[C# MicroStation V8i SELECTSeries 10] OpenDesignFile causes error 'No design file is active'

I have this code below working in an MS_INITAPP for MicroStation CONNECT edition update 15, but running it in MicroStation V8i in an entirely new project for.NET 3.5, I am seeing the following error: 

No design file is active
at Bentley.Interop.MicroStationDGN.Application.OpenDesignFile(String DesignFileName, Boolean ReadOnly, MsdV7Action V7Action)

Source code:

private Bentley.Interop.MicroStationDGN.Application app;


protected override int Run(string[] commandLine)
{
    app = Bentley.MicroStation.InteropServices.Utilities.ComApp;
    app.Visible = false;

...
...

    DesignFile designFile = app.OpenDesignFile(document.Path, true, MsdV7Action.UpgradeToV8);

...
}

The C# .NET35 project for the MicroStation V8i project has all the dll references to the V8i versions as seen below which differs from the CONNECT Edition:

Bentley.Genral.1.0

bentley.interop.microstationdgn

bentley.microstation

Bentley.MicroStation.General

bentley.microstation.interfaces.1.0

ustation