WCF error when querying using LINQ to Objects

Please excuse me if this is a duplicate question - I have searched but have not found anything that explains my problem.

I created an ASP.NET website. I have 3 layers - Data Access, Business, Presentation. I used shared entities throughout using Entity Framework.

• Presentation: UI
• Business: WCF Service
• Data Access: code to connect to DB (contains the EF context, connection string)
• Entities: .edmx - EF Entities. These are shared throughout all 3 layers.

I have come upon some odd behavior in the WCF service which I cannot understand. My original code had a function in the DAL which queried the db for all customers, and returned a List. The service than further queried this list based on what the UI requested and returned a List to the Presentation Layer.

DAL:

public List<Customer> GetCustomers()
    {
        List<Customer> custList= new List<Customer>();
        try
        {
            using (NorthWindsEntities context = new NorthWindsEntities(connectionString))
            {
                custList= context.Customers
                                 .Include("Orders")
                                 .Include("OrderDetails")
                                 .ToList();
            }
            return custList;
        }
        catch (Exception ex)
        {
            //handle exception
            return custList;
        }
    } 

WCF:

 public List<Customer> GetCustomersByState(string state)
    {
        contextManager contextDAL = new contextManager();
        List<Customer> custList = contextDAL.GetCustomers()
                                            .Where(c => c.State == state)
                                            .ToList();
        return custList;
    }

When I debugged the code, eveything worked fine, but when the service tried to return the custList to the client, I got this error: An error occurred while receiving the HTTP response to localhost/WCF/MyService. This could be due to the service endpoint binding not using the HTTP protocol. This could also be due to an HTTP request context being aborted by the server (possibly due to the service shutting down). See server logs for more details.

I changed my DAL to inclued the entire query and my WCF Service to this:

  public List<customer> GetCustomersByState(string state)
    {
        contextManager contextDAL = new contextManager();
        List<Customer> custList = contextDAL.GetCustomers(state)
        return custList;
    }

This worked fine. I also tried to put the entire query in the service (the service connected directly to the context and got the list) and that worked fine as well.

So basically, my question is, why can't the WCF service return a list of objetcs that were queried using Linq to Objects (the DAL returns a List of customer so all further querying is linq to objects). It works fine using Linq to Entities (with all the code in the service) and it works fine with no querying at all - just getting a list and returning it.

I'm sorry for the lengthy post, I tried to include all necessary details...Thanks!