Ten of the children fell ill after eating undercooked hamburger served in a taco lunch at the elementary school. But the majority of the award went to an 11th child, a preschooler whom the jury concluded was infected by schoolchildren who ate the taco lunch.
She suffered permanent kidney damage and is expected to need several transplants during her lifetime.
"Hopefully this puts us a little closer to the day people who really need this money are going to get it," said Denis Stearns, the Seattle attorney for the children and their families.
The district's insurer argued that the jury was not given enough evidence to determine the taco meal caused preschooler Faith Maxwell's illness.
But the Court of Appeals pointed out that generally 1 percent to 10 percent of cases in an E. coli outbreak are secondary infections.
"To conclude that this is how Faith was infected is more than mere speculation," wrote Judge Dennis Sweeney in the opinion.
"Faith spent time with two children who ate the taco meal," he wrote. "One had a confirmed case of E. coli infection. An infected child spent the night at Faith's house, and played with her, including dressing her up like a baby."
The facts were consistent with a secondary infection, and the district offered no plausible alternative explanation for her illness, according to the opinion.
The district's insurer also asked that the jury's decision be overturned because it was based on the Washington Product Liability Act. The law covers product manufacturers, but school districts and others who provide a professional service are exempt, the district argued.
The court found the district did not raise arguments related to product liability during the trial.
"We need not entertain them for the first time here," Sweeney wrote.
But the court also concluded that even if the arguments were allowed, it would fail.
"The lunch was a stand-alone product," Sweeney wrote. "It was sold independently of any professional service."
The district was a manufacturer, taking frozen ground beef and thawing, cooking, rinsing, draining, seasoning and assembling the taco filling, the court concluded.
If the district's insurer decides to continue to fight the jury decision, the next step would be to ask for a Washington Supreme Court review. The Supreme Court already declined to hear an appeal of the case in May, transferring it down to the Court of Appeals.
William Hickman of Seattle, who represents the school's insurer, could not be reached for comment late Thursday afternoon when the court decision was released. The decision is posted at www.courts.wa.gov/opinions/recent.cfm on the Internet.