The Nebraska meat supplier denied any responsibility for the outbreak and terms of the settlement are not being released, said one of Northern States' attorneys, Cheryl Adamson of Kennewick.
The families also are suing the Finley School District, and that action is set to go to trial in Benton County Superior Court on Jan. 10. The school district, which is covered by insurance, also is denying responsibility.
The settlement reached with the meat supplier still must go through a court approval process because it involves children. If approved, the settlement would be put in trust for each of the children and administered by Benton County Superior Court.
In the meantime, the families have yet to receive money to cover uninsured portions of their medical bills, said Bill Marler, the Seattle attorney for the children. Several of the children were flown to Seattle for treatment of a complication from the infection that can cause permanent kidney damage.
Most of the children sickened in the outbreak two years ago had eaten the school lunch, but a younger child is suspected of picking up the bacteria after playing with schoolchildren.
The Washington State Department of Health investigated and concluded undercooked hamburger served by the school was the most likely cause of the illnesses.
However, attorneys for Northern States Beef have said there is no evidence the company's hamburger sickened the children. Leftover hamburger from the meal, both cooked and uncooked, was checked for the bacteria in 1998, but none was found.
Attorneys also said the lot of thousands of pounds of beef was widely distributed elsewhere, and no one else reported getting sick from it.
Marler has countered that finding bacteria in some parts of a lot of hamburger and not in others is not unusual.
The hamburger has been suspected because the state found some leftover chunks of the taco meat served to the children were not cooked all the way through, which could have allowed bacteria to survive.
When Dr. John Kobayashi of the state health department discussed the results of his investigation shortly after the outbreak, he said not finding the bacteria in the meat did not mean it was clean. E. coli is difficult to isolate from food, particularly meat, he said.
Northern States Beef has maintained that the bacteria could have come from one of many sources, including lettuce, cheese or tomatoes served with the meal. The possibility that a child could have walked through infected cow manure on the way to school also was raised.
State investigators said they considered the possibility the outbreak could have come from lettuce that had been irrigated with dirty water. They dismissed that theory because the packaged lettuce from the same shipment had been distributed throughout Benton County and in Oregon and no cases of E. coli poisoning were reported outside the Finley School District.