Couple Sues Walmart for Calling Cops Over Bath Time Photos

For Lisa Demaree and her husband A.J., it was the hardest time of their lives. It all began a year ago, when the Demarees dropped off some digital photos to be printed at their local Walmart in Peoria, Ariz.

"It was a nightmare, it was unbelievable. I was in so much disbelief. I started to hyperventilate. I tried to breathe it out," Lisa Demaree said, struggling through tears.

Among the batch of 144 family photos, the developer spotted eight photos that shocked her and she turned them over to police.

According to the police report, photos were of the children in provocative positions, with their genitals exposed.

"Some of the photos are bath time photos," Lisa said, "but there are a few after the bath. Three of the girls are naked, laying on a towel with their arms around each other, and we thought it was so cute."

Investigators went to the Demaree home to question them and search their residence.

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A.J. Demaree said he could understand why the police were there, but he said the pictures were innocuous snapshots of his kids goofing around, and some of them involved the children being naked.

ABC News was able to obtain access to four of the photos. There are still nine other photographs which were not released because the Demarees' lawyer said that the photos were intended for private home use and showing them to outside parties would violate the law for distribution of child pornography.

"We have told our girls that they have freedom to be in their home and feel OK about their bodies and their nudity, but that there is a time and a place for it," Lisa said.

Police seized numerous videotapes and the Demarees' computers and found more photos and videos of the children frolicking without clothes.

"Our family is very open and comfortable. We don't want our children to feel inhibited in their own house," A.J. Demaree said. "If they want to run around in their underwear, if they want to go run and grab an old Halloween costume and throw that on and run around the house, or if they want to run around the house naked and play around, that's what we encourage."