At the big partners meeting announcing the merger and the formation of Pearson Darby, Rachel storms in and denounces Mike as a fraud. Lucky for him, it was only a nightmare, but it prompts him to go see Rachel, who suggests a way out of his predicament: quit. Can it really be that easy?
Harvey's trying to hold up his end of the deal with Jessica and make his peace with the merger, but she's not buying it because he's still acting like Harvey. She thinks that's a sign he wants to be fired. She warns Darby as much when he assigns Harvey to a high-profile bribery case defending an oil company executive, but since their partnership is 51-49, Darby will apparently be getting his way 100 percent of the time. Jessica tells Harvey the assignment was her idea, and now that he knows she lied to him, he actually does want out of the firm. And he gets Darby to agree to fire him if he wins the case.
Which Harvey sets about doing, even though the executive is totally guilty. He patches things up with Scotty enough to get some vital info on his client, then pressures the prosecuting U.S. Attorney, an old friend, to cut a deal. But the guy isn't budging. Meanwhile, Mike does go to Jessica, but he has second thoughts about quitting when she presents him with his own office. Rachel is not impressed. And Mike's next attempt to quit is derailed when Louis finds out and Mike claims he's leaving over his falling out with Harvey (which happened, you'll recall, because Jessica blackmailed Mike into screwing Harvey over). Louis advises Mike to prove that Harvey still needs him, which Mike does by blackmailing an IT guy into letting him access Harvey's hard drive so Mike can provide unsolicited help (which doesn't impress Harvey anyway). But at least Mike's relationship with Rachel improves after he tells her everything. Or so we can assume, since they end up doing it in an actual bed this time. Mike never does quit, but he does give up his new office.
Also, Louis is in a battle of wills over his favorite office supplies with a mysterious new quartermaster; who turns out to be none other than Nigel, the man Louis screwed out of his job at the end of last season. Rather than mending fences, Louis takes on Nigel by getting himself appointed quartermaster in Nigel's place. Which turns out to be just what Nigel wanted, because an obscure bylaw means that Louis no longer gets to be in charge of the associates. He's devastated, but Nigel is implacable. Poorly played, Louis.
And poorly played, Harvey, whose pressure on the U.S. Attorney only leads to the man appointing a special prosecutor: Harvey's old boss, the former D.A. Now the case is going to be tougher, so Harvey asks Darby to sweeten the pot if he wins. Harvey no longer wants to leave his job; he wants Jessica's.
We're starting the third season with some previouslies, and it's been long enough that they're actually helpful. So I'm going to depart from my usual policy and cover them. Harvey made a bet with British law firm boss Edward Darby in which the stakes were his firm's merger with Pearson Hardman, and Jessica added that if Harvey lost, he'd have to stick around to try to earn his name on the door. Louis and his British counterpart Nigel Hobbling-Thump or something made an agreement not to axe each other in their efficiency reports, which Louis went back on, thinking Nigel would do the same -- but he didn't. Jessica blackmailed Mike into screwing Harvey and causing him to lose the bet, after which Harvey tried to fire him, but Jessica overruled him. Harvey's sometime girlfriend and Darby's employee Scottie got fired in the fallout, until Harvey vouched for her to Darby, who asked if Harvey preferred her in London or New York. Jessica told Harvey to get over himself, and Mike confessed to Rachel that he never went to Harvard. And then sexed her up in the file room, as you do.
It's nighttime in New York. Mike mopes on his couch and then we see employees starting to flood into the office, dressed for work even though it's still dark outside. Mike shows up at Harvey's office door asking what's up, and Harvey explains about an emergency partners' meeting. "Essential personnel only." The two of them seem to be cool with each other, because not only are they bantering about Mike's fear of the dark, Harvey says "we" are finalizing the terms of the merger. Mike wonders if this means he's suddenly a partner, but Harvey clarifies that he and Jessica decided he deserves to be there, given his part in making the merger happen. Mike seems surprised that Harvey seems to have forgiven Jessica. "She won, I lost. Nothing to forgive." As for Mike, "You did what you had to do." Mike accepts this -- and Harvey's handshake -- gratefully. Now just wait until Harvey finds out he told Rachel the truth. He's going to be Mike-firing-pissed all over again.
In the conference room, Darby and Pearson make a speech announcing the completed merger of Darby Pearson. Rachel interrupts the big moment by saying it's all "full of shit." "I told her," Mike whispers to Harvey. "Told her what?" Louis asks from Mike's other elbow. "That Mike Ross is a fraud," Rachel says. Suddenly a cop appears behind Mike to bend him over the table and that's when Mike sits up on his couch, having woken from this nightmare. Yep, saw that coming.