The goblins must have taken Bilbo to the mountainside encampment of Pinnath Fenui.
You should clear all the goblins and wargs from Pinnath Fenui to ensure none attack you from behind while you confront their leader at the top of the camp.
Sorrog Crows-eye is not pleased.
You have a choice: either to slay Sorrog Crows-eye or to spare his life.
To spare him, ensure that you have him selected and then use the No emote.
To slay him... you know what to do.
Things have gone from bad to worse: Bilbo is not held captive in Pinnath Fenui, but in Goblin-town!
Celeblír has arrived, and waits to hear what you learned about Bilbo's whereabouts.