Since LiAlH4 is a reducing agent for amides, it should successfully reduce your Lactam group in theory. Given your 58% yield, it sounds to me like some type of reaction occurred, but side reactions also occurred. Perhaps a procedural step was the issue, as you did not clarify the process that you used to perform your reduction. For instance, did you correctly perform an acid work up with your solution, presumably dissolved in diethyl ether?