Laura befriends a new girl, Anna, who stutters and has a hard time making friends. A jealous Nellie starts an elite club and although she invites Laura, she leaves Anna out. While at the Olesons, Laura falls horribly out of character when she snatches a music box from Nellie's bed.
Laura plays the music box in secret in the barn, but one day she actually drops and breaks it. She tries to hide this, but Nellie soon catches her with it. Laura admits the theft and begs Nellie not to tell. Using the situation to her own advantage, Nellie agrees to keep quiet--so long as Laura does everything she says. One of the conditions, however, is that Laura must join Nellie's snooty club and be mean to Anna (or else Nellie will go forward with information about the theft of her music box). Terrified of the trouble she'll be in if Nellie tells, Laura goes along with it. Her new attitude causes friction between her and Mary, who has noticed Laura's cold behavior toward Anna. Later, Laura suffers from nightmares because of her guilt (with the Olesons cast as her tormenters), and Willie doesn't make things any easier when he joins in on the blackmailing. After Charles finds out about Laura being mean to Anna, Charles makes Laura quit Nellie's club unless Anna can join, too. Nellie agrees to let Anna join, but only to pull a cruelly sadistic initiation stunt for her own amusement (she forces Anna to read a tongue twister without stuttering). A humiliated Anna runs out, and Laura immediately goes after her.
Laura and Anna have a long talk; Laura apologizes and agrees to work with Anna on her speech every single day so she can show up all the girls who laughed at her. Realizing how dangerously far Nellie's blackmail has gone, Laura comes clean with her family. The next day, Charles takes Laura to the mercantile to admit her mistake and return the music box. An embarrassed Mr. Oleson goes easy on Laura, although the same can't be said for Nellie.