The Baudelaires aimlessly drift on a river and come across a ship called the Queequeg (yes, this is a Moby Dick allusion) and encounter Captain Widdershins and his stepdaughter Fiona, a fungi enthusiast. The seafarers too are in search of the sugar bowl, which Klaus suspects to be in the Gorgonian Grotto, a cave covered with a poisonous mushroom.
Fiona and the Baudelaire children dive down into the cave, and Sunny becomes poisoned by the fungi. Before Fiona can help them, Count Olaf's submarine swallows the Queequeg. On the submarine, they encounter a hook-handed man who turns out to be Fiona's brother Fernald. He agrees to help them. While escaping, the children figure out that the antidote for Sunny's illness is horseradish so they give her wasabi. The children safely make it to Briny Beach after receiving a message from Quigley telling them to go there. They encounter Mr. Poe, who urges them to go to the police. Ignoring Mr. Poe's pleas, they enter a cab with a woman named Kit Snicket.