The Stepping Stones Group, LLC v. Amethod Public Schools, 4:23-cv-00199

In 2019 Futures Education of California contracted with Amethod Public Schools (AMPS) to provide special-education teachers and services; a 2021 addendum extended the Agreement.
Futures later merged into The Stepping Stones Group, LLC (SSG), which assumed Futures’ contractual obligations.
SSG sued AMPS for unpaid fees (alleging at least $518,193.64 owed). In response, AMPS filed a Second Amended Counterclaim (SACC) asserting a single breach-of-contract counterclaim and ten affirmative defenses.
AMPS alleges SSG breached by failing to provide required staffing, legally mandated special-education services and required reports/records (including allegedly omitting over 130 days of services), forcing AMPS to hire another provider and incur over $850,000 in replacement costs.
SSG moved to dismiss AMPS’ counterclaim for failure to state a claim; the parties proceeded under the assumption California law applies.
The Court denied SSG’s motion to dismiss, concluding AMPS pleaded sufficient contractual obligations and breaches to survive a Rule 12(b)(6) challenge.

Issue	Plaintiff's Argument (SSG)	Defendant's Argument (AMPS)	Held
Whether AMPS pleaded a plausible breach-of-contract claim under Rule 8/Twombly-Iqbal	AMPS’ counterclaim is conclusory and fails to explain how SSG breached or identify contractual terms with required specificity	AMPS identified contractual duties (staffing, services, reports), alleged specific failures (including >130 missed days) and damages	Denied dismissal — allegations suffice to state a plausible breach claim under Rule 8; not subject to heightened Rule 9(b) pleading
Whether failure to specify applicable state law is fatal	SSG noted SACC does not name governing law	Parties agreed California law governs; AMPS pleaded elements under California law	Court proceeded under California law and found pleading adequate
Whether AMPS needed to plead contract terms verbatim (Twaite)	SSG argued Twaite requires pleading contract terms in haec verba or exact terms	AMPS pointed to the Agreement and Addendum and alleged the relevant obligations and breaches without verbatim quotation	Court: Twaite does not require verbatim text; AMPS sufficiently described the terms and breaches to put SSG on notice

Khoja v. Orexigen Therapeutics, Inc., 889 F.3d 988 (9th Cir. 2018) (incorporation-by-reference doctrine for documents attached to or forming basis of pleading)
Mendiondo v. Centinela Hosp. Med. Ctr., 521 F.3d 1097 (9th Cir. 2008) (Rule 12(b)(6) dismissal standard explained)
Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (plausibility standard for pleading)
Ashcroft v. Iqbal, 556 U.S. 662 (2009) (application of plausibility standard to factual allegations)
Oasis W. Realty, LLC v. Goldman, 51 Cal. 4th 811 (Cal. 2011) (elements required for a California breach-of-contract claim)
Twaite v. Allstate Ins. Co., 264 Cal. Rptr. 598 (Cal. Ct. App. 1989) (discussing requirement to plead contract terms, but not necessitating verbatim quotation)
Manzarek v. St. Paul Fire & Marine Ins. Co., 519 F.3d 1025 (9th Cir. 2008) (courts accept well-pleaded factual allegations as true on motion to dismiss)