While this was the southern district of new York, the 9th circuit court of appeals ruled on a similar issue with Vidangel on 2016. They would buy DVDs and let people pay to watch a censored version, even going so far as to purchase a physical version for every one that was streamed for censorship, and they claimed fair use. They were ruled against and filed for chapter 11.

https://en.m.wikipedia.org/wiki/Disney_v._VidAngel#:~:text=J...

I'm sure someone will reply to tell us how it's not really that similar but I thought there were some parallels