Good morning Boris,
There are two 2017 TDA RULES that govern the outcome.
TDA RULE #35 - Misdeals
A: Misdeals include but are not necessarily limited to: 1) 2 or more boxed cards on the initial deal; 2) first card dealt to the wrong seat; 3) cards dealt to a seat not entitled to a hand; 4) a seat entitled to a hand is dealt out; 5) In stud, if any player’s first 2 downcards are exposed by dealer error; 6) In flop games, if 1 of the first 2 cards dealt off the deck or any other 2 downcards are exposed by dealer error. House standards apply for draw games (ex: lowball).
B: Players may be dealt 2 consecutive cards on the button (see also Rule 37).
C: In a misdeal, the re-deal is an exact re-play: the button does not move, no new players are seated, and limits stay the same. Cards are dealt to players on penalty or not at their seats for the original deal (Rule 30), then their hands are killed. The original deal and re-deal count as one hand for a player on penalty, not two.
D: Once substantial action occurs a misdeal cannot be declared; the hand must proceed (See Rule 36).
TDA RULE #36: Substantial Action (SA)
Substantial Action is either A) any 2 actions in turn, at least one of which puts chips in the pot (i.e. any 2 actions except 2 checks or 2 folds) or B) any combination of 3 actions in turn (check, bet, raise, call, fold). Posted blinds do not count towards SA. See Rules 35-D & 44-B.
So, seat 2 was entitled to a hand and was dealt out which would be considered a misdeal by Rule #35A . However, as it was not declared before Substantial Action had occurred, according to Rules #35D and #36A the misdeal cannot be declared and the hand must proceed.