Directly after leaving the school with Wilbur, the scene shifts to Nate.
As Nate, you're drunk and conversing with a pirate king. After choosing the correct conversation choices (equivalent to "I'm leaving") or exhausting all conversation options, you are stopped from exiting the palace by the bounty hunter. You start a fist fight.
Scene shifts to first person and the controls are TERRIBLE. I was trying to move the sticks, pull triggers, do anything to move the fist symbol on the screen to move to the "bam", "wham", and hit-sound-cloud things. Nothing doing ... the fist just wouldn't move until quite a bit into the mini-game. When the fist could move, the sound-cloud things started moving, too.
Anyhow, quickly move your "fist" (not the first person hands you can see ... the little fist icon floating on the screen) over the cloud and hit the A button. When you do another cloud will appear. Hit all five and you'll get the achievement.