We have a split domain (mercury.net) with some email users on SmarterMail and others in Office 365. Our MX record points to Office 365. Smartermail has the domain configured as Domain Location: External (use MX record). Office 365 has the equivalent setting, knowing to send e-mail to non-local @mercury.net addresses to Smartermail.
The problem is that Smartermail is not treating mailing list addresses as local and processing them accordingly. When a message is sent from an Office 365 user to a mailing list configured in Smartermail, Office 365 sends the message to Smartermail and then Smartermail sends the message back to Office 365 and then Office 365 sends the message back to Smartermail, and then Smartermail sends the message back to Office 365, and that continues until Smartermail eventually responds with:
Maximum hop count exceeded. Possible loop.
Smartermail needs to treat mailing list addresses as local and process them.
Hopefully Smartermail can create a custom build for us to fix this sooner than later.