judgment. Federal Rule 38 adopts a case-by-case approach to identifying and deterring frivolous appeals; the Alabama statute precludes any exercise of discretion within its scope of operation. Whatever circumscriptive effect the mandatory affirmance penalty statute may have on the state court's exercise of discretion under Alabama's Rule 38, that Rule provides no authority for defining the scope of discretion allowed under Federal Rule 38.

Federal Rule 38 regulates matters which can reasonably be classified as procedural, thereby satisfying the constitutional standard for validity. Its displacement of the Alabama statute also satisfies the statutory constraints of the Rules Enabling Act. The choice made by the drafters of the Federal Rules in favor of a discretionary procedure affects only the process of enforcing litigants' rights and not the rights themselves.

III

We therefore hold that the Alabama mandatory affirmance penalty statute has no application to judgments entered by federal courts sitting in diversity.

Reversed.

Syllabus

IOWA MUTUAL INSURANCE CO. v. LAPLANTE ET AL.

CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR
THE NINTH CIRCUIT

No. 85-1589. Argued December 1, 1986-Decided February 24, 1987
Respondent employee (hereafter respondent) of a ranch located on the
Blackfeet Indian Reservation and owned by Indians, brought suit in
Blackfeet Tribal Court seeking compensation from the ranch for personal
injuries respondent suffered when the cattle truck he was driving "jack-
knifed," and seeking compensatory and punitive damages from peti-
tioner, the ranch's insurer, for its alleged bad-faith refusal to settle the
personal injury claim. Upon petitioner's motion to dismiss, the Tribal
Court held that it had subject-matter jurisdiction, ruling that the Tribe
could regulate the conduct of non-Indians engaged in commercial rela-
tions with Indians on the reservation. Without seeking review by the
Tribal Court of Appeals, petitioner brought an action in Federal District
Court, alleging diversity of citizenship as the basis for federal jurisdic-
tion, and seeking a declaration that petitioner had no duty to defend the
ranch because respondent's injuries fell outside the applicable insurance
policies' coverage. The District Court dismissed the action for lack of
subject-matter jurisdiction, and the Federal Court of Appeals affirmed,
concluding that the Tribal Court system should be permitted to initially
determine its own jurisdiction, which determination could be reviewed
later in federal court.

Held:

1. A federal district court may not exercise diversity jurisdiction over a dispute before an appropriate Indian tribal court system has first had an opportunity to determine its own jurisdiction. Pp. 14-20.

(a) The rule announced in National Farmers Union Ins. Cos. v. Crow Tribe, 471 U. S. 845, requiring exhaustion of tribal remedies, applies here even though National Farmers Union was a federal-question case rather than a diversity case. Regardless of the basis for jurisdiction, federal policy supporting tribal self-government requires federal courts, as a matter of comity, to stay their hands in order to give tribal courts a full opportunity to first determine their own jurisdiction. Pp. 15-16.

(b) At a minimum, the requirement of exhaustion of tribal remedies means that tribal appellate courts must have the opportunity to review lower tribal court determinations. Here, since petitioner did not obtain appellate review of the Tribal Court's initial determination that it had

jurisdiction, the National Farmers Union rule has not been satisfied and federal courts should not intervene. Pp. 16-17.

(c) Nothing in the diversity statute (28 U. S. C. § 1332) or its legislative history suggests a congressional intent to override the federal policy of deference to tribal courts, and, in the absence of any indication of such an intent, civil jurisdiction over the activities of non-Indians on reservation lands presumptively lies in tribal courts. Pp. 17-18.

(d) Petitioner's contention that local bias and incompetence on the part of tribal courts justify the exercise of federal jurisdiction is without merit since incompetence is not among National Farmers Union's exceptions to the exhaustion requirement and would be contrary to the congressional policy promoting tribal courts' development, and since the Indian Civil Rights Act, 25 U. S. C. § 1302, protects non-Indians against unfair treatment in tribal courts. Pp. 18-19.

2. Although a final determination of jurisdiction by the Blackfeet Tribal Courts will be subject to review in federal court, relitigation of any Tribal Court resolution of respondent's bad-faith claim will be precluded by the proper deference owed the tribal court system, unless a federal court determines that the Tribal Court, in fact, lacked jurisdiction. P. 19.

3. The Federal Court of Appeals erred in affirming the District Court's dismissal of petitioner's suit for lack of subject-matter jurisdiction, and, on remand, the District Court should consider whether that suit should be stayed pending further tribal court proceedings or dismissed under National Farmers Union's prudential rule. Pp. 19-20. 774 F. 2d 1174, reversed and remanded.

MARSHALL, J., delivered the opinion of the Court, in which REHNQUIST, C. J., and BRENNAN, WHITE, BLACKMUN, POWELL, O'CONNOR, and SCALIA, JJ., joined. STEVENS, J., filed an opinion concurring in part and dissenting in part, post, p. 20.

Maxon R. Davis argued the cause and filed briefs for petitioner.

Joe Bottomly argued the cause and filed a brief for respondents.*

*Briefs of amici curiae urging affirmance were filed for the United States by Solicitor General Fried, Assistant Attorney General Habicht, Deputy Solicitor General Wallace, Richard G. Taranto, and Edward J. Shawaker; for the Blackfeet Tribe of Indians by Jeanne S. Whiteing; and for the Navajo Nation Tribe of Indians et al. by Claudeen Bates Arthur, Yvonne T Knight, and W. Richard West, Jr.

JUSTICE MARSHALL delivered the opinion of the Court. Petitioner, an Iowa insurance company, brought this action in Federal District Court against members of the Blackfeet Indian Tribe resident on the Tribe's reservation in Montana. The asserted basis for federal jurisdiction was diversity of citizenship. At the time the action was initiated, proceedings involving the same parties and based on the same dispute were pending before the Blackfeet Tribal Court. The question before us is whether a federal court may exercise diversity jurisdiction before the tribal court system has an opportunity to determine its own jurisdiction.

I

Respondent Edward LaPlante, a member of the Blackfeet Indian Tribe, was employed by the Wellman Ranch Company, a Montana corporation. The Wellman Ranch is located on the Blackfeet Indian Reservation and is owned by members of the Wellman family, who are also Blackfeet Indians residing on the Reservation. Petitioner Iowa Mutual Insurance Company was the insurer of the Wellman Ranch and its individual owners.

On May 3, 1982, LaPlante was driving a cattle truck within the boundaries of the Reservation. While proceeding up a hill, he lost control of the vehicle and was injured when the truck "jackknifed." Agents of Midland Claims Service, Inc., an independent insurance adjuster which represented Iowa Mutual in this matter, attempted unsuccessfully to settle LaPlante's claim. In May 1983, LaPlante and his wife Verla, also a Blackfeet Indian, filed a complaint in the Blackfeet Tribal Court. The complaint stated two causes of action: the first named the Wellman Ranch and its individual owners as defendants and sought compensation for LaPlante's personal injuries and his wife's loss of consortium; the second alleged a claim for compensatory and punitive damages against Iowa Mutual and Midland Claims for bad-faith refusal to settle.

Iowa Mutual and Midland Claims moved to dismiss for failure properly to allege Tribal Court jurisdiction and for lack of jurisdiction over the subject matter of the suit. The Tribal Court dismissed the complaint for failure to allege the factual basis of the court's jurisdiction, but it allowed the LaPlantes to amend their complaint to allege facts from which jurisdiction could be determined. The Tribal Court also addressed the issue of subject-matter jurisdiction, holding that the Tribe could regulate the conduct of non-Indians engaged in commercial relations with Indians on the reservation. Since the Tribe's adjudicative jurisdiction was coextensive with its legislative jurisdiction, the court concluded that it would have jurisdiction over the suit.' Although the Blackfeet Tribal Code establishes a Court of Appeals, see ch. 11, § 1, it does not allow interlocutory appeals from jurisdictional rulings. Accordingly, appellate review of the Tribal Court's jurisdiction can occur only after a decision on the merits.

Subsequent to the Tribal Court's jurisdictional ruling, Iowa Mutual filed the instant action in Federal District Court against the LaPlantes, the Wellmans, and the Wellman Ranch Company,' alleging diversity of citizenship under 28

1Iowa Mutual and Midland Claims renewed their motions to dismiss for lack of subject-matter jurisdiction after the LaPlantes amended their complaint to set forth the factual bases for the Tribal Court's jurisdiction. The Tribal Court summarily denied the motions. Brief for United States as Amicus Curiae 3-4.

2 Midland Claims also initiated a federal action against the LaPlantes in which Iowa Mutual intervened as a plaintiff. The companies sought a declaratory judgment that the Tribal Court lacked jurisdiction over the LaPlantes' claim of bad-faith refusal to settle, as well as an injunction barring further proceedings in the Tribal Courts. The jurisdictional basis for this suit was 28 U. S. C. § 1331. The District Court dismissed this suit for failure to state a claim and both companies appealed. While the appeal was pending, this Court decided National Farmers Union Ins. Cos. v. Crow Tribe, 471 U. S. 845 (1985). The Court of Appeals for the Ninth Circuit remanded the action to the District Court for reconsideration in light of National Farmers Union. On remand, the District Court dismissed the action without prejudice, pending exhaustion of tribal court remedies. That decision is not before us.