IMO it's telling that publishers ignored the controlled limited lending that as you mentioned had been going on for a decade before COVID, and didn't file a lawsuit until IA started doing unrestricted lending.
My impression is that publishers were willing to look the other way when IA was distributing a small # of rare/out of print books, but once IA's homepage became unlimited copies of Harry Potter they felt like a line had been crossed.
They had been building up to a court case over that decade, including a 2019 open letter from most of the major players of the lawsuit. And if their problems were just with the NEL, they would have dropped things after the IA shut down the NEL.
The NEL was a PR boon for publishers, allowing the narrative to be "the IA deserved it for the few weeks they allowed a couple hundred copies of The Lion, The Witch, and The Wardrobe be unfairly borrowed." But it's irrelevant to the actual lawsuit.
My impression is that publishers were willing to look the other way when IA was distributing a small # of rare/out of print books, but once IA's homepage became unlimited copies of Harry Potter they felt like a line had been crossed.