Seems like his article is way over your head. The issue is not whether or not lavabit could circumvent their own system and decrypt the emails stored on their server. With less than 5 lines of code they could grab Snowden's password the next time he logged in.

The decision to shut down lavabit was purely financial. He bet that he would make more money (via donations) by shutting down the service than he would if he kept it running. So he shut it down. It was always about the money.