I don't know if they misinterpreted what Joey said but I believe Joey was going to give Merritt some competition and possibly phase him out. That may have all changed when Joey found out about Merritt helping himself to Joey's money. At that time all bets were off and Joey may well have fired Merritt Feb. 4th causing Merritt to go over the edge.
Typically I would agree that there are always options, however, put yourself in their shoes for a minute and honestly think about it. They had no idea what jobs were outstanding, they didn't know how to build fountains, they had their own families and jobs, Merritt still owed Joey money and they were frantically searching for their missing family. I don't think anyone can honestly say what should or could have happened unless they were in their shoes living their nightmare.