Ah yes I remember this one.
Theres an instance that drags you into a fight.. You challenge the crew to that mini game or kill them.
Depending on how well you go the monsters attack.
When you first go there you get a custscene at x39,y38 and that drags you into the fight.
The next time you go you need to go into a tunnel, like an underground passageway that starts at x36/37,y39
A fair way into it and you get dragged back into the fight.

You have to go north from Broken Water past those narrow passageways.
Enter the open area and hug the walls near the area you will find it there