As with all schools, grades are important, but with law school they can make or break the likelihood of you getting a decent job after graduating. The grades that you receive in your first year at an ABA accredited law school are extremely important. Companies and employers will be keeping track of students from the beginning, just to pick and choose between the ones they want… and the ones they don't.
The top students of the first year will be selected to have interviews with the best law firms in the latter part of the second year. After these interviews students have a chance to gain offers to summer associate positions within the last years of law school. This of course leads to many more opportunities, such as the chance to be offered a permanent position with law firms after graduation.
This can put a lot of pressure on a first year student because if you are not ranked in top after your marks are tallied in the first year, chances are that you may not secure the high paying legal job that you always wanted.
Not only should you be concerned about your first year grades, but you also need to worry about journal competitions. In law school, at the end of the spring semester, there is a journal writing competition. These journals are student run and all first year students can compete to gain entry for membership. Although the writing may not be fantastic, the top law firms will be watching and waiting to hire those who are writing law journals.
This however, like most things in law school, depends on and is sometimes biased on the grades you receive in your first year. It comes down to this: the higher your grades, the higher the chances are of you getting into the journal. Even if your writing is perfect, if your friend has a higher GPA, it's pretty likely they will be getting into the journal before you.