Two boats overlapped with red as leeward boat encounter a third (grey) boat. Purple establishes an overlap to leeward of Grey within two boat lengths and has a rule 17 limitation. Red however does not have the same limitation. She has an overlap with Grey (because Purple in the middle has an overlap with both), but not within two boat lengths, so Red does not have a rule 17 limitation.
Grey must keep clear as windward boat, but Purple may not sail above her proper course. Because Purple has to keep clear of Red her proper course is to luff when Red luffs. She does not sail above her proper course, because she would have done the same, if Grey wasn't there and she must keep clear of Red.
With me so far?
Now almost the same situation.
My question to you: does Red have to Gybe immediately? In other words, does rule 17 now apply for Red?
And what if we added a fourth boat overlapped to leeward of Red?