The Lowes sued Clements on April 7, alleging emotional distress, defamation, breach of contract and trespass. The lawsuit claimed that, when the Lowes were out of town, their former chef threw parties at their home, had sex with strangers in their bed, stole from their medicine cabinet and stole their food.
"Once Peter Clements provided Rob and Sheryl Lowe with accurate information, the Lowes willingly dismissed their claims against him without cost to either side," the papers say.
The papers did not disclose what information he provided.
But a source close to the Lowes tells PEOPLE that the couple filed the suit as part of a bigger counteroffensive after being told that Clements was backing two former nannies complaining of sexual harassment against the Lowes.
But after Clements later told the Lowes that they were misinformed, and that he had nothing to say about the nannies' allegations, the Lowes filed dismissal papers on Friday in Santa Barbara Superior Court.
"It was a big mistake," says a source close to the case.
Clements could not be reached Tuesday for comment.
The nannies' attorney, Gloria Allred, says Lowe's dismissal of the lawsuit will "blow up in his face."
"Whatever Mr. Lowe has attempted to cook up smells bad and will leave a lasting bad taste in his attempts to go after two innocent nannies who loved and cared for his children," she says.