I was able to figure out what was happening. In our environment, our SmarterMail domain is a remote domain to our exchange environment. In our exchange environment for each smartermail user we had a mail contact and a distribution group. I noticed that when we tried auto responder to an external address that an email loop was created between the mail contact address and the distribution group address.
We eliminated the distribution group, adding its addresses to the mail contact. That's what resolved it.