By Terry Baynes

Nov 14 (Reuters) - Two women who are seeking restitution from a man who viewed pornographic images taken of them when they were children must show that the defendant helped circulate the images, a federal appeals court ruled on Wednesday.

The 7th U.S. Circuit Court of Appeals, in Chicago, said the two victims must prove a causal link between their losses and a defendant's crime of possessing the images.

The issue, which has divided federal courts, could determine the extent to which victims of child pornography can recover money for medical costs, therapy and lost income from the people convicted of viewing their images.

The case centers on Christopher Laraneta, who pleaded guilty to possessing child pornography and was sentenced to 30 years in prison in February. He was also required to pay restitution to two women, identified in court documents as "Amy" and "Vicky," photographs of whom, taken when they were children, were found in his possession.

The court awarded Amy all of her losses, calculated at more than $3.3 million, even though she had already recovered around half that amount from other defendants. It awarded Vicky more than $900,000 in restitution.

On appeal, Laraneta argued that he was not responsible for the victims' monetary losses. Although the images were found on his computer, he was only one of a number of viewers, he argued.

But an attorney for the two women argued that they did not have to prove that Laraneta was responsible for the bulk of their losses. Federal law requires a defendant to pay a victim the "full amount of losses," including medical services, therapy costs, lost income and "any other losses suffered by the victim as a proximate result of the offense."

The phrase "proximate result" only applies to the last category - "any other losses" - and not to the other listed costs, such as medical and therapy expenses, the victims' attorney argued.

The 7th Circuit rejected that argument on Wednesday, finding that the "proximate result" requirement applies to all of a victim's claimed losses.

It would be "beyond implausible that the victims would have suffered the harm they did had (Laraneta) been the only person in the world to view pornographic images of them," Judge Richard Posner wrote for the unanimous three-judge panel.

The appeals court sent the case back to the lower court to determine whether Laraneta had distributed any of the images, which it said could establish that he contributed to the victims' injuries.

Laraneta's lawyer, Viniyanka Prasad, did not immediately respond to a request for comment.

Paul Cassell, a former federal judge who is representing the women, said he was optimistic the lower court would find that Laraneta distributed the images.

Cassell also said he welcomed part of the ruling in which the appeals court said that if Laraneta was found to have distributed the images he could be responsible for the entire amount of the victims' losses that haven't been paid so far.

It is important for a child pornography victim to be able to recover their full losses from a single defendant, said Cassell, who left the federal bench in 2007 to work for victims' rights.

In Laraneta's case, the district court had ordered him to pay the restitution from his prison wages of $100 a year, but most recoveries come from a handful of rich defendants, he said.

On Oct. 1, Cassell won a case on behalf of the victim identified as Amy in which the 5th Circuit, in New Orleans, ruled that the victim does not have to show that a defendant's acts caused the victim's injuries.

Then, on Oct. 24, Cassell lost a case on behalf of both women in the 9th Circuit, in San Francisco, which found that the victims must show "proximate cause."

Cassell said he plans to ask the Supreme Court to review the 9th Circuit case next week. The split between the circuits makes it more likely the high court will take the case.

The U.S. Attorney's Office for the Northern District of Indiana, which brought the prosecution against Laraneta, declined to comment on the litigation.

The case is USA v. Laraneta, 7th U.S. Circuit Court of Appeals, No. 12-1302.

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