Transaction associated with the current Connection

Question

Hi all.  I have a challenging query!!

This project we are on working on is an application which resides on any windows 7 or 8 machine.  Mainly used for windows based tablets.  So, each an every instance of this is capturing data about different bodies.  So imagine 5 people with 5 tablets capturing data on 5 different things.  Eventually, all this data has to be synchronized and available for everyone. 

So the way this is being done is like this:
Every tablet (or instance) is connecting to a web service which sends/retrieves data to a database. (Web Service is written in .NET/and the DB is SQL Server 2008).  So in a nut shell, the data is sent and broadcasted to other instances in order to keep every instance updated and so on.

Till now, working locally and internally, in our connection string of both the local application connecting to the WS and the WS connecting to the DB was using hard coded authentication in the app/web.config file.

Now, we have replicated the live environment and we must use active directory authentication (so the user logging into the tablet or machine will enter his/her credentials from active directory and basically this will be used to authenticate all).

We are experiencing this problem which is rather vague and i have no idea what it may be. The thing is that with regards to code, i am very sure that we are fine. The amount of testing of threads and processes management that we have done took place.  Therefore we are positive that a thread is not keeping some transaction process alive.  One must understand that on every synchronization, a lot of data is being transffered and a lot of sql statements in a transaction are taking place.

We have a feeling that it may be something with the configuration of the servers.  Please note that the Active directory, the SQL Server DB and the web service are all on separate servers. 

This is the error we are getting when the application tries to authenticate.
  The transaction associated with the current connection has completed but has not been disposed. 
  The transaction must be disposed before the connection can be used to execute SQL statements.

Im honestly not waiting or expecting an answer that may pin point.  Though maybe some pointers for where to start looking.  Im not the technical architect on this project, though im trying to help him figure out the issue and wondered if one of you guys have a good amount of experience in server configuration and authentication for this kind of setup.

thanks. Good day.