Now that more than 100 cases of E. coli infections and one fatality have resulted from contaminated bagged spinach, the National Restaurant Association has recommended that restaurants remove spinach from their menus, at least for the time being. McDonald's and several other chains, including California Pizza Kitchen, have already done so. The infections have been reported in 19 states so far and the cause has not yet been confirmed, but it is now suspected that contaminated irrigation water, which the spinach is exposed to when it is packed in the field, may have been a contributing factor.
The FDA is recommending avoiding all fresh spinach or salad blends with spinach, even spinach that is being sold at farmers markets. Washing it will not kill the bacteria and can even spread it around. Similarly, while cooking spinach can kill E. coli, you still run the risk of contamination just from handling it. If you really have your heart set on making a spinach dish, frozen spinach is the safest choice.
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