Violet, Klaus, and Sunny enter the care of Esmé and Jerome Squalor, a wealthy couple who live near their former home. Esmé is a financial adviser who's obsessed with trends. She adopts the Baudelaires because orphans are "in" and plans an auction of "in" things with her auctioneer Gunther, aka Count Olaf.
Exploring their new home, the siblings discover that one of the elevators on the top floor is ersatz, or fake. They find the Quagmires trapped below when they climb down its empty shaft. Perusing the auction catalog, Klaus discovers a Lot #50, V.F.D. The children tell Esmé about Olaf's plan to sneak out the Quagmires but she pushes them down the empty shaft. She's in on the secret with Olaf, who used to be her acting instructor. The children rush to the auction after escaping and discover that Lot #50 is full of Very Fancy Doilies. Olaf slips on a doily, which unveils his disguise. He and Esmé make a run for it. Newly abandoned by his wife, Jerome refuses to help the children find their friends and gives them up for adoption.