You and your friend are actually both right!
In my way of assessing actors, there's no such thing as A-list and B-list. Rather, it's about viewing the people you and your friend put on those lists in a different light.
In most circles, Danny DeVito would not be considered a stereotypical leading man. What he is superb at, nonetheless, is his talented transcendence of his physical stature and looks. Hollywood status being more about glamour and beauty--superficial characteristics--DeVito has forged a brilliant career, easily a better character actor than most of the men the television cameras zoom in on during the Academy Awards ceremony. To that end, you are correct in your assessment of Danny DeVito.
B-list? How about looking at this list as a tally, instead, of men who are best supporting actors? Leading men, in my opinion, would more often than not fall flat on their handsome faces were it not for the complementary support they receive from their fellow actors. Danny DeVito was not the most physically attractive man on the television series, "Taxi," yet he is one of the more memorable ones whenever a nostalgic conversation about that TV show comes up. Or, who can forget his "over the top" portrayal of Batman's nemesis, The Penguin? Who else could have been the "other brother" to Schwarzenneger in "Twins?"
Viewed in the light of Best Supporting Actors--the real Hollywood laborers without whom most movies would easily be forgotten--Danny DeVito stands head and shoulders above the rest.
A-list? B-list? Throw these lists out the window. You and your friend ought to pick up a few DeVito movies, some great munchies and beverages, kick back, and have a lot of fun indulging in a revelry and tribute to his talent. Life is too short to be arguing about who belongs to what list.