Longtime friends Martha (Shirley MacLaine) and Karen (Audrey Hepburn) run a boarding school for girls. When an unruly child, Mary (Karen Balkin), is punished for lying, she concocts a story that Karen and Martha are having a lesbian relationship. When the story spreads, parents withdraw their children from the school. The women's lawsuit for libel hits many snags when they lack witnesses to speak for them. All the stress adversely affects Karen's engagement to Joe Cardin (James Garner).