Three children were taken away from their parents for a month after some 'beautiful innocent' bath time photos of them were reported to child protection services.
Five years later, the mum and dad are now suing Walmart for damages for their ordeal, which they say cost them $75,000 in legal fees.
Their 'nightmare' happened in 2008 when Lisa and Anthony 'A.J.' Demaree took their three young daughters – then aged five, four and 18 months - on a trip to San Diego.
When they got home, they took 144 photographs, mostly from their recent trip, to their local Walmart in Peoria, Arizona to have them developed.
The couple were reported after an employee expressed concern that some of the images being developed might be child pornography.
The daughters were then seized and placed into the care of the Arizona Child Protective Services Agency.
"It was a nightmare, it was unbelievable. I was in so much disbelief. I started to hyperventilate," Lisa told ABC News at the time.
She added: "Some of the photos are bath time photos but there are a few after the bath. Three of the girls are naked, lying on a towel with their arms around each other, and we thought it was so cute."
It was a month before the girls were returned to their parents, after a Maricopa County Superior Court judge ruled the photographs were in fact harmless and a medical exam revealed no signs of sexual abuse.
The family was reunited but the damage had been done. The couple's names went on a central registry of sex offenders, while Lisa was suspended from her job at a local school for a year while the investigation was under way.
The couple also had to spent $75,000 on legal bills.
"We've missed a year of our children's lives as far as memories go," said Lisa. "As crazy as it may seem, what you may think are the most beautiful innocent pictures of your children may be seen as something completely different and completely perverted."
In 2009, the couple sued the city of Peoria and the State Attorney General's office for defamation.
They also sued Walmart for failing to tell them that they had an 'unsuitable print policy' and could turn over photos to law enforcement without the customer's knowledge.
The couple lost the initial hearing after a federal judge sided with Walmart, ruling that employees in Arizona cannot be held liable for reporting suspected child pornography.
However the Demarees appealed to the 9th Circuit Court of Appeals and on March 6 the court held a hearing before three judges.
They are now awaiting a verdict from the appeals court on the case against the city and Walmart.