Poor grades can be indicative of many things.  Does SD struggle with certain subjects or concepts and need more practice? Is SD emotionally immature and her behaviour brings down otherwise good grades? Is SD not being academically challenged and, therefore, not trying? Does SD have a learning disability? Is SD desperately seeking attention? Who knows?  Your DH might gain some insight if he would request a meeting with her teacher. But, if he isn't worried about it, then that won't likely happen.

Has Dad had a sit down with his daughter's teachers to get their input on SD in the classroom? I mean overall on everything from grades, socialization skills with her peers, responsive to adult authority, classroom to playground and back? 

What does her teacher/s say about her 'C' vs A & B potential? Has the teacher noticed attitude change in SD at school since your addition to the family at home? 

Continuing the line of my thought, is I read where Dad is open to having his daughter do some therapy for the home behavior and emotional distress she has over the lack of maternal 'love' from her mother. 

I would think reports/observations from the school (teacher, support staff) along with a complete updated physical from SD's pediatrician would all be helpful to include in a initial review for the selected therapist to leaf through. 

As to what you asked in this post. My kids varied. My last daughter (BD18) went pre-school through senior year of HS excelling. Both in behavior and academics. My oldest daughter (BD37 now) did mostly B and C. I worried over OBD when she was in 1st grade, however the teacher tried reassuring me it was not OBD's ability , it was OBD's desire. Looking back now , having had a second daughter to 'compare' with, I can see it. Both girls are smart and very capable, but OBD was what I would call a 'slacker' .  Where YBD was and is a go getter. YBD loves the challenge and thrives,  BD was 'happy' enough doing just enough.

Back then, I did not believe BD was old enough to know what she was doing in her 'relaxed' ways. She was six. Surely six year olds can't manage to pick up the idea that 'meh, a C is good enough'.... but I was wrong.  The 'meh, good enough' attitude is a trait BD has carried with her well into adulthood. It drives me crazy. She was raised absolutely no different than the rest of my kids. We held the same expectations, the same standards of the learning process... but BD just blew it off. Good enough works for her *shrugs* , has always been her attitude 

My boys were A and B in K-12. It was after high school reality sunk in for them and they decided if they 'wanted more' they had to be willing to exert themselves a wee bit harder. 

I think it is concerning. My stepson also gets horrible grades, and I am certain it is because he is horribly immature and cannot sit still for lessons. I do not think he has any disorder, and maybe it will improve with time. It would improve more with discipline, but that is not likely to happen.

One of my kids had bad grades at that age, but was trying hard at the lessons, so the teacher and I asked for an evaluation. The problem was dyslexia. With the right help, that same kid makes only A's now.

Either way, I do not accept bad grades as ok. Parents should look for the cause.

To me? I could care less if sd failed every class. It would match her attitude and she way she acts.  Sd is actually as dumb as a sack of bricks. It's a wonder that she passes at all. But according to BM that's why she has her in that school,  she's apparently in the top of her class,  yet is absolutely a moron. 

Struggling this early on can only mean she will struggle for the rest of her schooling. Kindergarten and 1st grade are the years they set the groundwork for learning habits such as homework, in school behavior, studying, etc. A parent should have stepped up by now if they were worried. It shouldn't be the last report card and all of a sudden she has Ds. If I were her parent I would be worried, but alas we are only steps and to answer your question: you should only let yourself care as much as your partner is willing to care. They accept subpar scores and they will always get subpar scores. If you push for more then you will be the tyrant over driven stepparent expecting perfection. Don't set yourself up for that. 

In our schools, the lower grades don't have ABCDF grading.  The report card is a list of skills they need to acquire along with an indication of whether they're on track, exceeding expectations or behind where they're expected to be.  So it's easy to see if the problem is their ability to sit still, their ability to turn in assignments on time, or actual issues with understanding substance.  Even social skills are graded.  Without something like that, I think the only way to get to the bottom of the problem is for your DH to have a face to face meeting with the teacher to find out WHY your SD is doing poorly - and I'm assuming that Cs and Ds is doing poorly.  It used to be that "C" was average, but that hasn't been the case at most schools in a long time.  With grade inflation, many kids are getting all As and an occasional B.  Only by checking with the school will you know what the norm is at your SD's school.  In our schools, the parents of a child who was not meeting expectations would have been contacted multiple times over the course of the year; they wouldn't find out when a bad report card went home.  

One benefit of meeting with the teacher early and often is that your husband can explain to the teacher what is going on at home, the situation with her mother, etc.  It's human nature that a teacher is more likely to be kind and understanding with a child who is struggling because she's been abandoned by her mother (or has other issues going on in her life) and is acting out than with a child she knows nothing about who is a behavior problem.  

It is so important for your husband to intervene quickly.  Struggling in the early years will lead to bigger struggles as school goes on.  Those school problems will translate to home problems.  Time and effort invested now will pay dividends.

Missed the part about how do you deal with it with your own kids? Care,  contact the teacher, ask what more can you be doing for your child, is the anything in particular she seems to be not catching on to.  Is there any tests coming up that you can help study for.  Talk to your child.  Is there a reason they aren't doing well? Problem focusing? Staying up too late? Depression hinders focusing, is he/ she depressed?  These are all things you as a parent can help with,  as a step parent, not so much,  maybe help study, but if the step kid doesn't want to, hand off to the real parent

Skids could flunk all their classes for all I care. Not my monkeys not my circus. I’ll tell them how sweet and funny they are if that will make them feel better.

My BFF's son had to repeat first grade - much to her horror and dismay.  But he went on to graduate from Harvard. 

My husband's son (now 33) was not stupid at all.  But he is lazy and a total eff-up.  He never finished high school.   He could have really made something of himself with the tiniest bit of effort.