All three female villains in New Townsville had their own individual stories (that happened simultaneously) of what led them to discover the other two villains and form the team.
Princess Morbucks went to Annie's restaurant and placed a very tall order, which she demanded be delivered to her mansion in an hour. As Annie worked the stand, Jason came in and gave her a present, which she planned to open later.
Sedusa was activated, shortly after Annie delivered Princess her order and Princess smothered her with the lipstick.
All three of the girls met up in The Morbucks Mansion and took it upon themselves to form a team of their own since all three of them wish to achieve the same goal, which was to destroy The Powerpuff Girls. All three of them though very highly of themselves, appearance wise, so they thought it would be good to call themselves "The League of Lovely Ladies".
The League of Lovely Ladies heard about the unveiling of a Powerpuff Girl themed statue and they seized the opportunity to steal the statue, destroy it, and replace it with a statue of themselves. They distracted the public, by leading a trio of robot armies to raise hell in three different locations in New Townsville. This distracted The Powerpuff Girls and got them to flee the scene. Shortly afterward, Sedusa entered the scene, dressed as Blossom and she told The Mayor that they need to evacuate the area, leading to him, the secret service and every member of the public to leave the park, giving The League of Lovely Ladies the opportunity to commit their crime.
The League of Lovely Ladies watched the news, as they saw their crime unfolding in front of the public. Everyone was shocked when the statue that they thought was going to be of The Powerpuff Girls, turned out to resemble The League of Lovely Ladies. Violet and Sedusa were a bit less satisfies than Princess was when they saw the way their statue turned out. Princess was the one who designed the statue and she only put effort into making herself look beautiful. Sedusa was depicted as lying flat on her face and Violet's statue was made out of wood.
Violet came up with a plan to steal a bunch of junk from random people and fly over the skies of New Townsville, dropping all of the stuff on the heads of random people on the streets.
The League of Lovely Ladies broke into a stadium and played really loud and obnoxious music, which drove everybody in the stadium crazy. Just then, The Powerpuff Girls came in and fought them. Violet grew really huge and made herself even more powerful, by having Princess and Sedusa jump inside of her and fuse with her. The Powerpuff Girls were still able to defeat them after they learned an important lesson about teamwork.
All three of the villains also had their own stories of what happened after they disbanded.
Sedusa reverted back to Annie and didn't remember a thing from the incident. She did, however, keep the lipstick and lovingly thank Jason for giving it to her.
Princess Morbucks also forgot the entire event. When she awoke, she found the golden statue of herself in the backyard, which was an absolute delight to her. Queen Morbucks told her that this was a gift from Daddy Morbucks. Princess wanted to thank her daddy for giving this to her, but Queen Morbucks told her that he was currently on vacation, fishing with Duchess, much to the absolute fury of Princess. Due to Princess being so accustomed to being spoiled and overly pampered, this minor inconvenience came across as an absolute pain of a punishment to her, which can arguably be considered justice for her wrongdoings.