I didn't say grades are arbitrary; they measure something. But it's not a grouping of people who naturally "get" the law and people who never will. At least not at top schools, and I doubt it's much like that at other schools either.
Your comment definitely implied that you felt that the curve imposed an arbitrary ordering. Beyond that, I'll contest your claim that exams don't measure people who "get the law". The question, again, is one of where the bar is set. Most students at a T30 school are probably smart enough to be able to learn and understand the rules. I doubt, however, that all of them can master them to a point where they can apply them quickly in unfamiliar scenarios. And it would seem to me that this is exactly what a law school exam measures.
To return to my previous anecdote, in my engineering classes most people knew the material. This was not enough to consistently get you an A. The people who got A's on a regular basis were the ones that had mastered the material so well that they could apply it to unforeseen scenarios. People who didn't get A's complained that the exams were nothing like the homework, but that missed the point of the whole exercise. The goal of the exam was to identify those people who would be good candidates for the graduate program, where they would have to apply their knowledge to genuinely novel scenarios. Your median B-student would make a fine engineer, applying well-understood rules to well-understood problems, but it was the exceptional people, the ones who could derive the differential equations of flight dynamics from first principles in 30 minutes*, who could do innovative research.
That being said, I'm a 0L, so what do I know? I just find it difficult to believe that law isn't like, well, everything else in the world. I've worked in engineering since I finished high-school, and you could always find a distribution. On any given question, some people were just stumped, some people got an answer, but only after running the math, and some people could do an estimate in their head in five minutes that was within 10% of the answer the second group spent an hour computing.
*) That was actually one of the qualifying exams for the PhD program.