The complaint, filed Thursday in Manhattan federal court, said directors breached their fiduciary duties by awarding more than $54 million of compensation in 2011 to the executives, including $15 million to Pandit, though the bank's performance did not necessarily justify it.

At Citigroup's annual meeting on Tuesday, about 55 percent of shareholders participating in an advisory vote rejected Pandit's pay package. That marked the first time that investors had rejected a compensation plan at a major U.S. bank.

That vote "has cast doubt on the board's decision-making process, as well as the accuracy and truthfulness of its public statements," said the complaint, brought by shareholder Stanley Moskal. "Absent this (lawsuit), the majority will of the company's stockholders shall be rendered meaningless."

Citigroup spokeswoman Shannon Bell said the lawsuit is without merit and that the bank will seek its dismissal, "consistent with court rulings in similar cases."

"The board takes the shareholder vote on executive compensation very seriously and will consult with representative shareholders to better understand their concerns," she added.

Shareholders won the right to vote on executive pay at most public companies under the 2010 Dodd-Frank Act. Many analysts remained skeptical the "say on pay" votes would matter much.

Richard Parsons, a Citigroup director retiring as chairman of the New York-based bank, called the rejection of Pandit's pay package a "serious matter" that the board would address.

Pandit was paid a symbolic $1 in 2010 and $128,741 in 2009. He had joined Citigroup in 2007 when the bank bought his hedge fund Old Lane Partners for $800 million. Citigroup is the nation's third-largest bank by assets.

Thursday's lawsuit seeks to force Pandit, Parsons and other Citigroup directors to pay damages to the bank and for Citigroup to bolster internal controls.

The case is Moskal v. Pandit et al, U.S. District Court, Southern District of New York, No. 12-03114.

(Reporting By Jonathan Stempel in New York; Editing by Tim Dobbyn and Steve Orlofsky)

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