The penalty isn't excessive and arbitrary based on the actual terms (although I wouldn't oppose someone making that argument). The problem with the penalty is that the Devils were the only team to be hit. The league turned a blind eye to other, similar cap circumventions and randomly decided enough was enough when the Devils did it; while they're within their rights to put a stop to those contracts, it is inconsistent to punish only one of many guilty parties.
I think arguing the penalty was excessive and arbitrary has 2 problems. 1) Was the penalty excessive and arbitrary? That's a judgement call, the league will argue no and the Devils will argue yes and so it becomes he said. she said type thing. 2) Is there any language to prevent the league from being excessive and arbitrary? I don't think there really is, the league is really given almost carte blanche in deciding punishment. You can argue rules were not broken but I find it very hard to rule the league isn't allowed to lay out any penalty it wants.
Basically the Devils are part of the NHL which is governed by the CBA, the NHLPA, the BOG, and the Commisioner. There really isn't a "that's not fair" argument that you can make to an arbitrator because the person who defines fairness is also the person who gave the penalty. You would need the league admitting to the arbitrator that the ruling was unfair to get an arbitrator to rule in your favor, IMO.
I could ask the rhetorical question "what's different about the Kovalchuk contract that caused it to be blocked while other, similar contracts were allowed?", but someone would be pedantic enough to answer it. The point is that the CBA was vague enough in this particular area that there was no clear "letter of the law", with the closest you can come to it being "commissioner's discretion", and I have a hard time accepting an argument that violations of the "spirit of the law" are punishable by BOTH a stiff fine AND the forfeiture of multiple draft picks.