I did uncheck the box and still the reports were going out to all recipients contained on the list. They are not being recognized as disbution lists. I called support they recommended creating a custom dictionary, place the distribution lists addresses in there and create a policy to delete immediately based on the dictionary entries. I did that, not pretty but its working.
I'm monitoring the spam quarantine and other distribution lists that I missed that show up, I add them to the dictionary and delete them from quarantine.