The well-known bestselling author Miles Finch arrives at the Greenway Press coporate headquarters within the Empire State Building in New York after agreeing to meet Walter and his team in an attempt to create a better idea for a children's book.
During a board meeting, Buddy comes in and mistakes Miles as an elf (because he is extremely short) and asks him how he escaped the North Pole. Unfortunately, Miles misunderstands, and thought Buddy was insulting him. Miles goes on to brag about making more money than Buddy ever will, being extremely rich, and owning houses with 70 inch plasma screen TVs in Los Angeles, Paris, and Vail in an effort to intimidate him.
He follows this up by sarcastically asking Buddy to call him elf one more time. Buddy whispers, "He's an angry elf", seemingly unaware of the sarcasm in Finch's statement. Finch, unable to control his temper, charges at Buddy on Walter's table (to which Buddy says, "Look at you!" in amazement) He begins to severely beat Buddy before storming out of the building, despite Walter trying to explain Buddy's misunderstanding.
Furious that the one chance of saving his company has been ruined, Walter yells at Buddy, saying even though he is his son, he wants him out of his life. Deeply saddened and hurt, Buddy returns home and, after writing a message on an etch-a-sketch apologizing for ruining everyone's lives, leaves Walter's apartment.
After Finch leaves the building Walter comes across Finch's notebook, and attempts to plagiarize one of Finch's stories as a pitch to his boss. Ironically, Finch calls all of Walter's team's story pitches "too vulnerable", while his self-proclaimed best story idea is about a vulnerable peach.
At the end of the film, The Central Park Rangers set out to kill or arrest Buddy. Santa Claus and Buddy are chased by Miles and his men. On Christmas Eve Jovie faces her fear of singing to loads of people, loads of people join in by watching her and saving Christmas. They are defeated when Walter Hobbs, Jovie, Emily Hobbs, Michael Hobbs, Gimbel's manager, Morris, Dr. Leonardo, Carolyn and the rest of the cizitens of New York sing "Santa Claus Is Coming to Town".