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Netflix would lose that lawsuit almost immediately.

EDIT: To explain further, it literally doesn’t matter if Netflix has copies of that media. If Netflix loses the rights to distribute that media, they can’t distribute that media. If Netflix continued to distribute said media, they would not have a case in US courts. When people in the US buy physical media, they only receive a license (intangible) and a copy of the media. With some exceptions, people have to adhere to the terms of that license. Even if ripping for personal use is allowed, you can’t buy a DVD, rip it, and then pass the DVD to a friend to keep because you transfer your license to use that media onto a friend.

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