Okay so there's a tiny little gasket around the top needle. This had come off for some reason causing my problem, thus the grounds spewing because there was nothing to hold things secure around the needle !$$&*. Solution: Called Keurig (they are wonderful) and they offered to send out a new gasket (free of charge and this was an older machine) along with a special tool it takes to get the gasket installed securely.
I recommend using a flashlight and looking at the base of the needle on top to see if the necessary little rubber grommet looking gasket somehow has dislodged and gotten discarded on the top of a K-cup most likely! Then call Keurig and see if they will help remedy your problem?