DETROIT | Tue Feb 1, 2011 - (Reuters) - Clothing retailer J Crew Group Inc (JCG.N) violated its settlement of a shareholder lawsuit over its proposed takeover by private equity firms TPG Capital TPG.UL and Leonard Green & Partners LP, a lawyer for the investors said.

J Crew executives undermined a deal under which the company agreed to extend a period for competing bids to the $2.86 billion offer made by the TPG group, Stuart Grant, a lawyer for shareholders objecting to the takeover, said in a court filing. The deal had included a $10 million payment to plaintiffs if the TPG group bought J Crew.

While the parties agreed to the extension until February 15 of the "go shop" period that had expired January 15, Grant said J Crew had undermined the agreement with its January 18 disclosure of the results of the first "go shop" period.

By also setting a record date for investors eligible to vote on a final buyout offer and releasing a proxy statement before the expiration of the extended "go shop" period, Grant said the company showed it clearly favored the TPG offer.

J Crew officials "sent the signal to the world that they are investing all resources in closing the deal with TPG as soon as possible, and that nobody else should bother to bid for J Crew," Grant said in a letter to Delaware Chancery Court Judge Leo Strine that was filed on Monday.

Grant added that J Crew officials had turned the extended "go shop" period for competing bids into a "charade."

Shareholder lawsuits had protested the proposed sale price and asserted that J Crew Chairman and Chief Executive Officer Millard Drexler breached his fiduciary duties to investors.

J Crew called the January 18 agreement with the shareholders binding and said it intended to proceed with a planned shareholder vote on March 1.

"The company will challenge any attempt to change or revoke it," J Crew said in an email statement of the agreement. "J Crew said it has honored its obligations under the agreement.

"The agreement, subject to court approval, settles the putative class-action lawsuit pending in Delaware chancery court against the company and others in connection with the proposed acquisition," J Crew added.

Grant disagreed.

"In light of defendants' actions to undermine the benefits of the settlement, plaintiffs now intend to focus all efforts toward obtaining a very significant monetary recovery after a trial in this matter," Grant said in the letter.

Shares of J Crew were down 0.1 percent at $43.38 in morning trading.

(Reporting by Ben Klayman; Editing by Lisa Von Ahn)