You should modify your code to handle the fact that under Visual Studio, you're in Design Mode and you don't want the Visual Studio Visual Designer to run any custom WCF code, or anything that can fail, in this case.

Here is a good article on this subject here: Detecting design time mode in WPF and Silverlight

It's also possible that Visual Studio 2010 SP1 has fixed this issue (at least handling it more gracefully...)