The first episode of the 2nd season brought the welcome addition of Peggy Castle to the cast as Lily Merrill.  The pleasant but somewhat colorless Dru Lemp (Bek Nelson) and her cafe disappeared about half-way through the first season.  She was replaced as Dan's potential love interest by Barbara Lang as Julie Tate.  This standard Warner's starlet brought  nothing interesting to Laramie and replaced the interesting Harry Tate as editor of the newspaper.  Although Lily Merrill, as proprietess of the Birdcage Saloon, could have been  a hackneyed character, she turned into a good foil and love interest for the stalwart Dan Troop.

In her introductory episode, Lily sets up in Laramie after being run out of Billings for a robbery she had no responsibility for.  However, her trouble followed her to Laramie in the person of Len Ferrell, a dealer and boyfriend of one of Lily's girls.  Although she knows he was responsible for her trouble in Billings, she gives him a second chance.  Lily's first meeting with Dan is predictably an edgy one.  She thinks he wants a pay-off.  He thinks she is responsible for men being robbed in her alley.