SBS 2011 Exchange return mail

I have a company with a newly installed sbs 2011. I have two users that when they type out the email address for someone within the company it gets returned and get a "Delivery has failed to these recipients or groups:" error.  when i delete the cached email address and type it out and send it it works fine or when i hit the to button and send it from the address book it works fine.

Original message headers:
 
Received: from DOMSERV01.domain.local ([fe80::30bf:7ab5:695d:ea00]) by
 DOMSERV01.domain.local ([fe80::30bf:7ab5:695d:ea00%11]) with mapi id
 14.01.0438.000; Wed, 8 Jan 2014 11:07:20 -0600
Content-Type: application/ms-tnef; name="winmail.dat"
Content-Transfer-Encoding: binary
From: Kraig Klu <KKlu@domain.com>
To: Marlene Aundson <MAundson@domain.com>
Subject: FW: Julie Palmer
Thread-Topic: Julie Palmer
Thread-Index: Ac8Mi9DTMaiMq3E/SvONWz3oy2W4DwACEB4g
Date: Wed, 8 Jan 2014 11:07:19 -0600
Message-ID: <4BC3AF69B218644C8DA3D4004E1FA4419F0258@DASSERV01.domain.local>
Accept-Language: en-US
Content-Language: en-US
X-MS-Has-Attach: yes
X-MS-TNEF-Correlator: <4BC3AF69B218644C8DA3D4004E1FA4419F0258@DOMSERV01.domain.local>
MIME-Version: 1.0
X-Originating-IP: [192.168.2.21]


Your help would be much appreciated

Thank you