlotte arrives to discuss the lighthouse. She tells Olivia it's where her father proposed years ago, looking over the water. With that, Charlotte departs, and Olivia is trapped between a rock and a hard place. Grace comes over later, and as they look through some old photos, Olivia sees a picture of her father. He was a lawyer, and Olivia wonders what he would do in this situation. Grace tells Olivia that he would follow the law, but find some way to make things right. This gives Olivia an idea.
The following day, Olivia is at Grace's when a worried Jack calls Olivia to warn her. A group of town protestors (including Bob, Peggy and Charlotte) are going to block Warren's crew from starting the demolition, and the sheriff is being called in. Olivia arrives to see an angry confrontation between Warren and the townspeople. She tells Warren to send his crew away and meet her in her chambers; she may have a solution to the standoff.
In her chambers, Olivia explains her plan. She contacted Senator Raymond for help, and he found a preservation philanthropist willing to put up of Warren's asking price for the land. She will cover the rest herself. Warren agrees to the proposition but only if all of the details are kept secret so he can take credit for changing his mind and saving the lighthouse. Reluctantly, Olivia agrees to the deal. The townspeople are overjoyed when Warren tells them and he becomes a hero. Grace, however, is certain Olivia had something to do with the end result, and sends Jack to find her.
Justine pays a visit to Seth, and they talk more about the fact that she's not ready to rush into a new relationship. But Justine is drawn to him, and despite her reservations, she kisses him. Now Seth might have a reason to come back from the jobs that take him away from Cedar Cove so often.
Olivia goes out to the lighthouse to take pictures and Jack finds her there. He asks how she solved their lighthouse problem, but Olivia won't admit the truth, as promised. He's glad about the direction their relationship is going, although when he tries to kiss Olivia, she teasingly turns away. "We'll see," she says with a smile, and they look out on the water together.