You left out the second half of that paragraph: "For these reasons, the Publishers have established independent and distinct distribution models for ebooks, including a market for lending ebooks through libraries, which are governed by different terms and expectations than print books."
Normal public libraries can do digital lending (and have, for decades) because they get proper licenses from publishers or authors to do so.
The IA is claiming that they don't need a license for physical books they own under the first sale doctrine, which is blatantly false: the first sale doctrine means they can sell or lend the physical copy of the book they possess, not that they can distribute the underlying IP of the book without permission of its creator. And even to the extent that the IA claimed it was limited lending on a one-to-one basis, it abandoned those limits and simply lent out as many copies as people wanted.
Also from the publisher's lawsuit: "Separately, Section 109 of the Copyright Act is clear that, pursuant to the doctrine of first sale, the owner of a lawfully acquired print book may dispose only of her/his particular print copy."
In its response, the IA denies that section 109 [https://www.law.cornell.edu/uscode/text/17/109] in fact says precisely that. It lets you know that their argument isn't premised in any sort of legal grounding.