Sort of. The publishers have always hated the concept. They simply never chose to file any lawsuit until the National Emergency Library came about. The trouble with lawsuits is they might be ruled the other way, providing explicit precedent that something is allowed (such as in 2013 when the Supreme Court ruled that importing and selling international editions of textbooks is legal). Sometimes the threat of litigation has a stronger chilling effect than actual litigation. But not here—IA saw an opportunity to push the boundaries, and took it. And the publishers probably think uncontrolled digital lending is an easier battle to win than controlled digital lending.

Yeah that was a huge mistake on their part and may have cost them an otherwise excellent cause.

No, that was probably what pushed them over the edge, but the lawsuit also claims that transforming a physical work to a new medium without consent is illegal.

(For example, libraries are not allowed to convert their VHS collection to DVD and lend them out)