Anthony and Lisa Demaree went to a Wal-Mart in Peoria, Ariz. to get their family vacation photos developed. But an employee there quickly raised a red flag.
Mixed in with the 144 snapshots were eight pictures of their three little girls playing during bath time. The girls, then 18 months, 4 and 5 years old, were partially nude.
The Wal-Mart employee called police, who decided some of the photos could be child pornography.
The Demarees spoke exclusively to Good Morning America's Robin Roberts.
"Can you understand why there may have been some concern?" asked Roberts.
"I don't understand it at all. They're photos that 90 to 95 percent of families out there in America have these exact same photos, there's nothing to them," replied Anthony Demaree.
Despite pleas by the Demarees that the photos were innocent shots of the kids goofing around at bath time, child protective services removed the three girls from their home. But a medical examiner found no signs of abuse, and the judge soon ruled the photos were harmless.
"The authorities need to prove intent on the part of the parent, some sort of sexual intent, and once a judge reviewed the situation I think everybody agreed that there was no such sexual intent," says ABC legal analyst Dana Cole.
After a month, the kids were returned, but the damage was done.
"They're doing really well considering what's happened," says Lisa Demaree.
"But sometimes, we don't know the effects that children experience and are undergoing when been through something like this. Occasionally, my oldest has a lot of anxiety about going to other over people's homes," she added.
Lisa was suspended from her job at a school for a year, and the couple says they were put on a list of sex offenders.
"As crazy as it may seem, what you consider to be the most beautiful innocent pictures of your children can be perceived as something very perverted," says Lisa.
Neither parent was ever charged with sexual abuse, but the Demarees are suing the city of Peoria, the state of Arizona and Wal-Mart.
Wal-Mart released a statement saying, "these are sensitive allegations and we're taking them very seriously."