I am surprised my Zach's post, because he is mistaken. This is an issue under active investigation. My ticket on this topic was added to one that was already open.
Here is the problem: The user has an autocomplete entry, which should be interpreted as a friendly name and email address:
"first last" <user@domain>
Instead it is being interpreted as an invalid email address with embedded spaces:
<first last user@domain>
The problem is clearly visible in the logs, where friendly names do not appear. You are correct that the problem can be resolved by deleting the problem autocomplete entry or emptying the autocomplete folder completely.
Obviously, this could be a Microsoft issue or a SmarterMail issue. We can hope that it is a SmarterMail issue, or that SmarterMail can find a workaround to a Microsoft issue, so that we obtain a solution sooner rather than later.