As others have suggested: At a well-regarded school, this isn't a problem and will probably help you. Knowing that everyone at Yale and Boalt are relatively smart, employers and the like won't feel like they're taking a chance on a student with no grades. But at a school that isn't well-regarded, employers who would normally take only the top ten percent might not take anyone, since they can't tell the 10% they're interested in from the 90% they're not. Of course, it is also harder to transfer.
It depends on the school, but if it isn't a top school, I'd want grades.