Stephanie - in reviewing some internal threads, I found 2 possible workflows to resolve this error message.
1. Simplify Line - run the Simplify Line Tool on the line feature class and use the output of the 'Simplify Line Tool' in the 'Create Locator Tool."
2. Export as a shapefile - export the line feature class to a shapefile and use the shapefile result in the 'Create Locator Tool.'
Something else to try is to clear the Display Cache - go to the Projects tab->Options->Display and check the Clear cache checkbox. Click OK.
What is the result? Please advise.