It turns out that Santa had taken Grandma back to the North Pole for medical treatment. Unfortunately she has amnesia, and until receiving Jake's e-mail Santa had no idea of who she was. After Jake explains the situation, Santa, Quincy, and Grandma agree to go with him to stop the deal. When they arrive in Cityville, however, Cousin Mel and her attorney, I.M. Slime, quickly trick Grandma into going with them. After Santa explains to Austin what has happened, Jake and Quincy discover that Grandma has gone missing once again. Cousin Mel uses the opportunity to accuse Santa of being behind her disappearance. Santa is arrested and put on trial for kidnapping, leaving the scene of an accident, and "sleighicular negligence". The two then plot to sue him, deducing that someone who can pay for billions of presents must be incredibly wealthy. Three months later, Daphne suspects that Cousin Mel may have been involved in Grandma's second disappearance, and Jake and Quincy follow her to a cabin in the woods where she and I.M. Slime are keeping Grandma out of sight. They rescue Grandma and find Santa's letter explaining what happened, that Cousin Mel had found at the site of Grandma's accident, and also the vial of the ingredient Cousin Mel added to Grandma's fruit cake that Christmas Eve night, which had the effect of "reindeer-nip" irresistible to reindeer. They manage to restore Grandma's memory by feeding her some of her own fruit cake, and rush to the courthouse to prove Santa's innocence. Confronted with the evidence, Cousin Mel is forced to confess everything she did. She even admits that she hates the true meaning of Christmas and is nothing more than a greedy person. She is then placed under arrest for obstructing justice and "almost ruining Christmas," and the judge lets Santa go after finally discovering the truth. Austin approaches Grandma again, this time offering to franchise her store throughout the country, having seen how much she and Jake care about their family and their business. The show ends with Grandma accidentally picking up the tainted fruit cake instead of her own recipe, with the result that Santa hits her again as he is trying to fly back to the North Pole. Grandpa and Jake pick her up; this time she did not suffer amnesia. Santa's sleigh takes off into the night with him saying the Spanish phrase for "Merry Christmas": "Feliz Navidad."