According to the documentation, a failover should occur in either of the following scenarios:
WAN failover: WAN monitoring is performed using the same internet connectivity tests that are used for uplink failover. For more data on these checks, see the Connection Monitoring for WAN Failover article. If the primary appliance does not have a valid internet connection based on these tests, it will stop sending VRRP heartbeats, which will result in a failover. When uplink connectivity on the original primary appliance is restored and the warm spare begins receiving VRRP heartbeats again, it will relinquish the active role back to the primary appliance.
LAN failover: The two appliances share health information over the network via the VRRP protocol. These VRRP heartbeats occur at layer two and are performed on all configured VLANs. If no advertisements reach the spare on any VLAN, it will trigger a failover. When the warm spare begins receiving VRRP heartbeats again, it will relinquish the active role back to the primary appliance.
Assuming that the primary MX68 lost LAN connectivity when switch 1 went down, then yes a failover is expected.
Is the above diagram an exact match of your topology?
How long did the MX lost LAN connectivity for?