Unable to assign a Story to Unassigned

When trying to assign a Story to "Unassigned" the message appears that

"...the category this work item is assigned against is currently set to unassigned .../ Based on the contents of the work item, the category seems to be Trade Warehousing, would you like to ste the category this work item is filed against to 'Trade Warehousing'"

OK / Cancel.

and after selecting OK, it keeps the original setting of Trade Warehousing and never sets it to Unassigned.

Any help would be appreciated!

Thank you,
David