Yes, because the ball hit the ground first. The term "dropped third strike" often confuses people, thinking the catcher must "drop" the ball and then batter can run. In reality, it's an uncaught third strike. The ball must go directly to the catcher's glove for it to be an out. When there are less than 2 outs and 1B isn't occupied, or when there are 2 outs, if it hits the ground first and the catcher catches it, he must either tag the runner or throw him out at 1B.
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