ATC "cancellation" of scheduled carrier flights?

While discussing reimbursement of hotel bills from a major airline, I
was told that my flight(s) were cancelled BY ATC.

Now, I know that ATC can delay IFR clearances/takeoffs based on
weather, traffic volume, landing slots at the destination, and
probably cosmic ray intensity as well, but I have never heard that ATC
can CANCEL flights.

For you ATC folks - are they blowing smoke up my ass? Can ATC CANCEL
a flight? Can you point me to the regulations that cover this area,
so that I can do my own research?

Thanks in advance.

--
Marc J. Zeitlin
http://www.cozybuilders.org/
Copyright (c) 2006