Citigroup has a letter of intent on the Wachovia deal, not a contract, which weakens its argument. Three judges in three different courts, and the Secretary of Treasury, have dealt with the case on an emergency basis over the weekend.
The Wells Fargo offer for more money ($15 billion) without a government guarantee seems like a better deal than the Citigroup offer ($2 billion) which exposes the FDIC to up to $350 billion in liability.
Citigroup claims it was bad faith or a breach of the letter of intent for Wachovia to shop itself (query, was the Wells Fargo bid unsolicited and does it matter?), while Wells Fargo claims that the letter of intent was pre-empted by the bailout bill.