In Cleveland, Ohio, some officers have boarded the train. They are looking for Mrs. Primrose, who escaped from the Benzinger Clinic mental institution that morning, and they have come to take her back. The news soon spreads throughout the train: "She's a Nut!" Oscar suddenly has no money again, and Lily, who has not yet signed the contract, angrily confronts him. Max Jacobs arrives with a new play, and Lily joyously greets him. She reads over the play, trying to envision herself as the decadent, glamorous title character, "Babette", but her thoughts keep straying to Mary Magdalene. Nevertheless, she finally decides that she will do Max's play.