No, it was not, even supported by the quotes you pulled. Libraries right now, with publisher blessing, offer all manner of controlled digital lending. The suit was because IA did it buy undercutting the publishers copy rights to that legal market. Had IA simply done what every other library has done to provide controlled digital lending, there would be no suit.
In contrast to this, the e-book lending practiced by most libraries with publisher blessing involves the library purchasing special library-specific e-book licenses from the publisher. These licenses contain various contractual restrictions, such as the library having to re-purchase the e-book after a certain amount of time or after a certain number of borrows.
So making it seem as if all "controlled digital lending" is not allowed under current law, even under the description you give, is not that simple.