Removing block of code is the string is found in entire block using powershell

Your current script has 3 major problems:

• Wrong comparison operator - -contains is for testing collection containment, not substrings - you'd want something like -like or -match for string comparisons instead
• Repeated positives - even if one string from $data is found in a specific line, the line will still be copied/included on the next iteration of the outer loop because it won't contain the remaining $data substrings
• Subquadratic time complexity - testing every single item in $data against every single line in the file gives your script a bounding time complexity of O(N*M) where N is the number of $data items and M is the number of lines in the file. This means your code is going to get significantly slower when you increase the input size. By structuring your code differently this can be improved somewhat, and by structuring you data differently this can be improved massively

Instead of attempting to solve these problems point-by-point, I'm gonna show you how to prepare the $data array and parse the input file for better performance (and correctness of course).

This will consist of two steps:

• Organize the $data items into a data structure that allows for constant-time lookups - something that can tell us, as quickly as possible, whether a specific string is part of the collection or not.
• Parse the relevant file name out of each line in the file, use the extracted file name to test if the collection from the previous set contains it, and use that to filter out the relevant line

$pathOFDj='Y:\St\Retail\FTP\2022-03-23\DJ.bat'

# Read file names into array
$data = Get-Content path\to\listOfFileNames.txt

# Create a hashset - this will provide super-fast lookups
$fileNameSet = [System.Collections.Generic.HashSet[string]]::new([System.StringComparer]::CurrentCultureIgnoreCase)
$data |ForEach-Object { [void]$fileNameSet.Add($_) }

# Now we can start parsing and filtering the file
Get-Content $pathOFDj |Where-Object {
  # attempt to extract file name, then use the extracted file name to test if it's one of the relevant file names
  -not($_ -match '-sc "File=[^"]+?\\([^\\"]+)"' -and $fileNameSet.Contains($Matches[1]))
} |Set-Content path\to\modified_dj.bat

The statement -not($_ -match '-sc "File=[^"]+\\([^\\"]+)"' -and $fileNameSet.Contains($Matches[1])) will only evaluate to $false if a filename was successfully extracted and found to be contained in the hashset - otherwise, it'll evaluate to $true, and Where-Object will let the line filter through as expected.