But when Luke reveals evidence to Marissa, and then Sandy, that some of Oliver's references from his old school are false, they refuse to believe Luke, especially after learning that he's been. Meanwhile, Sandy and Kirsten get lost while traveling to a restaurant for dinner, and, thinking they're in a rut, find themselves out of their environment at a swingers house party. At the opening day of the new school year, Ryan doesn't feel like he fits in at his new school of Harbor High, and Luke doesn't make the situation any better when he and his jock friends continue to bully and harass both him and Seth, who doesn't like being at school any more than Ryan. Luke finds that his secret romance with Julie is getting harder to keep a secret. Meanwhile, Summer and Seth take it upon themselves to finally make Marissa feel more at home at Jimmy's apartment.
Meanwhile, Oliver continues to charm Marissa and throws his weight around by inviting her, Ryan, Seth, Summer, Anna and Luke to a rock concert where the band Rooney is playing. Jimmy and Sandy run into a roadblock in their effort to re-open the Balboa Lighthouse restaurant when some investors withdraw their funds and it's revealed that they were Jimmy's former business clients whom he lost all of their money. But he does not play it well, leading to both of the girls running into each other and learning about Seth's two-timing. As Kirsten attempts to put her life back together, Sandy assumes leadership of the Newport Group and finds himself the heir-apparent to Caleb Nichols' legacy of scandal. When Anna announces that she is leaving Newport to go back to her home in Pittsburgh, Seth feels guilt-ridden for the way he treated her.
. Kirsten's uptight father, Caleb Nichol, comes for a visit along with his new girlfriend, Gabrielle, a 24-year-old model. Meanwhile, the monetary secret involving Julie, Jimmy, Kirsten and Sandy comes to a head when Sandy finds out of Jimmy's financial problems about the money investments he lost and unwisely 'borrowed'. Anna and Seth hatch a plan to make Seth feel better with his current situation. Back in Newport, Jimmy has plans of his own to get out of his financial and legal problems, which don't sit well with Marissa or Julie.
Meanwhile, Marissa slides more into depression and debauchery over her family life problems and gets arrested for shoplifting with Ryan. Back in Newport, Kristen invites Caleb and Julie over for Thanksgiving dinner where Seth takes the player role of playing both Summer and Anna. Things take another turn when Ryan's former flame, Theresa Diaz, show up in Newport to work as a waitress for a special gathering and wants to try to reconcile with him. Meanwhile, Luke approaches Marissa and tells her that he wants a second chance with her, much to Ryan's disappointment. Also, Summer makes the moves on. Ryan takes a job at the Crab Shack diner where a co-worker, named Donnie, might mean bad news for the Newport kids when he takes Ryan and Seth out to party queen Holly Fischer's parties where drugs and alcohol flow freely.
Having chose Ryan over Luke, Marissa wants to make plans for their first romantic date together, while Ryan does not know how to behave for his first date with Marissa. Also, Ryan enrolls at his new school, with conditions after his past life in Chino is revealed. Kirsten is shocked, and a little burdened to find she's been asked to be Julie's Maid of Honor. Ryan continues to become suspicious of Oliver when he suddenly transfers to Harbor High and begins making plans of his own with Marissa. Summer shows off her new boyfriend, Danny, to Seth and Anna who correctly think that Summer is just showing off to satisfy her own ego. But things don't go well for everyone, except for Oliver when his erratic behavior begins showing itself to Ryan and Luke, but Marissa brushes it off as just playful behavior.
Kirsten finds her job at Caleb's company, Newport Group, in jeopardy, while Sandy considers making a change. Meanwhile, Ryan finds Caleb with another woman, that being Julie Cooper, while Sandy continues to resist temptation with his co-worker Rachel. Although getting along fine with everyone, she shows her true colors when she throws a destructive New Year's Eve party at the house when Sandy and Kristen are out and locks both Ryan and Seth in the guest house. On Thanksgiving Day, Ryan ventures to his hometown in Chino to help his imprisoned brother, Trey, with some business he has, while Marissa tags along with Ryan to get a look at the neighborhood where he was born and raised, but it brings out some bad situations and unpleasant trips down memory lane for Ryan. Meanwhile, Julie and Luke begin having a passionate affair behind everyones backs, while Seth and Summer decide to declare their love for each other. Also, Theresa brings a lot of trouble for herself and Ryan from Chino when her boyfriend, Eddie, shows up, making Ryan slightly jealous and worried about Theresa's well being.
Kirsten and Marissa end up in charge of throwing Julie's wedding shower, and Marissa invites an unwanted guest: Julie's estranged sister whom does not approve of her upcoming wedding whom she suspects that it's purely for money. Jimmy and Hailey continue their romance, and Seth awkwardly meets Summer's. During rehearsals for Newport Beach's annual Cotillion Ball, Ryan continues to pursue Marissa and asks her to be his dancing partner, while a continuing jealous Luke tries to break them up. Meanwhile, trouble brews for both Caleb and Kristen at the Newport Group over their legal funds, and Sandy tries to help them out. Meanwhile in Newport, Jimmy and Sandy decide to. But trouble brews for Ryan. Theresa Diaz, an old friend Ryan's, shows up in town as part of the catering services for the benefit, which forces Marissa to lay her feelings on the table that her breakup with Ryan may have been a mistake.
Ryan finds himself truly out in the cold when he's suspended from school, shunned by Marissa, and even scrutinized by the Cohens, all of whom refuse to believe Ryan's claims that that Oliver is a dangerous sociopath and obsessed with Marissa. Meanwhile, Jimmy discusses his recent financial woes with Kirsten, and she offers a solution. Also, Seth and Summer take their friendship to another level. Luke wants to tag along with them to try to get back together with Marissa, but she later changes her mind about him when she catches Luke making the moves on Holly Fischer. Ryan learns more about Luke when they're paired for a school history project which is that Luke isn't the macho tough guy he puts out to his friends, but he is quite a nice person with a perfect home life. Ryan and his surrogate brother Seth, a socially awkward yet quick-witted teenager, deal with life as outsiders in the high-class world of Newport Beach. Meanwhile, Sandy and Jimmy prepare to sign the lease papers to build their own seafood restaurant, the Lighthouse.
Ryan and Sandy then stage an intervention for Julie about her handling of everything in which she. But Jimmy doesn't know if he's ready. Also, Marissa, and Sandy and. But they soon find out that it is not as easy as it looks. Meanwhile, Theresa calls Sandy for help when she runs away from Chino and tries to avoid Ryan.
Meanwhile, Kristen continues to avoid. Caleb does not hesitate to speak his mind and immediately angers both Sandy and Ryan, and browbeats Seth, with constant criticism with their backgrounds, while Gabrielle makes a move on Ryan. Seth makes Kirsten aware of his anger over Ryan's situation, and Kirsten makes a compromise to bail Ryan out of jail to stay with them, temporary. Also, Summer tries to impress the Nana by knowing the traditions of Judeaisum, while Jimmy and Hailey take a step forward with their own newfound romance. When his mother disappears and faced with the prospect of life in a group home, Ryan decides to run away from Newport, but Seth and Marissa convince him to stay and hide in a vacant building project.