Video Explanation of overlay swapping issue: 
Video Explanation of the issue
Here is the Figma prototype link:
Prototype Link
I ran into the exact same thing today 
The explanation is that your dropdown menu is also an overlay, and you essentially swap that overlay instead of the one opened before.
My solution is not elegant, but it worked:
I created an overlay with the dropdown menu inside it and linked them to swap on click. So that swapped the right overlay.
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HAHA that is a a great way to solve this issue. I guess I have to nest my dropdown inside my overlay so it doesn’t act weird like this.
Thank you so much for tip, saved me a lot of time 
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Hey @Steven , the concern is temporarily resolved but it is not a complete solution. We are achieving the same result in a hacky way. That’s why I wanted Figma to be aware of this weird dropdown overlay behavior.
Thank you,
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The concern is solved, but you wish Figma offered a better way. I think the best thing to do here is to conclude this topic and create a product ideas category topic for it.
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@Hossein_Boroji I agree with @Steven here, I think this current issue is solved. If you want a more solid solution included in Figma natively, you can create a post and describe your suggestion in the #product-ideas category so people can vote for it and Figma team could eventually find it.
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