A lawsuit between Wells Fargo & Co. and Citigroup Inc. over Wells' acquisition of Wachovia Corp. has been transferred from federal court to New York state court, where Citi began the litigation almost six months ago.

U.S. District Judge Shira Scheindlin, who has been presiding over the lawsuit in Manhattan federal court, transferred the case on March 20 to New York State Supreme Court, where another judge will preside over issues relating to liability and damages.

The ruling grants a transfer request by Citi, which initiated the litigation in New York State Supreme Court in October before Wachovia and Wells Fargo sought to have several lawsuits heard in federal court.

Wells Fargo agreed to buy Wachovia, of Charlotte, in October after topping a bid by Citigroup. Citi, of New York, had offered $2.16 billion for Wachovia's banking operations. As part of the Citi deal, the Federal Deposit Insurance Corp. agreed to absorb any losses beyond $42 billion on a $312 billion pool of Wachovia loans.

After Wachovia and Citigroup signed a Sept. 29 letter agreement, Wells Fargo trumped the bid with an offer valued at $13.1 billion. Wells had no guarantees from the FDIC. Citigroup dropped its bid Oct. 9.

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