Whether a copy of a work is fair use turns on, amongst other things, the effect of the copy on the potential market for the original. The article acknowledges this.
Controlled Digital Lending competes directly with the licensing scheme publishers have for library ebooks. The fair use argument was always doomed to fail.
The article then completely ignores the copyright argument and tries to equate CDL with libraries loaning out their physical copies. This is completely absurd, since libraries do not distribute duplicates of their physical books and so do not even enter the realm of copyright.
If libraries were systematically distributing duplicates of their existing books they would be sued for copyright infringement.